Income inequality: The new pivot-part II | TSLN.com

Income inequality: The new pivot-part II

Steve Dittmer
AFF Sentinal

Part I discussed why the economic logic behind "income in equality" is faulty and how it is based on a continuance of the politics of envy and class warfare President Obama favors.

Part of the problem is the left's vision that there are only so many dollars out there, and if some rich person gets more, it takes away from some poorer person's purse. That is simply not true. Plants grow, animals reproduce, inventors create new things, people demand new services. New people are born. The natural order of things is for more people to create more, if economic conditions allow more to be created. The object is to satisfy the wants of people by doing and creating. The general order of things is not for everyone to be getting things by taking them from someone else. That is called stealing for people and punishable by law. It it's a government, the government passes laws to permit its taking and it's called taxation, regulation, prohibition and confiscatio n.

Bret Stephens looked at the gap in a couple of columns in the Wall Street Journal, utilizing both Census Bureau and Congressional Budget Office (CBO) data, inflation adjusted or not and different definitions of income.

"…Americans are getting richer across the entire income spectrum, even if they are getting richer at very different rates," Stephens wrote.

If one wants to be nauseated, one should look at the rates of increase in non-inflation adjusted figures (Census Bureau) to see just how much inflation, through the cheapening of our currency, has robbed from our citizens. For just a taste, the poorest income quintile advanced 186 percent unadjusted (1979-2012), with the other quintiles posting much higher percentage gains ("Obama's Envy Problem," Wall Street Journal, 12/31/13).

Look at inflation adjusted data from the CBO: the poor's income increased 18 percent (1979-2007), the middle classes 40 percent and the top 81-99 percent by 65 percent, Stephens said. It's the top one percent who did the best: 275 percent ("About Those Income Inequality Statistics," Wall Street Journal, 01/03/14).

Recommended Stories For You

We like Stephens' analogy of why this disparity exists:

"The richer have outpaced the poorer in growing their incomes, just as runners will oupace joggers who will, in turn, outpace walkers. But, as James Taylor might say, the walking man walks," Stephens said. He continues.

"The moral greatness of capitalism rests in the fact that it is the only economic system where one person's gain can be another's also – where Steve Job's billions are his shareholders' thousands. Capitalism cultivates a sense of admiration where envy would otherwise rule in a zero-sum economic system. It is what draws people to this country."

By the way, the income definition the CBO uses includes so-called "non-cash transfers" that go to many of the poor like food stamps, Medicaid, CHIP (children's Medicaid) and housing subsidies and also measures after-tax, after-transfer income.

Robert E. Grady pointed out how President Obama's ideology triumphs over either economic ignorance or his disregard for economic fact.

The president said, "a dangerous and growing inequality and lack of upward mobility" is "the defining challenge of our time."

"This belief," Grady said, "makes Mr. Obama unique…he places inequality above economic growth as the organizing principle of U.S. economic policy ("Obama's Misguided Obsession With Inequality," Wall Street Journal, 12/22/13).

Grady noted that Obama said the income inequality problem is a "decades-long trend."

Not surprising, since it fits with Obama's conception that America's system is fundamentally flawed. Yet the data don't support that contention. Grady notes a Columbia University study that took into account our progressive tax system and all the benefits and transfer payments and found "inequality actually declined 1.8 percent during the 16-year period between 1993 and 2009…" ("The Mismeasure of Inequality," Policy Review, 2011).

The left often ignores upward mobility but Obama claimed it is lacking in America. Yet Grady notes a U.S. Treasury study finding "considerable income mobility" in the decades 1987-1996 and 1996-2005. In the latter period, roughly half of those in the bottom income quintile in 1996 had moved into a higher quintile by 2005. The study found percentage movement from the lower quintiles was higher than higher income quintiles. The real incomes of two-thirds of all taxpayers increased.

The bottom line, according to Grady: In periods of high economic growth ( '80s and '90s), the vast majority of Americans gain. In slow growth periods, like the Obama years, poor people and the middle class are hurt the most.

"The point is this: If the goal is to deliver higher incomes and a better standard of living for the majority of Americans, then generating economic growth – not income inequality or the redistribution of wealth – is the defining challenge of our time," Grady concluded.

Oh, before we forget, one last bit of evidence Grady mentioned that bolsters our claim regarding Obama's economic IQ or his TQ (truth quotient): Obama cited Obamacare as one of his initiatives to improve the economy!