Income inequality is the Democrat’s official political villain of 2014, but this is not really new. President Obama often likes to distinguish between the fat cats and easy money of “Wall Street,” and the daily struggles of “Main Street.” The inference is that there’s only so much success to go around, and whatever goes to the rich on Wall Street is being withheld from its rightful recipients, the average guys on Main Street. John Edwards almost rode his version of this argument–“two Americas”–to the Democrat nomination for President in 2008. More recently it was the centerpiece of Bill de Blasio’s successful campaign for mayor of New York City. The inequality of outcomes argument is at the core of Marxism and has been repackaged by many redistributionists over the years.
At the national level, President Obama has played the class warfare card incessantly since running for the office. A majority of Americans still reject socialism when clearly presented as such, so leftists are constantly looking for softer and more creative ways of repackaging the argument. Taxes have become contributions, government spending has become investment, and there’s a constant reference to everyone paying “their fair share.” Business leaders are greedy wealth-seekers while government leaders are “public servants.” The minimum wage must be a “living wage.” The fact that some people’s skills are worth more in the marketplace than others is now called income inequality.
Who can oppose fairness, equality, living wages, public service, and investing in our people? These sound reasonable if not attractive to the uninformed voters among us, but they are really part of a concentrated attack on capitalism, one that threatens our survival as a free, productive society.
Capitalism is based on freedom and views fairness through the lens of opportunity. Outcomes will, by definition, differ in a capitalistic society because individuals have different talents, goals, and motivations. Moreover, free markets are always fair in the truest economic sense. Some might get more than others, but one’s returns are based on the value one deliver to others through voluntary exchange. This diversity in financial outcomes is both necessary and beneficial to society for many reasons. I’ll give you three:
- The highest wage earners in a society make the greatest economic contribution. They receive high wages because they offer the highest value. Brain surgeons save lives, CEOs run companies that produce products and services that enrich our lives, and even athletes and celebrities provide entertainment. Most of these jobs require advanced and/or specialized training, high tolerance for stress, and the like. The higher wages attract individuals to these professions. Cut the wages through regulations and taxes, and you cut the incentives, and ultimately the quality of products and services they produce. Remember, transactions in a free economy are voluntary, so individuals can only earn high wages when others obtain the benefits of the products and services they provide.
- The highest wage earners pay the most taxes. The top 10% consistently pay more than 70% of the taxes in the US, enabling those who earn less to pay less. This is a reality that leftists who constantly promote more government spending to cure society’s ills should champion, but they don’t. Envy is the root of the problem and it’s a powerful motivator of the masses in elections.
- High wage earners create opportunities for the rest of us. The earnings they retain after taxes are either spent in the economy to create jobs or invested in firms that need capital to grow. They also finance many of the benefits we often take for granted. Consider that you can watch the Super Bowl in high definition free of charge even if you cannot afford to support any of the advertisers. Others—including a high proportion of high-income earners—are paying most of the freight.
Yes, income inequality is our friend, not our enemy. It’s a healthy byproduct of a free society, not a demon that must be exorcised. Contrary to the President’s rhetoric, our ability to reduce the gap does not define our greatness as a society. The fight against income inequality is a more subtle argument for redistributing income and expanding power of the state. Don’t buy it.
The income gap is the cause of most social problems. “Capitalism” cannot solve this without government help. We need a balanced approach that shares the wealth more evenly or we will all perish!
Income inequality is an enemy. How can we live in a prosperous country where some people are rich but so many people are left without anything? There is a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain — that if you work hard, you have a chance to get ahead. My American can do better than this.
Back in the day, when the teacher told Johnny he should share, it meant that he was to give some of what he had to Jimmy. Now it means that he is to give it to the teacher and she will decide who should justly receive it. Like the teacher, the government can only redistribute, since the goods to be “shared” are owned by its subjects. In this context, the wealthy are doing a pretty good job of sharing. Since almost half of us pay no income taxes, the burgeoning cost of the welfare state is borne by the higher income taxpayers. With millions getting food stamps, medicaid and unemployment, there is a whole lot of sharing going on. Meanwhile, the 53% who do pay income taxes get nothing except a whole lot of grief for not paying their fair share.
Excellent post. Are redistributive policies the only way to lift those up at the bottom? I think not. We spend $1 trillion per year on anti-poverty programs, but we are not spending it in the right ways or this problem would have been fixed long ago. Take education – why do we spend so much for so little return? How about values? Look at the statistics on children born to single mothers.
Children born to single mothers are the result of lack of education,limited access to medical services/knowledge and unfortunately ,in many cases it is also the lack of parental care and support.
Since the constitution was written, our answer has been, more government…how’s that working out for ya?
“Children born to single mothers are the result of lack of education” – Really, how does reading, writing and math prevent young women from getting knocked up? (A+B = C maybe?, hilarious!!). It is the lack or parenting and social moral decay that is the main factor, a viscous circle that keeps repeating itself.
“limited access to medical services/knowledge” – See answer above, how do medical service prevent pregnancy?
“in many cases it is also the lack of parental care and support.” – I agree.
“Hey there young ladies, here’s a tip for ya. Never, ever, never have sex with a fella who will not help you support a child. If for some reason you fell compelled or obligated to have sex with someone whom your not sure about…WEAR A CONDOM!!!”
This should be a PSA shown at every commercial break on MTV, VH-1, You Tube, etc, you know where all the cool kids get their information.
See there easy as pie.
Directly regarding the subject – neither the president, democrats, nor republicans have ANY interest in helping the people that elected them. They are now in the club and will do/say anything to keep their membership. How many broken promises and back door deals are needed to wake us up, sadly I am guessing many, many more. To think government is here to help is ignorance at it’s finest.
Maintaining the family unit is the surest way out poverty. The government should do nothing to encourage movement away from it. But we are discussing income inequality between the middle and upper classes. If one is in the middle class, she would be employed and not in poverty. It is safe to assume she is working in the private sector, since surely there is no income inequality in government jobs. We already have laws against discrimination, so we can also assume she is compensated fairly for her efforts. Changing the tax structure does not affect the income of Upper or Middle, only the tax each pays. To narrow the income gap, Upper is going to have to take a pay cut. Don’t hold your breath. So equality would have to come via government fiat or intervention. Don’t hold your breath on that one either.
The best way to get from Middle to Upper is to make more spots available in Upper. That is a function of capitalism. It isn’t done to honor some quota system, but because talent is needed to run expanding businesses. We are still better at doing this than any other country in the history of the world. The government should do nothing to encourage movement away from it.
Question…if one person makes $25K and one makes $50k and we pull some levers and turn some dials so that they both double their income, is that good or bad? Income goes up, but the income gap widens.
Velvet, this is how lack of education related to single motherhood: unfortunately,young women from poor neighborhoods will usually go to lousy schools that will provide them with lousy education. Most likely, they will not be encouraged to excel and peruse a college degree that will allow them better career choices. Some of them may not believe that they have a great future ahead and may not see that getting pregnant at young age will ruin their future. They may not be powerful enough to say to him “take it (the condom) or leave it” or to take responsibility on their sex life by using contraceptive pills. It might be also a matter of luck of sex education that they don’t get at school or home, but hey, if some Congressmen believe that a woman cannot conceive as a result of rape, then what could we say to them?
“how do medical service prevent pregnancy?” – a doctor that prescribe contraceptives, maybe? but if she cannot see a doctor and cannot buy the pills, we can’t prevent pregnancy.
As for your condom campaign – good idea, should be addressed to young gentlemen.
As for your tip:”Never, ever, never have sex with a fella who will not help you support a child” – since the invention of the pill in the 60s, this tip became so obsolete and women are free from the equation sex=reproduction.
“how do medical service prevent pregnancy?” – a doctor that prescribe contraceptives, maybe? but if she cannot see a doctor and cannot buy the pills, we can’t prevent pregnancy.
My tax dollars pay for Planned Parenthood, so for young women it’s free, your welcome. So I get to pay for their contraception, pay for their abortions (again Planned Parenthood) and I get to support them and their children throughout their entire life (food stamps, gov housing, medicare, medicaid, etc, etc). That’s why I work so hard (sarc).
As for your condom campaign – good idea, should be addressed to young gentlemen.
Why, as soon as she’s pregnant, they bail. A condom add does nothing for young men. It is the WOMAN’s responsibility to not get pregnant as it’s obvious the men they choose are not responsible.
As for your tip:”Never, ever, never have sex with a fella who will not help you support a child” – since the invention of the pill in the 60s, this tip became so obsolete and women are free from the equation sex=reproduction.
I do not understand your point. If they are all on the pill (free of charge), they can’t get pregnant. They are now free to finish high school, go to college, get a job, contribute to society, etc.
A massive cultural change is needed, no government policy can solve this problem, but it sure can crank out more dependent voters.
Summary of Aliza’s position: It is society’s fault that the woman got pregnant, now society has to jump in to fix it.
No wonder we spend $1 trillion per year and never fix the problem.
Eliza pretty much nailed it. After 50 years of the War on Poverty, we still have poor neighborhoods. After untold billions spent on public schools, we still have lousy public schools. Meanwhile, teachers are marching for more pay. Everyone except the most left leaning of us knows that the War on Poverty was a failure. The left, of course, continues to maintain that it can all be fixed with more money and more time in office. Guess what. We are out of money. We can still borrow as long as we have the world’s best economy to keep the dollar strong and as long as the Fed keeps the interest rates down. But we cannot raise income tax, payroll tax or gas tax or create new taxes. Why? Because Congress will have none of it.
This is the reason Obamacare will fail – not because it is a bad idea, although it is. But because we cannot pay for something this big. We have spent ourselves way into the future with welfare at home and defense abroad. Obama had to resort to deceit and a penalty provision to get the ACA through the Democratic Congress and the CBO. If Obamacare did nothing else, it showed us the error of our ways. First, the government is out of money. Second, the young and healthy are required to ante up to pay for those who need the insurance most and now they see the impact of redistribution, up close and personal.
Funny, I just wrote an article with the same exact title. I did a search to see who else had used it, and landed here.
Excellent article John. Isn’t it interesting that the democrats act as if the rich got rich by taking wealth away from others, when in fact they supported the GM bailout, which did just that?
Like you said, in a free society the wealthy get wealthy by providing something of value. We voluntarily give the wealthy our money, in exchange for their products and services. Government on the other hand, takes our money and gives it to others without our consent. And yet many think government intervention is preferable to a truly free market.
Here’s my article on the subject: http://www.truthinexile.com/income-inequality-is-good/
Great article, Pedro. I highly recommend it!
Thanks John. I’ve bookmarked your blog. You got some good stuff on here.
Dr. Parnell, you picked up a hot topic. Here is another article about this issue from today’s WSJ. You guys here will love it.
http://online.wsj.com/news/articles/SB10001424052702304325004579296752404877612?mod=WSJ_hpp_sections_opinion&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304325004579296752404877612.html%3Fmod%3DWSJ_hpp_sections_opinion