President Obama and progressives (statist liberals), trying to change the subject from the complete failures of their policies and the resulting human carnage, now incessantly flog income inequality with new claims that demonize successful people and free markets. They seek to lay a basis for their ultimate fantasy: massive new redistribution initiatives.
Not only do they claim that economic inequality is increasing, but further that the rich prosper by making the poor and the middle class worse off – that is, literally poorer. And where we used to have economic and social mobility allowing productive regular folks to move up and the indolent princes of privilege to sink back where they belong, they allege that income mobility has ended and we’re a soulless static stratified society.
It’s all nonsense, as the facts show.
First, the family income data on which they rely misleads for three reasons: It includes market income only and does not reflect the reductions in income of better off folks due to the taxes they pay; nor does it reflect the benefits to lower-income folks of government aid (“transfer payments”); and it’s not adjusted to reflect the declining size of families.
A 2011 Congressional Budget Office report adjusted for these items and revealed that, instead of the poor and middle class becoming worse off, over the last 30 years average household incomes for the poor grew 49 percent and those for the middle class climbed 40 percent. Although incomes of the wealthy grew 201 percent, their total tax bill also rose even more as a consequence of their greater prosperity. Since the poor and middle class became much better off, the claim that they are exploited by the well-off is false.
Further, the historical pattern of people starting near the bottom when they first enter the work force and migrating up the ladder as they gain experience and become more productive also continues. But today’s young adults start at much higher income levels than did their parents’ generation, and they move up from there. Mobility and more!
Further, economic freedom, beleaguered as it is (especially in recent years), is still much higher in America that in the great majority of other countries. As a consequence, disposable incomes of our middle class are exceeded only by those in three very small and unique countries (one of them a big oil producer). Americans are much better off than the European statists that our progressives seek to imitate.
Our middle class and the poor, more than the wealthy, have been burdened the last half-dozen years by the Great Recession caused by government excess and over-reach and they continue to be burdened by Obama’s non-recovery. But the middle class has really struggled to make ends meet only when, like government, it fails to control its spending. Our system is not perfect, but is fairer than those in most other countries, leaving folks now much better off than our earlier generations and those today in other countries.
The only way to put a negative spin on all this is to do what Obama, the statists and other leftists do regularly: indulge wantonly in envy.
But here’s the kicker: American states controlled politically by progressive obsessions with inequality and redistribution – that is, “blue” states with high taxes, high minimum wages and expanding government benefits levels – have not only labored with the slower economic growth those policies cause; on average, they also have higher income gaps between the wealthy and everyone else than do the “red” states. So, the agendas of the progressives fail all the basic goals of public policy, even the ones they worship most.
A good part of this pattern results from the fact that productive people and businesses vote with their feet, taking their productivity and resulting income and wealth levels to states that tax them less and do not badly or excessively regulate them. The jobs they provide to the poor and middle class, plus the economic dynamism they create, go with them to the red states. Left behind less well off than they would be but for the out-migration are the progressive politicians, voters and workers, especially in heavily union high-tax and over-regulated areas.
Their problem is simple: They live on narratives, not facts, data and logic. They think stories about redistribution in which they claim to really care about human wellbeing and fairness are all that’s needed. They think that demonizing and attacking economic freedom, market system and the people who are productive (and some just plain lucky) means that their statist policies will actually work. They think it’s all about their professed intentions, not the actual results.
(Ron Knecht of Carson City is an economist, law school graduate and Nevada higher education regent.)