Racism and redistribution in the United States: A solution to the problem of American exceptionalism

The two main political parties in the United States in the period 1976-1992 put forth policies on redistribution and on issues pertaining directly to race. We argue that redistributive politics in the US can be fully understood only by taking account of the interconnection between these issues in political competition. We identify two mechanisms through which racism among American voters decreases the degree of redistribution that would otherwise obtain. In common with others, we suggest that voter racism decreases the degree of redistribution due to an anti-solidarity effect: that (some) voters oppose government transfer payments to minorities whom they view as undeserving. We suggest a second effect as well: that some voters who desire redistribution nevertheless vote for the anti-redistributive (Republican) party because its position on the race issue is more consonant with their own, and this, too, decreases the degree of redistribution in political equilibrium. This we name the policy bundle effect. We propose a formal model of multi-dimensional political competition that enables us to estimate the magnitude of these two effects, and estimate the model for the period in question. We compute that voter racism reduced the income tax rate by 11-18% points; the total effect decomposes about equally into the two sub-effects. We also find that the Democratic vote share is 5-38% points lower than it would have been, absent racism. The magnitude of this effect would seem to explain the difference between the sizes of the public sector in the US and northern European countries.