Friday, October 28, 2011

The bogus issue of wealth and income disparity

Income disparity has grown in America over the last few decades.


So what?

Obviously some people have more wealth and make more income than others. That is not in dispute. Here is the real question. So what? What exactly are we to do about it? Should we do anything about it at all? Why do some people think that the government has the right and obligation to even the playing field or redistribute income from those who earned it to those who did not? The government has no obligation and frankly no right under the Constitution to mandate a certain acceptable level of wealth or the appropriate difference between the richest 1% and any other citizen.

This is an important issue because I can already see that President Obama is clinging to class warfare and appeals to envy like a drowning man. When all else fails, the Left always pulls out the class card and whispers of the unfairness that the guy over there makes a dollar a year more than you do. With one exception there is always someone in America who earns more, who has more, than any other given person and appealing to entitlement and envy has been a political winner for the Left forever. The “Occupy Wall Street” hordes are playing right into this by publically protesting against “greed”, an easy target, while their so-called solutions are toxic to most Americans. The irony of the middle and upper class children of a privileged upbringing protesting against the very system that has provided them with easy and comfy lives for most of their existence, the entertainment they demand and the ridiculously overpriced educations that they borrowed enormous sums to finance is lost on most of them, so caught up are they in their own self-righteous indignation.

The truth is that in any free society there will be disparity. In fact that is true even in controlled economies and totalitarian societies. In the Soviet Union the party bosses were at the top of the food chain and lived lives of privilege unimaginable and unattainable by the rest of their comrades. There will always be a “1%” that is better off than the other “99%”. The question is what determines the population that makes up that 1%: hard work and success or government bureaucracy and totalitarianism.

The other issue is that people who are the wealthiest have also created an enormous amount of economic benefit for those on the bottom rungs of society. Let’s look at an example. Bill Gates founded Microsoft in 1975 and through the decades since he has become one of the wealthiest men in the world. He is one of the “1%”. He might be in the top 1% of the top 1%! Of course he also gives away enormous sums in charitable giving but that is irrelevant to this conversation.

The company gates co-founded, Microsoft, also employs 90,000 people. 90,000. Many of those jobs are low skilled jobs but an awful lot of them are very high paying, great benefit jobs. Microsoft has created hundreds of billions in wealth via profits. Much of that wealth has gone to Mr. Gates but a lot of it has also gone to the employees and shareholders of Microsoft. Most people with a 401k plan probably hold a number of mutual funds that invest in Microsoft and have reaped the benefits of its profits. Companies like Microsoft, created by an entrepreneur and growing into an enormous company that in spite of the various flaws of Windows have made personal computing available to virtually everyone in America and billions of people around the world. The entire personal computer industry as it exists today can be traced back to Bill Gates and he has reaped the profits. Should Bill Gates be punished because of his success? Would we rather that people like Bill Gates just worked in a factory rather than being innovative risk takers? What about the Walton familty? In the 80’s and 90’s Wal-mart exploded in size and the Walton family reaped enormous benefits. Sure the Walton heirs are incredibly wealthy and Sam Walton was the richest man in America for many years but Wal-Mart also not only provides low cost products to hundreds of millions of consumers, it also employs 2.1 million employees worldwide. Think about that, over 2,000,000 employees, most of whom are low or no skilled service industry employees, that can trace their jobs back to the hard work and risk taking of a man, Sam Walton, who became supremely wealthy and rightfully so.

Even if we assume that rectifying income disparity is a legitimate function of the government, which it is not under any rational reading of the Constitution, there are two ways to address the issue. One is to seize, under threat of imprisonment, the generally hard earned income of the most successful among us, those who have often taken enormous risks to start a business or invest in an education. This method punishes the achiever and rewards the non-producers and the risk averse among us. This method is designed to encourage “fairness” but instead is more likely to reduce the overall wealth in our society by punishing achievers and quashing risk taking.

The other option is to take steps to encourage risk taking (real risk taking, where failure has consequences and the government is not going to bail you out) and investment. A strategy designed to facilitate the expansion of wealth so that more people have an opportunity to achieve. This strategy makes sense and has proven successful in the past but it is unpopular because it means that ultimately people are responsible for themselves and some people will end up being more successful than others.

We will be faced with two visions next November. On the one hand is a vision we see on display already in America, a vision of punishing achievement and rewarding failure, both on an individual level and an institutional level. A vision that has dominated our political discourse for decades, under Republican control and Democratic alike. The alternate vision, the vision I believe set in place the foundations for our prosperity that we have been trying to undermine for a long time and is in the spirit intended by the Founders of a system of limited government, would create an environment where hard work, risk taking and entrepreneurial spirit is permitted to flourish. The government cannot make people entrepreneurial, it can only hamper that spirit. The government cannot create wealth, it can only shuffle existing wealth from one person to another. The government cannot create jobs, it merely replaces private sector jobs with public sector ones. For far too long we have turned over our lives, our economy, our daily bread even, to the government and with each passing year it becomes more obvious that the government is not the solution, it is the problem. Our greatest challenge, the number one factor that is endangering our economic future, has nothing to do with the richest 1%, it has everything to do with the size and scope of the government, a government that creates crippling regulations, convoluted tax codes to reward favored industries and companies, borrows money and makes untenable economic promises with the intent of letting future generations pay the bill and generally makes individual Americans into members of a dependent class that is capable of little other than holding out our collective hands.

Is there income disparity in America. Of course there is, just as there is in every civilization that has ever existed or that will ever exist this side of eternity. Is the gap getting worse? Yes. The solution has nothing to do income redistribution but instead is centered on shrinking the size and scope of the Federal government, empowering up the free market by staying out of its way, encouraging investment and reasonable risk taking and making people responsible for their own prosperity. Unless we are willing to do that we are headed for a mess that will make the current European crisis look like the proverbial walk in the park.
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