Income Inequality, Faulty Reasoning, & Bad Policy

Barack ObamaWe’re hearing a lot of talk again lately about income inequality. President Obama, in what I believe is an attempt to take the focus off the failure of his signature healthcare law, has come out swinging against those who succeed too much. The impression he wishes to leave is that the reason some are doing poorly is because others are too successful.

This is an old ploy. It goes back to Karl Marx, at least, who theorized that the rich would get richer and the poor get poorer over time, with the rich achieving their high status on the backs of the poor. Marx, by the way, was a terrible prognosticator. He predicted all wealth would end up in the hands of a few, that the workers’ situation would get worse, and then there would be an uprising of workers to throw off the capitalists. In fact, entrepreneurship thrived, with small businesses doing most of the hiring yet today; workers’ standard of living steadily rose through the decades, and no mass uprising occurred. He was flat-out wrong. It’s amazing he still gets any favorable press.

Others took up the same theme, while not as starkly. The New Deal of the 1930s and the Great Society programs of the 1960s were extensions of the idea that the government had to step in to provide enough to ensure success for everyone. Think about that: what happens to the definition of success when you don’t allow failure? Well, no need to worry; the War on Poverty has been a complete bust, at least for the poor:

Improving Lives

Good intentions are not enough. Good policy must follow in the wake of those intentions. When all you do is trap people in welfare dependency, what have you really done to help them? You can count on one thing, though, if you criticize the welfare state: you will be accused of not caring for the poor. You will be be labeled as hardhearted and callous:

Really Mean

And don’t mention the national debt; we’re not supposed to notice it has ballooned more in the Obama administration than in all other administrations combined. Neither are we supposed to bring up the embarrassing fact that on Obama’s watch, that income inequality he says he’s so concerned about has gotten worse. Could it be the fault of his policies? No, of course not; he’s not to blame for anything.

Bottom line: Obama operates with a faulty economic vision that sees our economy as a pie that has to be cut and distributed properly. His “pie” is static, never growing. The reality, if he would humble himself enough to recognize it, is that an economy is a dynamic thing that can grow and benefit everyone at all income levels. But to ensure that happens, policies need to allow growth without penalizing those who are the engineers of that growth.

President Obama either doesn’t believe that or he has an unstated goal of suppressing real growth as an excuse for more government control. Either way, his path forward is full of pitfalls and speed bumps. We’ll never turn the corner to genuine prosperity again until he and his cronies are no longer calling the shots.