Gee, I don’t *feel* rich

Income inequality and socialism, revisited

We saw it coming, didn’t we?

“It’s not that I want to punish your success,” Obama explained. “I just want to make sure that everybody who is behind you, that they’ve got a chance for success too. My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody ! I think when you spread the wealth around, it’s good for everybody.”

Of course that was then-candidate Barack Obama, in response to Joe “The Plumber” Wurzlebacher’s question “Your new tax plan is going to tax me more, isn’t it?”.  Obama’s response was widely recognized (and condemned) as a “tell” of Obama’s love for socialism.  But that was just the beginning.  That love for socialism was one of the few “campaign promises” that he actually fulfilled, as he and his Democrat cronies rammed through a leftist ideology-fest of spending that bloated the government – and our national debt – to previously unheard-of heights.

“Soak the rich” is a time-tested philosophy for the Democrats.  And the idea lives on, now embodied by the “income inequality” socialists.  Inciting class warfare in the name of “equality” or “fairness” is one of the Left’s favorite tactics.  In the March 2nd NYT, Robert Frank invokes the spectre of inequality, this time in the guise of a so-called “toil index”.  The interesting (and silly) aspect of Frank’s assertions is the idea of using “family goals” as an indicator of the “cost” of inequality.

The index rejects the standard economic assumption that well-being depends primarily on absolute consumption. Instead, it assumes that the context of that consumption is often far more important. Context matters because the brain requires a frame of reference to make any evaluative judgment.

For example, is a particular family’s house adequate? The answer invariably depends on the quality and size of other houses in the surrounding area.

Rising inequality has shifted the context that governs housing choices. Higher incomes at the top have led the wealthy to build bigger mansions, shifting the frame of reference that shapes demands for those with slightly smaller incomes, who travel in overlapping social circles. The near-rich respond by building bigger houses as well, shifting the frame of reference for others just below them, and so on, all the way down the income ladder.

In other words, because a middle-class person lives around those who are wealthy, they must “toil” more to keep up with the Joneses… their perception that they are not well-off means that they must have more, therefore enlarging their inequality gap.

Apparently If I don’t feel rich, I must be a victim of inequality.

Does this mean that because I am jealous of the fact that they just built a more expensive house across the street that my inequality has suddenly grown?  Because I “feel” poorer, that means that I AM poorer?  Is it really a bad thing that I may have to “toil” to get a nicer house?  I suppose that this theory does correspond well with the liberal educators’ obsession with self-esteem, fairness and feelings, so it shouldn’t be surprising.

Despite the fact that the incumbent administration has a love affair with wealth redistribution, supported by the left-leaning mainstream media, a number of strong cases have being made against the fear-mongering.   Several years ago, the Heritage Foundation dissected some of the commonly-used income statistics to demonstrate that the alleged “inequality” was actually nowhere near as un-equal as assumed. They concluded:

The Census income distribution figures are the foundation of most class-warfare rhetoric. On the surface, these figures show a high level of inequality: The top fifth of households have $14.30 of income for every $1.00 at the bottom.

However, these figures are flawed by the exclusion of taxes and social safety net spending and by the fact that the “fifths” do not contain equal numbers of people. Adjustment for these factors radically alters the picture of income distribution: The top fifth of the population has $4.21 of income for every $1.00 at the bottom.

The remaining inequality in society is heavily influenced by the lack of work at the bottom. If working-age adults in the lower quintiles worked as much as their higher-income counterparts, the income disparity of the top to the bottom quintiles would fall to $2.91 to $1.00.

Still, the top fifth of U.S. households (with incomes above $84,000) remain perennial targets of class-warfare enmity. These families, however, perform a third of all labor in the economy. They contain the best educated and most productive workers, and they provide a disproportionate share of the investment needed to create jobs and spur economic growth. Nearly all are married-couple families, many with two or more earners. Far from shirking the tax burden, these families pay 82.5 percent of total federal income taxes and two-thirds of federal taxes overall. By contrast, the bottom quintile pays 1.1 percent of total federal taxes

More recently, Thomas A. Garrett, assistant vice president at the St. Louis Federal Reserve, authored a paper titled “U.S. Income Equality: It’s not so bad“, where he asserted that (similar to the Heritage piece) income inequality indicates that the economy is working, and that the most productive workers make the most money.  In an interview with the St. Louis Post-Dispatch, Garrett stated:

It’s just a statistical distribution. The ill is that there are poor people. There are no inherent effects of having an unequal distribution of income. My point is, the social ills that are the result of having a low income are not because other people have more. It’s because those at the bottom don’t have enough income. The resource pie is not fixed. If I make more than you, it’s not that I’ve taken it from you.

The problem isn’t the rich person. It’s that this person’s income hasn’t gone up fast enough, which is why they can’t live in Clayton. That’s how markets work. Big screen TVs. Vacations. Yachts. There’s nothing inherently wrong with that. You can say it’s not fair. But there’s nothing socially wrong with that.

Indeed – the problem is poverty, not inequity and “unfairness”. (Be sure to read Garrett’s entire paper and the P-D interview – good stuff there)

As Garrett states, “unfair” isn’t a problem – unless you’re a socialist.  For example, the good folks at Socialist Appeal (whose main agenda, interestingly, is “For the right to strike, union representation, and collective bargaining”):

This is all evidence that our current economic system does not “reward success” or “hard work” as some would have us believe. It is a slap in the face to the entire working class to claim that top income earners have put themselves in their inflated position of resource and wealth accumulation through their extraordinary hard work and diligence — as if the average worker doesn’t know what “hard work” really is!

The truth is that hard work and diligence did put this wealthy group of individuals into their elevated position — the collective work performed by the working class! Our economic system primarily rewards taking advantage of the already disadvantaged, and those who excel the most at this fundamentally anti-social behavior are rewarded handsomely for their efforts. With the resources gained through this method, the capitalists are able to work within our current government to create and enforce  programs and laws which serve to benefit their class at the expense of everyone else. This relatively small section of our society increasingly feels entitled to any and every thing our society collectively produces. However, they have the means to guarantee a certain longevity to this system only so long as there is an absence of any meaningful, organized opposition.

Sound familiar?  Because,  you know, “when you spread the wealth around, it’s good for everybody.”

For a more sane view of income “inequity”, socialism and free markets, we need look no farther than Lady Margaret Thatcher, who provides us this timeless commentary:

“So long as the gap is smaller, they’d rather have the poor poorer.  You don’t create wealth and opportunity that way, you do not create a property-owning democracy that way.”

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