Can the free market provide opportunity for all?
Arthur Brooks, the president of the American Enterprise Institute, argues that raising taxes won't help the poor and that the free market is the way to bring people out of poverty.
Jeremy Hobson: Yesterday on the show, as part of our coverage of Wealth and Poverty issues, we spoke with President Obama's former top economic advisor Larry Summers. We talked about inequality, which is an issue that's become central to the presidential race this year.
Summers told us the government has a responsibility to make sure that everyone in this country at least has an opportunity to succeed.
Larry Summers: The market left to its own devices is not going to help those least fortunate communities provide decent pubilc education. There's much that government needs to do to create more equal opportunity.
Well that is one view.
For another, we're joined by Arthur Brooks. He's the president of the American Enterprise Institute, a conservative think-tank in Washington. Good morning.
Arthur Brooks: Good morning, Jeremy.
Hobson: Yesterday, Larry Summers told us that the discussion really needs to be reframed from inequality of income to inequality of opportunity. What do you think about that?
Brooks: I agree. And even more than that, we need to largely abandon the whole idea of inequality of economic outcome and talk about mobility in America, because that's the real issue. That's what people care about. People are not worried about inequality at all, as long as they feel there's sufficient opportunity to rise, as long as they think that there's mobility in the economy. And that seems to be what people are starting to doubt quite a bit.
Hobson: What do you think needs to be done to make sure that people have the equality of opportunity that you would like right now?
Brooks: Well, the one thing that we don't do is by wasting our time by talking about simply how we can redistribute more money from people at the top simply because they have more money, and that seems to be largely what's going on in America today. We can think of the United States as an apartment building, where people at the top floor are doing very well; people in the bottom are seeing flooding. The trouble is that the elevator doesn't work very well, and we have a president and an administration that seems most content to be throwing rocks at the top floor. Well that doesn't do anything to help the elevator, and that's a metaphor that's rather apt, I think.
Hobson: The way that you say that, it sounds like you think that there's a possibility that we can reach a point that nobody lives on the bottom floor?
Brooks: No, I'm not saying that. I'm saying that people who live on the bottom floor should always have access to the ability to rise. And I think that the responsibility of people in positions of political power should be not simply to try to redistribute more from the top, but rather find more ways to help people get out of their economic situation.
Hobson: Do you think then that the government should ensure that everybody has access to going a university?
Brooks: We spend tons of time talking about college, and college is indeed important, but first let's talk about primary and secondary education. The truth of the matter is that we're spending multiples per kid in real dollar terms compared to what we were spending decades ago, and arguably getting worse student outcomes. We've got to ask ourselves what's going on in this country, primarily because that affects the bottom 20 percent of the income distribution.
Hobson: We've talked about the government. What about the free market? What should they be doing to make sure that more people have the ability to succeed in this country?
Brooks: Well, the free market is exceptionally adroit at doing just that, when it goes largely unimpeded. The problem is that today, the free market's not allowed to help the poor in lots and lots of ways. If you back 100 years or even 50 years, you find that the ability of people in the bottom 20 percent of the income distribution to be entrepreneurs was much higher than it is today. There were fewer regulatory barriers to starting businesses. There were fewer punitive tax barriers to starting businesses. The free market is great at creating opportunity. It's generally speaking the state that gets in the way of the free market, such that the poor really can lift themselves up.
Hobson: So you think that too much regulation is making it impossible for the free market to help the poor in the way that it could?
Brooks: I think it's hurting a lot, and it's not hurting everybody. I think it's disproportionally hurting the people at the bottom. And that's the real moral problem that we should all have with the system that gets more and more complex.
Hobson: Arthur Brooks is president of the American Enterprise Institute. Thank you so much.
Brooks: Thank you Jeremy.