A few thoughts on rising income inequality

 

 

Let us now praise famous men

 

I’ve been asked how I respond to the issue of widening income inequality raised a couple of days ago by President Obama and discussed here.

 

I have a number of thoughts about it.  Here are a few, hastily assembled (upon my return from the annual ward Christmas breakfast) in no particular order and with absolutely no claim to completeness:

 

Government tends not to help on this issue.  In fact, it often tends to hurt.

 

1.  Federal welfare policy has encouraged dependency, and has subsidized delinquent fatherhood.  This has led to a meteoric rise in single-parent families — a fairly reliable predictor of low income — and to the feminization of poverty.  And those, in turn, tend to create a new generation of poor and often unemployable children.

 

2.  Moreover, government agencies — which have proliferated in number and intrusiveness — tend to favor large corporations and large unions, the only organizations with the budget resources to systematically cultivate regulatory agencies and legislators and, thus, the organizations most reliably capable of garnering access to and the attention of powerful politicians.  It’s no coincidence that six of the nation’s ten richest counties are clustered right around Washington DC, which, before the rise of the behemoth regulatory state, was a small, sleepy Southern town.  Many large corporations have moved, or are moving, their headquarters to the greater DC area, because they know where the power is concentrated.  (A simple Google search for corporations moving their head offices to the area around Washington in recent years is instructive, if not stunning.)  Small businesses tend to lag behind in terms of access to federal authorities; most of them are local, for that matter, and cannot simply move to Maryland or Virginia.  Yet it’s in small business that much of American wealth is created and where economic recoveries typically begin.  That’s why it’s such bad news that small-business regulations have surged under President Obama even while the rate of small-business formation fell to record lows.   Although there has been some improvement lately in that rate — people and businesses adapt; they have little choice — the launch of Obamacare (with its difficult registration, its unpredictable consequences, its ever more whimsical enforcement, and its increased costs) may jeopardize those gains and could make the situation much worse.

 

3.  American public education is often mediocre, and it’s especially bad in poor areas.  It underserves disadvantaged people to the point of malfeasance.  (See here, for instance.)  Even graduates of our schools often find it difficult to compete, nationally and internationally.

 

4.  Drug policies have permitted, and perhaps fostered, widespread addiction, which often renders its victims essentially incapable of productive employment.

 

Having hastily written the above, I’ve also located some interesting and relevant links, with either reinforce what I’ve written above or, in some cases, go beyond it.  Here are two of them, chosen essentially at random from a vast pool:

 

http://www.nationalreview.com/corner/365536/obamas-failed-approach-has-increased-income-inequality-jeffrey-h-anderson

 

http://www.washingtonpost.com/blogs/right-turn/wp/2013/12/05/10-problems-with-obamas-income-inequality-speech/

 

And here’s a bracingly partisan take on the matter, with which I fully agree.

 

 

  • noel

    Why doesn’t Mormon Patheos have someone write on occasion who is not so conservative politically and theologically?

    • DanielPeterson

      You’ll have to take your complaint up with the leadership of Patheos.

      I have nothing to do with the management of the thing.

      I started a blog. They asked me to bring it onto Patheos. I did. End of story.

    • kiwi57

      Oh, you mean like Kiwimormon? Or The Mormon Therapist? Or Faith Promoting Rumor? Or, well, absolutely EVERY other Patheos blogger on the Mormon Channel?

      • DanielPeterson

        Indeed.

  • Sean Healy

    I am not convinced that, from a secular perspective at least, income inequality is per se a bad thing. And therefore I am not convinced that rising income inequality is a bad thing. Sure, if it’s the “rich get richer, poor get poorer” kind of rise in income inequality, that’s one thing. But what’s been going on in this country, at least pre-Obama, is everybody getting richer, just at different rates.

    Consider this Heritage Foundation report: http://www.heritage.org/research/reports/2007/08/how-poor-are-americas-poor-examining-the-plague-of-poverty-in-america

    Here’s an excerpt:

    - Forty-three percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.

    - Eighty percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.

    - Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.

    - The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)

    - Nearly three-quarters of poor households own a car; 31 percent own two or more cars.

    - Ninety-seven percent of poor households have a color television; over half own two or more color televisions.

    - Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.

    - Eighty-nine percent own microwave ovens, more than half have a stereo, and more than a third have an automatic dishwasher.

    Basically, this report says that in 2005 (when the report was published) 12.6% of Americans lived below the poverty line. That’s about 1 in 8. And yet these poorest Americans have more, in terms of material possessions, than the average European, even though all of Europe practices redistribution of wealth to a much greater degree than America. No wonder so many people would rather be “poor” in America than middle class elsewhere.

    I lived in Europe for four years. We lived in four apartments in three different countries. In none of the places we rented did we ever have an air conditioner. We did have a dishwasher in two of them. We never had more than two rooms per person. We never had a garage, and we only had a car (and only one car) for the second half of our time there. We never had more than one bathroom. In only one place did we have a television (but it was a color television and it did have satellite reception). We had a porch at one place, and a small balcony at two others. Disclaimer: I was a student at the time, so we definitely were not living like middle-class Europeans. But we certainly were not living as well as the “poor” in the U.S.

    So if rising income inequality means that our poor have more wealth than most middle-class people anywhere else in the world, I say let it rise.

    By the way, this additional report shows more of the “hardships” our poor must live through, such as the fact that over 17% of them own big-screen TVs: http://www.heritage.org/research/reports/2011/07/what-is-poverty. (I don’t even have a big-screen TV, and I make almost three times the federal poverty threshold for my family size.)

    Please note, I am not saying that more material wealth automatically means greater quality of living. All I am saying is that rising income equality doesn’t mean the poor are getting poorer. I am also not saying that there are no genuine poor in America, just that our poverty line is artificially high.

    For example, about 1.5% of those below the poverty line say that they often do not have enough to eat, and an additional 6% say they sometimes do not have enough to eat. So yes, real poverty exists here, but it’s less than 3 million people, not over 30 million. (That is, less than 1% of the population instead of over 12%.)

    Again, this is based on pre-Obama data; since he took office, median income levels have dropped across the board – that is, the poor are getting poorer (along with everybody else) – so we may have more truly poor now than we used to.

    • mike

      The census statistics are very telling. Michael Medved, in his book The Ten Big Lies About America, also goes into detail about the incredible increase in home square footage by the middle class over the last 40 years, the greater number of cars and t.v.s owned by the middle class, and the hundreds of thousands of middle income Americans who now go on cruises annually. We face serious economic issues, but the liberal talking point that the rich are getting richer at the expense of the middle class is a sham.

  • RaymondSwenson

    We provide aid to people with disabilities, and free public education, and job training, etc. But Obama wants to repeal the laws of economics by demanding that businesses pay people three times what they are worth in terms of skills. The notion that you should be able to make a lifelong career out of selling burgers is out of touch with reality. The belief that it won’t increase unemployment is just stupid.

    It is ironic that Obama likes to ridicule his opponents on subsidies to “green energy” for scientific ignorance, but then he totally ignores the science of economics in that policy and every other policy of his administration.

  • R Crawford

    DC 28:6 For if ye are not equal in earthly things ye cannot be equal in obtaining heavenly things;

    Francis Bacon wrote “Above all things good policy is to be used so that the treasures and monies in a state be not gathered into a few hands… Money is like fertilizer, not good except it be spread.” (Francis Bacon of Seditions and Troubles)

    In an age where CEO’s make upwards of 300 times per hour of the amount an average employee earns (http://go.bloomberg.com/multimedia/ceo-pay-ratio/) when the top 20% of citizens of the United States control 85% of the nations wealth (2007 figures (http://en.wikipedia.org/wiki/File:U.S._Distribution_of_Wealth,_2007.jpg) when given that wealth enables influential power to legislate and elect. Is the future inevitably bleak. You don’t have to be a prophet to see that practically every time wealth becomes disproportionate, the people will eventually suffer.

    According to the Congressional Budget Office, between 1979 and 2007 incomes of the top 1% of Americans grew by an average of 275%. During the same time period, the 60% of Americans in the middle of the income scale saw their income rise by 40%. Since 1979 the average pre-tax income for the bottom 90% of households has decreased by $900, while that of the top 1% increased by over $700,000, as federal taxation became less progressive. (http://en.wikipedia.org/wiki/Distribution_of_wealth)

    Do those with power, dictators, kings, billionaires, or polical power brokers of any stripe ever attempt to redistribute their wealth? Altruism does exist as described in Maslows’ Hierarchy of Needs, but it remains a relatively small fraction of the available resources. Only democratically represented government can be held accountable to maintain social stability. Inequality socially or financially, historically always leads to separation of classes and suffering by the disadvantaged which is the majority of the population. Given time the disadvantaged will always eventually rebel. One historian (sorry don’t recall the source) commented that if the great depression had gone on for a few more years we would be living in under a different form of government. Minorities have and are rising all over the world. Only the future will reveal the ultimate fulfillment of capitalism. Does capitalism by its very nature eventually lead to such inequality that it will produce its own demise.

    If we believe that in order for meaningful society to exist there has to be a distribution of power with checks and balances. Can there be checks and balances in a society in which the wealth is controlled by the few?

    • DanielPeterson

      I’m all for greater equality. But granting more power to the state is a very ineffective — not to mention a very frequently dangerous and even lethal — way of attempting to achieve that.

      Anyway, the United States simply isn’t an oligarchy. That’s a silly suggestion.

      • R Crawford

        Greater equality. Unfortunately United States culture disagrees. One of the best forms of balancing wealth was the inheritance tax. A tax on wealthy individuals reducing generational wealth transference by 50% helped reduce wealth disparity. I believe the tax was unpopular because the public felt it may impact them, the same reason people play the lottery, they aren’t going to win, “but someone will and why not me”.

        It is okay to say big government power is not the way to equalize wealth distribution but if government is not a solution then what is? I worked in one of the largest corporations in this country for 25 years and I can tell you the obvious – corporations do not have a conscience. Corporations obey laws because to do otherwise is expensive, both in terms of fines and loss of business due to public opinion. Profit corporations exist for one reason, to make a profit. Your own comments in item “2″ support this conclusion.

        As far as the United States not being an oligarchy, no we don’t currently live in a country in which a handful of men sit around in a smoke filled room and determine who will be the next congressman or president. We do live in a country in which lobbying dramatically influences labor, tax, trade and other government policies and wealth can and often does direct the course of the nation. Here is a thought of interest:

        United States

        Some contemporary authors have characterized current conditions in the United States as being oligarchic in nature.[10][11] Simon Johnson wrote that “the reemergence of an American financial oligarchy is quite recent,” a structure which he delineated as being the “most advanced” in the world.[12] Jeffrey A. Winters argues that “oligarchy and democracy operate within a single system, and American politics is a daily display of their interplay.”[13] Bernie Sanders (I-VT) opined in a 2010 The Nation article that an “upper-crust of extremely wealthy families are hell-bent on destroying the democratic vision of a strong middle-class which has made the United States the envy of the world. In its place they are determined to create an oligarchy in which a small number of families control the economic and political life of our country.”[14]

        United States political and finance industry leadership has recently been dominated by people associated with Harvard and Yale.[15] All nine members of the current Supreme Court attended Harvard or Yale law schools. The last member appointed to the court who was not a former student at one of those two institutions was Sandra Day O’Connor, appointed by the newly elected President Ronald Reagan in 1981.[16] Reagan was also the last United States President who did not attend either Harvard or Yale.[17]

        http://en.wikipedia.org/wiki/Oligarchy

        Conspiracy theories can go way off track, although some conspiracies have and do exist and have been documented. One non political example was the group of men who represented the tire industry who went around this nation in the early 1900′s and bought up inner city rail transportation for the purpose of dismantling them. Obviously this pushed transportation onto the highways and cars use tires. This has been documented, went to the highest courts and several of the key players went to jail. Big government, in this case the Judicial branch in action.

        Back to equality, religions are to diverse and have not accomplished it, corporations have no stake in reducing executive salaries – which in some cases can be 1000% greater than the average employees wage (part of the problem not the solution. Bloomberg cites JC Penney’s CEO’s pay ratio is 1,795 times greater than the average employee http://go.bloomberg.com/multimedia/ceo-pay-ratio/, that leaves either government or possibly special interest, but thus far no one seems to want to champion the cause.

        Do we really want equality. Is it moral quicksand. It sounds good but as we move more into multinational trade and competition, do we want our standard of living reduced so one billion people in China or India or Mexico can have cement instead of a dirt floor, or go to bed with their belly full for the first time in their life. It is easy to say the top 10% need to give up their affluent life style, but what happens when the rest of us have to reduce the number of TV’s, drive older cars – or worse yet – walk, or going out to dinner becomes a luxury, etc. Maybe I’m too cynical but that would be an incredibly hard sell.

  • Janet Thompson Umberger

    I take issue with your comment on public education. The University of Illinois recently did a study comparing students from public and private schools. They were careful to compare students from similar socio-economic backgrounds. The results showed that the students in public schools did better than their peers from private schools. People think private schools are better. Well, if the kids in private schools don’t make good grades, their parents pull them out of that school and find another which is “selling”grades. OK, that is my take on it. But failing students cost them money and trouble makers are kicked out of their schools. I’m tired of our public schools being maligned. No other country undertakes to provide a free education to all students, including those with special needs. Please find this article and study it. As an Illini alum, I was proud to read this.

    • DanielPeterson

      The simple fact is that, compared internationally, American students fare poorly. And they have for many years.

  • dangerdad

    Of course, the other possibility is that the whole thing is a lie. Nearly every stat about the economy is massaged to a degree that they’re no better than just being made up. A UC Berkeley (my alma mater) econ professor? Why would I believe him without replicating every single datum in his study?

    And furthermore, I keep hearing about income inequality while people ignore economy of scale. Uh, shouldn’t the CEO of the company that now does twice as much economic activity get more pay than the janitor? And proportionally more than it did when it had half the workers? Why would the janitor’s pay go up in that period.

    The whole reasoning is based on lies and sophistry.

  • DanielPeterson

    Wow. I’m really sorry that I’m testing the limits of even YOUR legendary patience and charity, Crixus/Kevin Graham.

    I get a kick out of your mention of Sean Hannity and Thomas Sowell. I can’t remember ever having cited Sean Hannity here or anywhere else. I very rarely see even a few minutes of his show, and almost never an entire episode.) I never, ever, listen to his radio program. Nor, for that matter, can I remember citing Thomas Sowell — though I might have, since (please forgive me, Kevin/Crixus!) I admire his work a great deal.

    This is my blog, incidentally. I started it, and I produce it. It’s for expressing my views and publicizing things that I want to publicize. You seem to regard that not only as evidence of cowardice on my part, but as, somehow, an injustice.

    Your reaction seems, to me at least, more than a bit weird.

    You’re free to start your own blog. In the meantime, I haven’t censored you here, so I’m not quite sure what your complaint is.

    • Jon

      See the references to Sowell on 5/21/12, 6/2/12, and 12/5/12.

      • DanielPeterson

        Okay. Three references, from between a year and nineteen months ago.

        You’re plainly more of a student of my blog than I am.

  • Sean Healy

    I read the article you linked, and noticed something interesting. The authors do not dispute a single finding of the Heritage Foundation’s series of articles on poverty; they merely dispute the conclusions.

    In fact, their argument essentially boils down to “Well, they’re right that the vast majority of America’s poor are merely relatively poor and not absolutely poor, but in a rich country like ours, people shouldn’t even have to live in relative poverty.”.

    While I agree with this argument, the fact that America’s relatively poor have more material wealth than the average European (note: not the average poor European – the average European overall) means that the relative poor are a low priority in my opinion. And as the Heritage Foundation reports point out, it would probably be a low priority for most Americans if they knew this truth.

    Instead, the Obama administration and the media cite the official poverty rate (12.6%), neglect to point out that that rate includes the relatively poor, and show an example of absolute poverty, while omitting the fact that less than 1% of America’s poor live in such conditions.

    The point of this deception is to garner support for government programs aimed at redistribution of wealth. Unfortunately, no government on earth has ever succeeded at redistributing wealth. What they have succeeded it is reducing overall wealth and then spreading what remains around in what they claim is a more equitable fashion.

    Don’t get me wrong, I don’t disagree that income equality is bad. I just don’t think that attempting to fix the problem via bigger government is a viable solution. Everybody, rich and poor alike, just ends up worse off.

    If you asked most relatively poor Americans whether they would rather keep their big houses, multiple cars, and wide-screen TVs, or take a hit in the material wealth department so that the income gap would be smaller, I’m pretty sure they would pick absolute wealth over relative wealth.

  • mike

    So you are disputing the census data cited by Heritage??

  • DanielPeterson

    Yes. And there are left-wing think tanks, too.

    So what?

  • Shelama
  • Lucy Mcgee

    Dr. Peterson, I’m surprised that you mentioned nothing about globalization, especially the globalization/liberalization of financial markets, and the concentration of wealth by monied interests.

    What drove the occupy movement, was the realization that those who created the near collapse of our economy, were, as an industry, the most successful in re-amassing lost gains after the financial crisis. Financial speculation allowed massive gains to be reaped by the financial industry, while the financial sector losses were shared by us all. Meanwhile, millions were thrown out of their homes and credit dried up. This is nothing more than wealth redistribution using the mechanisms of power. When a Wall Street hedge fund manager, at his/her peak, can earn more in one week, than the vast majority of people can earn in a lifetime, people should well realize that structural problems exist within economies. When private monied interests are able to write and direct legislation (20-30 thousand lobbyists working in D.C.), those with no voice (low-wage earners), will continue to be powerless and income inequality will advance. How much do those earning tens of millions, truly care for a those earning minimum wage? Have people become nothing more than commodities of business?

    Thanks Shelama, for the link. I’ve encountered you before, and you always come up with some very salient information.

  • noel

    Imagine Dan at the feeding of the 5000. Overhears the disciples talking about the boy who was smart enough to bring his lunch.(no such thing as a free lunch). Dan mumbles “if these people are too lazy or lack preparation, why shold the boy be deprived of his fish and bread”. Spokesman for the Heritage Foundation ” Yes we don’t want to become a nanny state”. Rush sitting on the outside mumbles “This Jesus fellow must be a liberal, What’s all this talk about rich men and camels and needles”?

    • DanielPeterson

      Imagine Noel as a theocrat abusing the scriptures in order to claim God’s approval of his particular political and economic prejudices.

      No. Wait a minute. You don’t HAVE to imagine it.

      • Shelama

              …he said with a sneer.

        • DanielPeterson

          No, he didn’t.

          And you plainly can’t tell the difference.

          Clean up your act or be blocked. You’ve cluttered my blog enough with such nonsense.

          • Shelama

            O, but yes he did.   – You misattribute “sneering” when it’s not present and you deny it where it’s obvious.

            Just as well block me, then, because I would be a recurrent reminder of what honest people already know: …that while you won your silly apologetics war with the Evangelicals all you really gained was a slightly better seat in the same boat.

            “Virtually nobody converts to Christianity – converts from Unbelief to Belief – based on the conclusions of serious, honest, informed, critical study of the Bible. Etc., etc., etc.”

              – You didn’t falsify it because you couldn’t falsify it. And you know it. And the reasons are obvious.

              – You didn’t falsify it not because of sneering or games or an imaginary ratio of effort to reward, or of what I think of your dissents or attempts. It’s because of what YOU think of those dissents or attempts.

              – Your failure to deny had nothing to do with not “giving reason.” We both know the reasons. As do honest people at BYU-Neal Maxwell, FAIR and mormonscholarstestify.org

            An Evangelical once – and he’s the only one ever – gave the only necessary and honest answer: ”Yes, that’s true, but so what?”   Score 1 for the Evangelicals.

            That’s not sneering or clutter. It just is.

            Happy Holidays   : )

          • DanielPeterson

            You’ve said you were leaving.

            How can I miss you, though, when you won’t go away?

          • Shelama

            lol

            I said I was leaving only in anticipation of you finally following thru on your repeated threats to toss me.

            So you finally ball’ed up and did it. (Or did you?)

            Truth hurts, huh, about the very sneering you imagine and decry in others?

            But please, lemme know if you ever can find somebody at FAIR or BYU-Neal Maxwell or mormonscholarstestify.org who converted from Unbelief to Belief based on the conclusions of serious, informed, honest, critical study of the Bible.

            That good ‘ol gnostic “Only True” is powerful and seductive… it always has been. Throw in the interpretation of common, routine religious experiences as a ghost bearing gifts and you can even keep and hold self-professed intellectuals. Especially those brainwashed in childhood.

            Happy Holidays : )


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