The goals of income redistribution seem laudable: to help the poor, protect everyone from financial risk, and ensure that people can afford essential health care. But good intentions don’t always make for good policy. There is an intense debate about how large the antipoverty programs should be, a debate that partly reflects differences in philosophy but also reflects concern about the possibly counterproductive effects of antipoverty programs. Disputes about the role of government in income redistribution are also one of the defining issues of modern politics.

There are two different lines of argument against antipoverty programs. One is based on philosophical concerns about the proper role of government. Some political theorists believe that governments should not redistribute income—that government’s role should be limited to maintaining the rule of law, providing public goods, and managing externalities.

The more conventional argument against income redistribution involves the trade-off between efficiency and equity. A government with extensive antipoverty programs requires more revenue, and thus higher marginal tax rates, than one that limits itself mainly to the provision of public goods such as national defense. Table 78.6 shows “social expenditure,” a measure that roughly corresponds to welfare state spending, as a percentage of GDP in the United States, Britain, and France; it also compares this with an estimate of the marginal tax rate faced by an average wage-earner, including payroll taxes paid by employers and state and local taxes. As you can see, France’s large welfare state goes along with a high marginal rate of taxation. Some, but not all, economists believe that this high rate of taxation is a major reason the French work substantially fewer hours per year than Americans.

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The trade-off between antipoverty programs and high marginal tax rates seems to suggest that we should try to hold down the cost of these programs. One way to do this is to means-test benefits: make them available only to those who need them. But means-testing, it turns out, creates a different kind of trade-off between equity and efficiency. Consider the following example: Suppose there is some means-tested benefit worth $2,000 per year that is available only to families with incomes of less than $20,000 per year. Now suppose that a family currently has an income of $19,500 but that one family member is deciding whether to take a new job that will raise the family’s income to $20,500. Well, taking that job will actually make the family worse off because it will gain $1,000 in earnings but lose the $2,000 government benefit.

This situation, in which earning more actually leaves a family worse off through lost benefits, is known as a notch. It is a well-known problem with programs that aid the poor and behaves much like a high marginal tax rate on income. Most welfare state programs are designed to avoid creating a notch. This is typically done by setting a sliding scale for benefits such that they fall off gradually as the recipient’s income rises. As long as benefits are reduced by less than a dollar for every additional dollar earned, there is an incentive to work more if possible. Current programs are not always successful in providing incentives for work. The combined effects of the major means-tested programs shown in Table 78.3, plus additional means-tested programs such as housing aid that are offered by some state and local governments, can create very high effective marginal tax rates. For example, one 2005 study found that a family consisting of two adults and two children that raised its annual income from $20,000—just above the poverty threshold in 2005—to $35,000 would find almost all of its increase in after-tax income offset by the loss of benefits such as those from the Supplemental Nutrition Assistance Program, the Earned Income Tax Credit, and Medicaid.

In 1791, in the early phase of the French Revolution, France had a sort of congress, the National Assembly, in which representatives were seated according to social class: nobles, who pretty much liked the way things were, sat on the right; commoners, who wanted big changes, sat on the left. Ever since, it has been common in political discourse to talk about politicians as being on the “right” (more conservative) or on the “left” (more liberal).

But what do modern politicians on the left and right disagree about? In the modern United States, they mainly disagree about the appropriate size of antipoverty programs.

You might think that saying that political debate is really about just one thing—how big should government’s involvement in income redistribution be—is a huge oversimplification. But political scientists have found that once you carefully rank members of Congress from right to left, a congressperson’s position in that ranking does a very good job of predicting his or her votes on proposed legislation. Modern politics isn’t completely one-dimensional—but it comes pretty close.

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The same studies that show a strong left–right spectrum in U.S. politics also show strong polarization between the major parties on this spectrum. Thirty years ago there was a substantial overlap between the parties: some Democrats were to the right of some Republicans, or, if you prefer, some Republicans were to the left of some Democrats. Today, however, the rightmost Democrats appear to be to the left of the leftmost Republicans. There’s nothing necessarily wrong with this. Although it’s common to decry “partisanship,” it’s hard to see why members of different political parties shouldn’t have different views about policy.

Can economic analysis help resolve this political conflict? Only up to a point.

Some of the political controversy over the welfare state involves differences in opinion about the trade-offs we have just discussed: if you believe that the disincentive effects of generous benefits and high taxes are very large, you’re likely to look less favorably on welfare state programs than if you believe they’re fairly small. Economic analysis, by improving our knowledge of the facts, can help resolve some of these differences.

To an important extent, however, differences of opinion on income redistribution reflect differences in values and philosophy. And those are differences economics can’t resolve.