What's the conservative solution to wealth disparity?

Question

While wealth/income inequality has generally been a Liberal concern, its increasing severity seems to have drawn Conservatives to consider it, including causing our current Conservative President to have several campaign goals on improving the economy and job growth for the middle-class.

However, from this answer:

The conservative view on this topic is that wealth inequality allows to create incentive systems which encourage people to contribute to society in order to increase their wealth.

In other words: work more, work well, provide the goods and services other people demand and you will receive more wealth and live a better life than your peers. The conservative believe is that when you are poor, then you are being punished for not contributing to society. If you don't want to be poor anymore, look for a job which is in higher demand, get paid for it, and get rewarded with a higher standard of life.

The idea of inheritance is that people don't just care about themselves but also about their children and want them to live a better life, even when they themselves are not alive anymore. So working hard and well does not just improve one's own life but also the lives of one's children.

Liberals often recommend utilizing taxes and wage adjustments as a solution, but that generally goes against much of the Conservative philosophy.

When wealth inequality reaches a point where the Conservative party has become interested in reversing it, what is/has been their solutions, and how have those solutions impacted the economy?

Answer 1

First, a useful definition for understanding the following.

Rent-seeking

Rent-seeking is a concept in public choice theory, as well as in economics, that involves seeking to increase one's share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through misallocation of resources, reduced wealth-creation, lost government revenue, heightened income inequality, and potential national decline.

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National Review: The Conservative Inequality Paradox

Conservatives have two intellectual commitments that are increasingly incompatible. They believe that the American economy is clogged up with crony-capitalist corruption that hands out special favors and protections to organized interests. They also hold that economic inequality — in particular, the surging share of total income earned by those at the very top — is morally justified by the rights of property and the tendency of free markets to raise living standards overall.

So, it looks like (at least some) conservatives are of the belief that income inequality is not necessarily an issue that needs to be tackled, but the current state of inequality came about via corrupt influences over the market, and that situation is something worth fixing.

[W]e argue that conservatives are not mistaken about the extent of what we call “regressive regulation” — government-created distortions of markets that have the effect of funneling income and wealth up the socioeconomic scale. Such schemes of upward redistribution have proliferated in the past few decades, an era that is often misunderstood as one of unceasing deregulation. And because these reverse–Robin Hood policies work by squelching and misdirecting competition, they exert a powerful downward drag on output and growth as well.

They define these corrupt influences as being rooted in too much government intervention in the markets.

In the best of all worlds, conservatives would respond to this state of affairs by attacking rent-derived inequality at its source. Their economic agenda would focus on curtailing subsidies for finance, excessive protection of intellectual property, the licensing of high-end professionals, and overly restrictive land-use regulation. Doing so wouldn’t require conservatives to become crusading egalitarians, as these reforms would also unleash economic dynamism, innovation, and growth — familiar conservative priorities.

This article argues that the best solution would thus be to tackle the issue of undue government influence in the markets so that wealth can be redistributed naturally by the marketplace in accordance to ability rather than through rent-seeking behavior.

Nevertheless, making regressive regulation a conservative priority would be a distinct change in approach. Too often, conservatives’ idea of a pro-growth policy agenda starts and ends with tax cuts, despite the overwhelming evidence that moderate increases or decreases in the top rate have little effect on growth. When conservatives do turn their attention to regulation, they usually think about providing “regulatory relief” for business by lightening health, safety, environmental, and labor regulations. In our view, though, the regulations with the most pernicious economic effects are the ones that subsidize business by blocking competition or by otherwise distorting markets.

However, this article makes clear that this is not the typical approach taken by conservative policy makers. Rather, the typical approach would be to focus on a pro-growth agenda through the use of tax cuts. Furthermore, when typical conservative policy turns to deregulation, it tends to focus on regulations that are more burdensome for businesses rather than on those regulations that distort the market effects.

Many conservatives did not look carefully at the evidence behind these dodgy empirical claims because they believed that they held the moral trump card: By cutting taxes, they were returning wealth to its rightful owners. But in the “captured economy” we’re currently living in, this belief is due for reexamination. Not only is a significant fraction of the rich’s income morally tainted by government favoritism, but it is also used to fund yet more rounds of regressive rent-seeking.

This article argues against the traditional solution of tax cuts because this returns wealth to the current holders of wealth rather than the rightful owners. That is, the wealthy have engaged in rent-seeking behavior to promote government intervention into the markets so that they can maintain or grow their wealth. By cutting taxes, the wealth returns to these individuals that corrupted the market so that they can in turn use their wealth to further corrupt the markets. However, in an ideal market, rent-seeking behavior should be discouraged and wealth should be distributed according to ability and ones contributions to the marketplace.

One way to begin solving this problem would be to build a veritable bonfire of the deductions that the wealthy use to shield their income from taxation. The exclusion from taxes of employer-paid health insurance, retirement savings through 401(k)s and IRAs, and education savings accounts could either be scrapped or converted into refundable tax credits. We could also consider a financial-transaction tax, which could raise a lot of revenue while also reducing the incentives for excessive trading of assets. Changes such as these would allow us to claw back some of the rents at the top of the economy without increasing the marginal income-tax rates that conservatives are so concerned with.

Some proposed solutions would be to do away with some of the financial instruments that promote rent-seeking behavior in the wealthy so that their assets are more likely to re-enter the marketplace for redistribution via market forces.

If conservatives took seriously the presence of ill-gotten gains at the top of the income spectrum, they might also look at immigration policy in a new light. Over the past few decades, the United States has exposed those at the bottom of the economic pile to intense global competition, whether in the form of products from China or workers from Mexico. As Dean Baker has argued, it is high time to expose the wealthy to those same bracing forces of competition by opening up the economy to more high-skilled immigrants, especially in protected professions such as medicine and dentistry.

Some further proposed solutions are in promoting more high-skilled immigration to the United States in order to bring more competition into the top end of the marketplace.

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It looks like the general conservative viewpoint is that inequality is natural and a consequence of a healthy marketplace. Some conservatives presumably view the current situation as a natural consequence that does not require fixing. However, as is argued in this article, some conservatives view the current inequality as unnatural and a result of too much government intervention, so the solution would be to reduce the government influences on the markets. Overall, in regards to this latter argument, there is a lot that liberals would agree with: most notably that the wealthy elites have used their economic positions to influence government in their favor.

It might be worthwhile to note that I am on the political left, so it's possible that this summary is distorted by my viewpoint (however, I've tried to avoid this).

Answer 2

First it isn't just disparity as Thomas Sowell says (below) and the truly conservative view of wealth would bring in things like Sumptuary Laws (below) The real place of the Church and charitable organizations has been usurped by government and to no good effect.

THOMAS SOWELL'S WARNING ABOUT HOW TO VIEW WEALTH DIFFERENCES

It is by no means obvious why we should prefer trying to equalize incomes to putting our efforts into increasing output. People in general and the poor in particular seem to “vote with their feet” by moving to where there is greater prosperity, rather than where there is greater economic equality. Rising standards of living, especially for those at the bottom economically, have resulted not so much from changing the relative sizes of different slices of the economic pie, as from increasing the size of the pie itself — which has largely been accomplished without requiring heavy rhetoric, fierce emotions, or bloodshed.

Does it not matter if the hungry are fed, if slums are replaced by decent and air-conditioned housing, if infant mortality rates are reduced to less than a tenth of what they were before? Are invidious “gaps” and “disparities” all that matter? In a world where we are all beneficiaries of enormous windfall gains that our forbearers never had, are we to tear the society that created all this apart because some people’s windfall gains are greater or less than some other people’s windfall gains?

_{Thomas Sowell - Wealth, Poverty and Politics}

SUMPTUARY LAWS

Well, what is a sumptuary law? A law regulating people’s consumption—what kinds of clothing and what kinds of luxury goods should be available to them.

Sumptuary laws give power to the state over commerce and social forms that seem odd today, as well as a very bad idea given the already intrusive nature of the federal government. Moreover, Adams expressed this view in what really was little more than a throw-away line. But it is indicative of his “crankiness,” of what some people mistakenly view as his aristocratic leanings, and, more accurately, of his Calvinist republicanism. Because, you see, the Puritans in New England had had sumptuary laws (at a more local level) for well over a century, and a number of people, especially proponents of republican government, missed them.

At root, Adams wanted to foster people’s devotion to virtue, to acting as they should, and to serving the public good. Only a virtuous people, he noted more than once, could be free. Only if the people were capable of governing themselves in their private lives—for example eschewing fripperies in favor of industry and humility—could they govern themselves as a people, through republican forms of representative government. Did this make him an aristocrat? Hardly. These are classic yeoman, middle-class values at the heart of America’s republican tradition.

_{Bruce Frohnen - Professor of Law at Ohio Northern University College of Law}

WHO BEST TAKES CARE OF THE NEEDY

Gertrude Himmelfarb writes on this but the following gives a hint of the direction of the argument

Tocqueville admired the spirit behind the English Poor Law but deplored the consequences. Unlike private charity, he said, which depends on the goodwill of the benefactor, public relief is a matter of legal right. The recipient of charity has no assurance of assistance; the recipient of relief has that assurance. And it is that assurance, the right to relief, that undermines the incentive to work and thus tends to pauperize the poor. By guaranteeing the means of subsistence as a legal right to all, England relieved the poor of the obligation to work and thus made paupers of so many of the poor.