How Republican Approaches to Social Spending Increase Income Inequality in the United States

Source: Christopher Faricy, Scholars Strategy Network, Key Findings, November 2015

From the summary:
Political parties in control of government can modify social spending in ways that either increase or decrease inequality in America. According to the conventional wisdom, social spending goes up when Democrats are elected to office, leading to reduced inequality. But this is only part of the story, because it ignores alternative kinds of social expenditures and the role of the Republican Party and other conservatives in shaping social policy. Republicans, it turns out, also tend to increase federal social spending – on policies that benefit the privileged.

Both political parties, not just Democrats, have incentives to increase federal social spending because many Americans, including most Republican voters, demand that the federal government play an active role in the provision of social benefits and services. For the GOP, the challenge is how to meet such expectations in ways that align with an avowed small-government philosophy. The solution for many Republicans has been to create and expand tax subsidies (also called tax expenditures) for social spending by businesses, individuals, and other private interests, while cutting back on direct public spending. Good examples include tax breaks received by employers who provide private health insurance plans and tax exclusions to citizens who donate to charities and nonprofits. Such tax reductions amount to transfers of resources to the rich largely at the expense of tax revenues that could pay for broad-based public social benefits that help the middle and working classes. With few exceptions, income inequalities increase as a result of such transfers….