The importance of financial self interest in politics

A while back, I tried to construct a simple model of politics where everyone just voted for whoever promised them the most money.  If you assume the government imposes a linear tax rate and offers a lump sum benefit to everyone, that means the population with lower than average income will always want to vote for politicians proposing a larger government (since they get more in benefits than they pay in taxes) and half the population with higher than average income will want to vote for politicians proposing a smaller government (since they pay more in taxes than they get in benefits).  What is interesting that in this simple set up, the swing voter with an average income will be completely indifferent to proposals to make the overall size of government larger or smaller (since they pay the same amount in taxes as they get in benefits), so they vote for other reasons entirely, ideally perhaps competence, experience, or what is best for the country, though this could also be for higher deficits, identity politics, or subsidies targeted directly at them.

This is why politics is so stable in developed countries.  Parties will divide along this size of government question and around half will support one party and around half will support the other, and if the other factors like competence, experience, or what is best for the country varies from election to election across both parties, than each party will win and get the chance to govern about half the time.  If politics organizes around identity politics, these voting shares tend to remain fixed over time, and one party who has the majority identity will consistently win and exclude the other party from governing all together. This is what happens in developing countries a lot, where there is not a large robust middle class.

The real threat to our politics then is that it will realign entirely around identity politics and financial self interest will no longer be the dominating factor in voting.  This could lead to one party remaining in charge for long periods of time and a lack of political competition overall, that causes governing to deteriorate over time.  Its not clear which party benefits from the identity politics, where whites are still a majority in the country, but the share of minorities is growing over time, and many white people reject a politics that tries to divide the country by race.  Keeping politics oriented around personal financial self interest, however, is what has kept politics stable throughout the western world for many decades and upsetting this balance is a dangerous development in politics. Appealing to personal financial gain, even if it seems a bit selfish, could actually lie at the heart of what keeps our democracy stable for decades into the future.