Are Wealthy Political Donors Hurting Themselves?
Lower tax rates have affected these donors in two opposing ways. On the positive side, they have supported higher consumption in the private sector. But on the downside, the resulting budget deficits have reduced the quantity and quality of public services. Compelling evidence suggests that the negatives have been much larger, and the positives considerably smaller, than many donors have expected.
Through private schools, gated communities, personal aircraft and other adaptations, the wealthy have been insulated from many costs of a decaying public sphere. But ill effects remain. Declining quality of public schools, for example, makes it harder for businesses to recruit productive workers, and a shrinking middle class makes it harder to sell their products in volume.
Many other effects of budget deficits also cut across the income divide. First, consider two extreme examples: When a poorly maintained bridge collapses, rich drivers are no less likely to die than poor ones. And if cutbacks in the Energy Department’s program for locking down loosely guarded nuclear materials in the former Soviet Union one day enable terrorists to detonate a dirty bomb in Manhattan, hedge fund managers and their families will suffer along with everyone else.
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