Over the past decade, a cottage industry of scholarship has examined the politics of rising economic inequality in the United States. Understandably, much of this work has concerned national politics. Yet the United States is distinctive not just for its skyrocketing inequities but also for its decentralized system of government. To date, however, analyses of the political, as opposed to the economic or social, dimensions of America’s inequality explosion have paid limited attention to the state and local governments that loom so large in America’s federated system.
William Franko and Christopher Witko seek to fill this gap with their well-timed new book. Their argument is simple: While the national government has been stalemated, some states have been moving to tackle rising inequality using the tools at their disposal—specifically, higher taxes on the affluent, state minimum wages, and state supplements to the federal Earned Income Tax Credit (EITC). Further, the states that have responded are those where citizens are concerned about rising inequality. Hence, the “populism” of the title: Federal authorities may not be responsive to popular unease, but states are.
To Witko and Franko, this “new economic populism” can be seen in part as “a coherent, rational response to growing inequality,” in which rising inequality sparks public concern and, in turn, state policy actions (p. 167). To substantiate this perspective, the authors present systematic cross-state comparisons of inequality and public opinion, as well as of state policies. The results are illuminating: Witko and Franko make a convincing case that those studying the politics of inequality should pay greater attention to what the states are doing. Yet their findings also suggest some fundamental limits to state responsiveness and, by implication, to the optimistic cast of their account.
The major story of the past few decades when it comes to inequality is the pulling away of the affluent—the top 10% and especially the top 1%—from everyone else. Indeed, Witko and Franko find little relationship between their estimates of state opinion (based on multilevel regression and poststratification using national samples) and broad measures of inequality at the state level (notably, the Gini coefficient, which is relatively insensitive to inequality at the tails of the distribution). Rather, their analyses show that the growing shares of income going to the top 10% and top 1% are most closely related to public concerns.
Whether this relationship is “rational” is open to debate: The authors show that shifts in partisanship within a state have vastly more effect on perceptions than do comparable (one standard deviation) changes in actual inequality. As they note, this partisan perceptual bias wipes out most of the increase in overall public concern that we might have expected in an age of rising inequality, since Democrats (more concerned about inequality) have declined as a share of state electorates relative to Republicans (less concerned) over the period they study.
In addition to being driven by the skyrocketing incomes at the top, America’s inequality explosion is also dominated by the growing inequality of what analysts sometimes call “market income”—that is, labor and capital income before taxes and public transfers. To explain why inequality has risen, therefore, we have to understand why income has become so much more concentrated at the top even before explicit government redistribution.
Yet Witko and Franko evince relatively limited interest in state policies that might affect this “predistribution” of market income, such as occupational licensing requirements and employment laws affecting wages, hours, and worker grievances (domains that have dramatically increased in importance at the state level over the last generation). With the prominent exception of the minimum wage, their emphasis is on redistribution rather than predistribution—both at the top (higher taxes) and the bottom (state EITC supplements).
How much effect do these policies have on inequality? Witko and Franko do not really say, but the effect has to be small given the overwhelming role of market income in America’s inequality surge. To be sure, top tax rates affect the pretax distribution of income as well as disposable income. The sharp decline of top federal tax rates over the past few decades has increased the incentive for companies to lavishly reimburse top executives and for those executives to seize a larger piece of the pie. Nonetheless, the fairly modest bite of state income taxes in even high-tax states means that these effects are likely to be similarly modest.
By contrast, the minimum wage is clearly a policy affecting market income—and, contrary to textbook economic models, it appears effective at raising the wages of lower-income workers without causing job losses. Although it cannot be a major contributor to income concentration at the top, its variation over time and across states clearly explains some of the patterns of wage stagnation at the bottom.
What is less clear is whether this variation reflects the pressures of public opinion. In an analysis closely related to Witko and Franko’s, Larry Bartels (Unequal Democracy: The Political Economy of the New Gilded, 2016) finds little evidence that opinion (overwhelmingly supportive of a higher minimum wage) drives policy—even in states with popular referendums. In contrast, he finds that the strength of labor unions is an important predictor of state-level increases in the minimum wage, especially in states with initiative processes. These results raise further questions about The New Economic Populism’s relatively sunny account of state responsiveness, especially given that the authors do not account for the role of unions (or any other interest group) in their models.
Witko and Franko also do not assess whether states have responded to rising inequality in ways that shape outcomes beyond wages and incomes. After all, the biggest state policy story of the past decade has been the uneven implementation of the (highly redistributive) Affordable Care Act. Due to a 2012 Supreme Court ruling, state governments were given the option to decline generous federal subsidies to expand their Medicaid programs. With regard to this crucial state choice, all signs are that the partisan hue of those governments has mattered much more than state public opinion. Within Republican-dominated states, however, there is evidence that interest groups do matter, specifically, organized business and professional groups supporting expansion, on the one side, and conservative donors and organizations opposing it, on the other—or at least that is the finding of Alex Hertel-Fernandez, Theda Skocpol, and Daniel Lynch (“Business Associations, Conservative Networks, and the Ongoing Republican War Over Medicaid Expansion,” Journal of Health Politics, Policy, and Law, 41(2), 2016).
Still, Witko and Franko offer a timely reminder that state governments are not standing pat as the federal government repeatedly succumbs to gridlock. A long tradition of research has cast the states as regressive forces, oppressing marginalized minorities or racing to the bottom to attract and retain mobile capital. Against the backdrop of this work, The New Economic Populism breaks important new ground. In doing so, it suggests that some of the key forces that have abetted inequality at the national level—namely, partisan polarization and its increasing alignment with state borders—have also emboldened states where egalitarian forces remain strong. Whether or not this counts as responsiveness, it counts as progress for those who believe that rising inequality threatens not just the well-being of Americans but also the health of our democracy.
