Obama’s Inequality Illusion

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Yet another flaw in the inequality narrative is that it ignores the tremendous leveling of inequality as it concerns quality of life. The authors’ cite George Mason University economist Tyler Cowen’s observation that, even as income inequality has risen, inequality as measured by living standards has been falling. As Cowen notes:

Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does. Like the vast majority of Americans, I have access to some important new pharmaceuticals, such as statins to protect against heart disease. To be sure, Gates receives the very best care from the world’s top doctors, but our health outcomes are in the same ballpark. I don’t have a private jet or take luxury vacations, and — I think it is fair to say — my house is much smaller than his. I can’t meet with the world’s elite on demand. Still, by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.

The same applies to America’s poor, who are not poor as the term has been understood throughout history. A 2011 study by the Heritage Foundation found that, in 2005, the typical household defined as poor by the government not only had access to food, clothing and shelter, but also owned a car, air conditioning, and a wide array of modern amenities – from a satellite TV to a PlayStation – that once might have been affordable solely for the affluent. As the late James Q. Wilson observed, “The poorest Americans today live a better life than all but the richest persons a hundred years ago.” In light of such tremendous progress, it’s perhaps not surprising that the Obama administration has moved to introduce a new definition of poverty that has virtually nothing to do with actual poverty. Only through linguistic legerdemain can Obama maintain that inequality is the dire threat to the American way of life that he has claimed it to be.

Finally, it is far from clear that inequality impedes economic growth. While the issue is still debated among economic researchers, Harvard economist Robert Barro has written that there is “little overall relation between income inequality and rates of growth and investment.” What does slow economic growth in richer countries like America is not income inequality but income redistribution. Barro notes that “active income redistribution appears to involve a tradeoff between the benefits of greater equality and a reduction in overall economic growth.” In other words, Obama can justify his soak-the-rich strategy as a matter of economic “fairness,” but it is hardly a formula for economic growth.

This is not to say that inequality is a non-issue, or that nothing can be done about it. However, one of the more pertinent ways to address the problem is to focus on a driver of inequality that Obama never mentions: bad government policy. Entitlement programs like Social Security and Medicare are a case in point. As structured, these programs are not means tested, and thus financial status is not a factor for eligibility. The result is that many of the workers paying for these programs are younger and less wealthy than many of the recipients. For instance, in 1979, households with incomes in the lowest 20 percent received 54 percent of transfer payments for these programs. By 2007, their share had fallen to just 36 percent. And because these programs are funded by payroll rather than income taxes, the burden of payment falls on low-income workers who pay the former but not the latter. It would be hard to imagine a more clear-cut instance of inequality. Yet Obama, like much of the political class, has been hostile to any proposed reform of entitlement programs.

A truly meaningful focus on reducing inequality would entail finding ways for low-skilled workers to compete in a modern economy that rewards skills and education. It would mean curbing illegal immigration, which places downward pressure on the wages of low-income workers. It would mean reforming government programs that burden the poor to benefit the rich. When Obama harps on inequality, however, what he really means is taxing the rich. That may please his political base, but it shouldn’t be confused with a serious solution.

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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?