Where Is the Political Response to Inequality in the US?

Why has the rise in inequality in the US not increased support for government redistribution and for candidates from the left?   The explanation advanced here proceeds from the changing returns to skills in the developed world.  Over the last two decades, as a result of technology diffusion and globalization, workers with a middling level of skill have seen stagnation or decline in their wages.  I argue that the decline in living standards caused an unexpected shift away from support for government spending and away from policies associated with the left.   Why would this follow?  Most government spending does not go to direct support of consumption for middle-class households engaged in the labor market.   As such, government programs compete with private consumption for many working families.  As income falls, the marginal benefit of cash rises, reducing the support for programs that require tax revenue – even when those programs fund valuable social insurance and services.   I elaborate this argument theoretically, building on models of the demand for welfare, and empirically, showing how changing earning affect support for public spending in a fixed effects model.   Additional empirical analysis relates trends in earnings by occupational group to support for public spending, for economic and social liberalism and for Democratic candidates from the 1970’s through to the “aughts” using data from the US General Social Survey.   I conclude with a discussion of the role of economic and social factors in explaining contemporary voting behavior and the lack of deep, popular support for government spending in the face of rising inequality.