How To Solve The Problem Of "Staggering" Income Inequality

Do you think that income inequality in the United States is a major problem?  How about a "staggering" problem?  Recall that our ex-President Obama in 2014 famously called income inequality the "defining challenge of our time."  Or there was New York's Mayor de Blasio, who one-upped Obama by raising income inequality to a "crisis," -- one that, moreover, is "quiet" and "persistent" and "urgent."  From de Blasio's January 2014 inaugural address:

New York has faced fiscal collapse, a crime epidemic, terrorist attacks, and natural disasters. But now, in our time, we face a different crisis – an inequality crisis. . . .  It’s a quiet crisis, but one no less pernicious than those that have come before.  Its urgency is read on the faces of our neighbors and their children, as families struggle to make it against increasingly long odds. 

For me, I say it all depends on how you look at the world.  If you want to look at the world as providing the occasion for anger, resentment, and victimhood, then by all means declare income inequality to be a crisis.  Are you not one of the 400 wealthiest people in the United States?  Well boo-hoo!  Let's all sit around and feel sorry for ourselves and plot our revenge!  

The other way of looking at the world is that it is a cornucopia of opportunity for those willing to go out and strive a little.  Capitalism has just created a few hundred new billionaires!  What are they going to do with all of that money -- put it in a big pile and count it over and over again?  If you want to be prosperous, and maybe extremely prosperous (if not a billionaire yourself), then get out there and find something to sell to these people!  Believe me, this is the entire business model of the major law firms, and the lawyers at those places are definitely in the "extremely prosperous" category.  Same goes for the people who run hedge funds, or who build and sell mansions, or yachts, or private jets, or luxury goods of every sort.  With all that wealth waiting to be spent, there is no reason for anyone to be poor or idle.  This is an economic engine ready to be ignited!

I'll bet you can guess which one of these two ways of looking at the world has been adopted by the Washington Post.  In the Post's Wonkblog of April 6, Jeff Stein reports on "How 12 experts would end inequality if they ran America."  First, we must all agree that income inequality in the United States is a major problem.  No, make that a "staggering" problem.  And all the right progressive "experts" are hard at work figuring out the solution!

Imagine you had complete control of the U.S. government: What one thing would you do to reduce the country's staggering economic inequality?  It's no small task: The 400 richest Americans control more wealth than the poorest 80 million households, and as the richest citizens continue to capture the lion's share of new wealth — the top 5 percent has captured 74 percent of the wealth created in this country since 1982 — the situation is only growing more extreme.  But while there's consensus that America is a wildly unequal country, there's broad disagreement on what, if anything, should be done to address that.

Notice that we don't bother here to stop to convince anyone that U.S. income inequality is "staggering" and that something needs to be done about it.  That goes without saying!  The richest citizens are "capturing" the "lion's share" of the wealth!  The situation is "extreme."  It needs to be fixed!  What are progressive government policy "experts" for, anyway?

Needless to say, the large majority (9 of 12) of the "experts" consulted by Stein are the usual progressive suspects with the usual progressive "solutions" -- all of which have been amply demonstrated, with decades of experience, not to work.  Indeed, not only not to work, but to make things worse (assuming that increasing income inequality is "worse").  It's not by accident that New York City and San Francisco have the most extreme income inequality in the country.  But it seems that these "experts" are so clueless that they don't even know about that.

One after another, the progressive "experts" offer "solutions" which amount to nothing other than more and more big government spending and redistribution programs:

  • From Heather Boushey of the Washington Center for Equitable Growth:  Universal access to child care.  We'll fund it with a new tax on capital! 
  • From Matt Bruenig of the People's Policy Project:  Give a big boost to union rights, start universal social wealth fund.  Has he noticed that the states with the biggest and strongest union movements (New York, California) have the highest income inequality?  Why is that, Matt?
  • From Darrick Hamilton, Professor of Economics at the New School:  Create a trust for every American baby, race-based reparations.  He seems to be talking about a new handout of an average of around $20,000 a person, or maybe $3 -4 trillion for openers.  No problem!  And when many of the beneficiaries blow through the money and find themselves broke again?  He doesn't mention that possibility.
  • From Valerie Wilson of the Economic Policy Institute:  Dramatically strengthen Social Security.  I love the infinite variety of euphemisms for spending vast new sums out of the infinite pile of federal money.  We'll "strengthen" Social Security, which on investigation means that we will pass out new and additional trillions to low earners, to students, for "dependent care" benefits, and, I guess, anything else that pops into our heads.  Social Security already going broke?  So what -- this is fairness and justice we are talking about!

But is there any reason to think any of this would work in the slightest?  I wonder if any of these people even know that the places with the most in the way of progressive programs have the highest income inequality.  Among the 435 Congressional Districts, my own District (New York 10) leads the pack with the highest Gini coefficient of all; and the other big Manhattan District (New York 12) and Nancy Pelosi's San Francisco District (California 12) are right up there in the top 25.

But finally, one of the 12 "experts" tapped by Stein is a conservative guy from the Heritage Foundation (David Azerrad), and he proposes a "solution" that would actually work -- if you buy into the idea that income inequality is a staggering problem.  Azerrad's idea is to ship the people in the top 1% of the income distribution to Venezuela.  If you think about how the income inequality statistics work, you quickly realize that this step would immediately flatten the income distribution dramatically.  But dare we ask:  Would anybody actually benefit from this step?  Not if benefit is measured by economic success.  If "benefit" is instead measured by the exquisite satisfaction that comes from revenge, I guess you will find some of that, maybe more than you want to know about.  Go for it, progressives!