Obama’s Inequality Illusion

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Lashing out at the Congressional Republican budget earlier this week, President Obama chastised the GOP for ignoring what he called one of the “big, fundamental issues” of our time: inequality.

“What drags down our entire economy is when there’s an ever-widening chasm between the ultra-rich and everybody else,” Obama claimed. He went on to insist that addressing inequality was not only an important moral cause in its own right but also an economic priority, since “research has shown that countries with less inequality tend to have stronger and steadier economic growth over the long run.” It was a theme Obama has sounded repeatedly in his first term, most famously last December in his speech in Osawatomie, Kansas, in which he claimed that “breathtaking greed” in America was the cause of America’s economic woes and belied America’s national promise that “this is a place where you can make it if you try.”

Obama is not completely wrong. America’s rich have indeed gotten richer. A 2011 report by the Congressional Budget Office pointed out that between 1979 and 2007 after-tax income for the highest-income households grew more than for any other group. Altogether, between 1980 and 2005, 80 percent of the total increase in incomes went to the top 1 percent of American households. But before enlisting in the nearest “Occupy” protest, it’s worth considering some of the complications with the inequality picture presented by Obama.

Authors Peter Wehner and Robert Beschel have done just that in a new essay in the public policy journal National Affairs. One problem with focusing on the increase of wealth at the very top, the authors note, is that it is misleading. The reality is that the income of individual households is not static. People have always moved up and down on the scale of income distribution, and that remains true today. Thus the CBO points out that the population with income in the lowest 20 percent in 1979 was not necessarily the population in that quintile in 2007. Similarly, the authors report, about half of those in the bottom income quintile in 1996 had moved up to a higher income category by 2005, even as 30 percent of those in the top income group in 1996 had fallen down to a lower quintile by 2005. Contrary to what Obama suggests, income distribution is not etched in stone.

Further, an exclusive focus on the rise of incomes among the highest earners ignores the disparate effect of taxes on the rich. Even as the top 1 percent has seen a significant rise in their wealth, they have also paid a disproportionate share of the country’s taxes. The top 1 percent of income earners now pay 40 percent of all federal income taxes, according to the CBO, more than double the less than 20 percent that they paid in the 1970s. While the point is often lost in Obama’s appeals for “fairness” and higher taxes on the rich, the fact is that among the world’s richest nations, America already imposes the largest share of income taxes on its rich, exceeding even socialist countries like Sweden.

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  • Dispozadaburka

    Obama is the 1 %.

  • Red Baker

    The wealth of the US is being consumed by big government. Greedy government takes more and more of the economy, and we're now at about the same point as Europe with slow growth, high unemployment, and greatly diminished income mobility. The greatest enemy of the aspiring poor is obese government. Government has grown from under 10% of the economy in 1900, to 30% in 1950, to about 60% today (government spending + regulation costs). The high earners are highly skilled and harder working than average. They invest and risk more, and the average person invests very little – big government is taking 15% of his salary as payroll tax, and invests not a penny of it. The average person has been robbed of his lifelong investment in a retirement portfolio which would have netted him a million dollars by maturity, and now he must live on a modest social security pension instead of his own substantial wealth.

    • http://MEXICANOCCUPATION.blogspot.com RYAN JONES

      such crap!

      the wealthy have looted this nation, and like a typical bankster, it's still not enough!
      the 1% have done quite nicely under obama and his various con jobs like BANKSTER REGULATION! profits for banksters are greater even under obama's first 2 years than under the supreme court, inc.'s appointeed, GEORGE W BUSH.

      in fact, obama is really nothing but the president for the 1%, and ILLEGALS! OR BUSH'S THIRD TERM as you wish.

      is obama a socialist? YOU BET… FOR HIS CRIMINAL BANKSTER DONORS, AND MEXICO! obama has substantially enlarged mexico's LA RAZA "the race" welfare state in our borders as he builds his party base of illegals!

  • husseiNO

    A good lie is when you blend 20% of lies into 80% of facts. It will only fool indoctrinated people.

  • husseiNO

    The more man made laws introduced by the government trying to equalize people, the more holes it introduced for the greedy people to be able to evade the laws.

    The only thing that can make equalization happen is morals in people's hearts, it restrains people from doing bad things to others while giving them happiness and peacefulness, and that can not be done through laws, regulations, and sentences.

    Has anyone found out that the Ten Commandments actually can cover all the man made laws manufactured over the past 200 years?

    • johnnywoods

      I believe that the Ten Commandments are the basis for all the laws of the past that were actually needed or helpful. Of course that was before the invention of "Progressiveism".

  • Dispozadaburka

    Equality, comparisons, truth.

    Since Michelle is always being compared to being as chic and savvy as Jackie O. Kennedy.
    (G-d rest her soul.)
    I'd like to see Michelle out fox hunting in Middleburg.
    That would be a sight for sore eyes.

    • johnnywoods

      Don`t you mean " a sight to make your eyes sore"? BTW, Moochelle could never exude the class and style of Jackie O.

  • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

    How about Obama fix the inequality in effort people expend in earning their wealth?

    When someone works as hard as me, then they deserve the rewards I've had.

    • patriothere

      how about you piss off?

      • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

        And how does that make the entitlement mentality realize that work is involved in rewards?

        Come on, you can do it. Just take a deep breath and try answering something with a decent answer for once.

        • wctaqiyya

          No worries my friend. When revealed in all it's glory, plan Obama will demand equal labor from all. Except for the government workers who will need to administer the labor camps, fields and factories. Maybe you will be lucky and get to shovel coal into the neighborhood iron forge with patriot. I'm gonna request a post in the punishment brigade. Hey, it helps to love what you do.

          • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

            Won't they need safety inspectors?
            Osha, Epa, none of the regular punishment brigade?

            We need to see documentaries on Cambodia and the Pol Pot leadership to understand where Obama wants us.

          • wctaqiyya

            Yes sir, I'm thinking Pol Pot all the way. The only true safety lies in obedience to the party, dear leader and the welfare of the collective. The individual exists to serve and will serve whether dead or alive. Labor or fertilizer.

  • popseal

    The poor stay poor because they keep doing what made them poor in the first place. Quit school, abuse credit cards, don't save, never invest, wait for government help, and most importantly they blame others for their problems. An important part of ethical capitalism is giving to the poor through a financially accountable agency like a congregationally managed church. I'm finding that harder to do as so many of the poor refuse to be responsible for themselves.

  • Schlomotion

    Wehner and Beschel provide an income disparity wave chart which shows that the current income disparity level between the elite and the general populace is higher now, but similar to the Great Depression. The top five causes of the Great Depression were the Stock Market Crash of 1929, Bank Failures, Reduction in Purchasing, American Economic Policy in Europe, and Drought. The first four causes where the fault of the elite. The same problem exists today. The Stock Market Crash of 2001-2006 was caused by Osama bin Laden's attack on the WTC, Fed policy, derivatives trading, and automated commodities index manipulation (tilting) by American cartels. The Bank Failures were caused by the Federal Reserve causing mortgage credit price inflation and becoming unable to define the value of money, as well as by record embezzlement and an oligarchical soci.alist bailout that consumed the entire GDP. Economic Policy toward Europe was a secretive and deliberate attempt to extracongressionally devalue the US dollar against the Euro and illegally link the US to the European Exchange Rate Mechanism without the consent or knowledge of the governed. This was done by manipulating (doubling) the price/tax of fuel. All of these plagues were the sole doing of the elite. One can go even further and name precise names of precise individuals. There are approximately 50 people responsible for this.

    • Western Spirit

      Don't forget hedge funds. All of the Democrat elite had hedge funds.

      • Schlomotion

        I agree. Definitely not trying to exclude Democrat corruption here.

  • Rick630c1

    Asking for help/opinion understanding a comment in the article. Maybe I'm being naive here and if so I apologize. The comment in question was how the author alluded to the Social Security Benefits as an "entitlement". In my mind how is SS an entitlement? I worked most of my life and will probably work till the day I die, pending any lottery windfall I doubt I will ever be considered rich (monetarily speaking) or "well off" for that matter and have been paying into SS all this time. Assuming of course the government keeps the SS program solvent should that not be an expectation of mine to receive at least some of that money back. My whole life I have been led to believe that money was mine, did I believe it wholeheartedly-eh-not so much, but still my point is it was never explained as an entitlement. Is this just an oversight, whether accidental or intentioned, on the part of the author or are SS benefits actually considered an entitlement?