Bruce Thornton is a Shillman Journalism Fellow at the David Horowitz Freedom Center.
Throughout this primary season, Hillary Clinton and self-proclaimed socialist Bernie Sanders have both been flogging the “crisis” of “income inequality,” which is “at the center of their campaigns,” according to CNN. Both have scourged the “greed” of the “1%,” called for higher taxes on the “rich,” and promised to expand and multiply government programs to rectify this injustice. Yet like other slogans progressives rely on, the idea of “income inequality” is an ideological construct, a statistical artifact that exploits envy and resentment for political advantage.
The first problem with “income inequality” is how “income” is defined. Progressives indulged in some noisy triumphalism a few years back when French economist Thomas Piketty seemingly proved with hard data that capitalism inevitably leads to a concentration of wealth and an increase in income inequality. Further analysis revealed the flaws in his argument and data. One problem is the same one that undermines how poverty is defined. As James Piereson wrote in The Inequality Hoax, “Figures [on income] exclude transfers from the government such as Social Security payments, food stamps, rent supplements, and the like, which constitute a growing proportion of income for many middle-class and working-class people.” Adding the value of those supplements would narrow the income gap considerably.
Ignoring the value of entitlement transfers also underlies Clinton and Sanders’ complaints about the “stagnant middle class” that worsens inequality. But Martin Feldstein points out in the Wall Street Journal that the dramatic gaps in income between the top 10% and everybody else “leaves out the large amount of wealth held in the form of future retirement benefits from Social Security and Medicare.” As Feldstein writes,
Add the $50 trillion for Medicare and Medicaid wealth to the $25 trillion for net Social Security wealth and the $20 trillion in conventionally measured net worth, and the lower 90% of households have more than $95 trillion that should be reckoned as wealth. This is substantially more than the $60 trillion in conventional net worth of the top 10%. And this $95 trillion doesn’t count the value of unemployment benefits, veterans benefits, and other government programs that substitute for conventional financial wealth.
And don’t forget, most retirees take 3-5 times more in benefits from Social Security and Medicare––which gobble half the federal budget–– than they contribute in payroll taxes. Try getting that deal in the private insurance market.
Then there’s the problem of what sort of “inequality” is being measured. Most of the handwringing over the lack of economic mobility that drives inequality focuses on “relative mobility,” which “measures changes for one group compared with a moving average of all groups,” as the Heritage Foundation’s Donald Schneider explains. But there’s also “absolute mobility,” which tracks financial improvement over time. If one just considers relative mobility, the fact that 43% of those whose parents were in the bottom quintile will also be in the bottom quintile is a grim one.
But if one measures how much richer people are than their parents, things look better––93% of those in the bottom quintile have incomes greater than their parents’, as do 84% of Americans across all income levels. As Schneider says, “In sum, relative mobility depicts a glass that is half empty, whereas absolute mobility depicts a glass that is half full.” Ideology, of course, will determine which view of the “glass” is more politically useful. But the material amenities and comforts enjoyed by the statistical poor suggest that the visions of Dickensian deprivation conjured by progressives are misleading. When people enjoy levels of material comfort, leisure, safety, nutrition, and health care denied 99% of the humans who ever walked the earth, only the ancient sin of envy and the misplaced faith in endless economic progress can explain the resentment of the better off stoked and exploited by progressives.
Income inequality, then, is a rhetorical device that exploits the human tendency to envy and resent the wealthy. More dangerously, it provides the rationale for expropriating and redistributing wealth, which has been the tactic for concentrating political power from the tyrants of ancient Athens to American progressives since the early 20th century. Once the masses are given political equality, as Aristotle pointed out, they chafe at any inequality. Differences of wealth and property are the most visible signs that despite the expectations of radical egalitarianism, all people are not equal in talent, hard work, virtue, and luck. This contrast between political equality and economic inequality in antiquity was the greatest source of conflict and tyranny. As Plato said, every city is in fact two cities, “one the city of the poor, the other of the rich; these are at war with one another.”
But since the “poor” in ancient Athens voted and created laws, they used the power of the state to redistribute wealth from the rich to the poor through entitlements and taxes paid for by the rich. Indeed, resentment of the wealthy was so intense that the orator Isocrates claimed, “A man has to be ready to defend himself against being rich as if it were the worst of crimes.” Because of this envy, city-states were always vulnerable to ambitious tyrants or elites. These ambitious men would promise even more redistribution from rich to poor in order to secure the support of the masses who, as Polybius wrote, “have become accustomed to feed at the expense of others” and whose “prospects of winning a livelihood depend upon the property of their neighbors.” The result was civic disorder or even civil war.
This disparity in wealth and property among citizens who are politically equal concerned the crafters of the Constitution. They worried about the dangers to the state created by factions motivated by diverse and divisive “passions and interests.” And as James Madison wrote in Federalist 10,
The most common and durable source of factions, have been the various and unequal distribution of property. Those who hold, and those who are without property, have ever formed distinct interests in society . . . From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results: and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties.
The debates on the Constitution were haunted by the specter of debt forgiveness, a way to reduce income inequality, and radical egalitarianism, which reflected the “leveling spirit.” The solution was a political order that by separating and balancing powers made it difficult for the majority to oppress the minority, or the minority the majority. Moreover, the economic opportunities and freedom open to all citizens gave them the opportunity to better their circumstances, and this economic dynamism over time constantly reshuffled who was “rich” and who “poor.” The American political-economic order aimed at equality of opportunity, and feared attempts to engineer equality of result, which is what the Democrats use the coercive power of the federal government to achieve.
Madison’s insight is still true today. From the 1936 Democratic Party platform decrying the “malefactors of great wealth” and FDR’s attacks on the “privileged princes of these economic dynasties,” to Barack Obama’s rhetoric of “you didn’t build that” and Hillary’s promise to “make the wealthy pay,” progressives have exploited the all-too-human tendency to resent and envy those with more, in order to gain votes and expand the scope and size of the federal government with the support of those with less. Yet the “rich” do not have enough wealth to finance redistribution forever. The United States’ 536 billionaires are worth about $2.57 trillion, which can’t finance even one year of federal spending. That’s why this expansion of the federal government has been financed by unsustainable deficit spending and debt. The result is that today two-thirds of the $3.7 trillion of FY 2015 federal spending is going to entitlements and interest payments.
The ancients feared the tyrant who would seize the property of the living and redistribute it to his clients. But the managers of the entitlement state are much more creative. To finance entitlement programs and pay for unfunded liabilities, they are also redistributing property from generations not yet born to those living today. Meanwhile the intrusive regulatory and confiscatory powers of the federal government continue to grow and erode our freedom and autonomy. We are now witnessing the fulfillment of Thomas Jefferson’s warning that the concentration of government power would allow politicians to “purchase the voices of the people and make them pay.” Expect to pay even more if Hillary gets elected.