Starting back in early December, your co-authors, Gary Wechter and Art Schwartz, sensed a growing churn of concern over the escalating rise in income and wealth disparity.
Joseph Stiglitz wrote an extensive article in Vanity Fair and in the N.Y. Times. President Obama started a series of speeches on the subject. Joining in on the chorus was former Secretary of Labor Robert Reich and N.Y. Times columnist Paul Krugman.
To explore the facts on this broad issue, as well as point out the fallacies and inaccuracies in all speechifying, your co-authors have written a series of blog posts on the subject:
- December 4 – A Conversation With Joseph Stiglitz
- January 22 – The Uproar Over Executive Pay
- January 29 – The Facts and Misconceptions About Poverty
- February 19 – The Shrinking Middle Class – How Bad Is It
- February 26 – The Effects and Consequences of Disparity
- March 26 – Opportunity Thrives in America
Now we conclude this series with an attempt to put it all in perspective by summarizing the facts and the fallacies, as well as outline what can be done. Hopefully this will allow you to draw your own conclusions.
Let’s start with some objective facts:
- There is a widening disparity of income and wealth in America, as well as the rest of the world.
- The wealthy do not gain or profit at the expense of the poor.
- Raising the minimum wage or extending unemployment benefits does not in any way lessen the disparity of income and wealth.
- If perceptions become facts, then compensation of some CEO’s unrelated to performance or in spite or poor performance borders on the obscene and indicates the lack of oversight by Boards of Directors.
- Raising income taxes on the wealthy a few percentage points will have no affect on the disparities.
- The same can be said for all the banks and investment houses that got bailed out after the 2008 financial plunge.
- The definition of poverty is hard to reconcile when you see all the stuff they have.
- Income and wealth disparity are not a new phenomenon. We have had this historically since the early 1900’s.
- Attempts to equalize income and wealth has never worked in any communist or socialist country. None—ever!
The disparity advocates like to promote several initiatives which may or may not be valid but, to be perfectly clear, show zero evidence of having any effect on income and wealth disparity.
- Raise the minimum wage
- Extend unemployment benefits
- Increase the safety net by printing or borrowing more money
- Promote more unionization
- Their advocacy of lax border control, more immigration, as well as continuing to increase our debt will put more pressure on the poor. Their real objective appears to be solely gaining Democratic voters.
They offer very little else as possible means of ameliorating the disparity of income and wealth.
There are, however, a series of programs and initiatives which could have a positive effect on this disparity. It would certainly help the middle class and the people below the poverty line.
- Grow the economy – John Kennedy said it best: “A rising tide lifts all boats” – everyone benefits in a growing economy
- Provide better education – more school choice – mandatory school uniforms – counter the influence of teachers’ unions
- Do more to discourage out-of-wedlock births
- Make English the official language of the U.S. – vote only in English, DMV tests, and everything paid for with public money
- Shareholders approve management compensation plans based on performance
- Reform the tax code to include a flat tax of 20% with no deductions (a sliding scale for charities) and a national sales tax of 3% (to reduce the debt)
- Redefine the AMT (Alternative Minimum Tax) to be 5% over $500,000 per year*
- Increase inheritance taxes over estates of $1 million *with some accommodation for family businesses
- In a free market capitalistic society, there is no reason to accept the concept of “too big to fail”
- Investment (Wall St.) banks should be operated as partnerships (not corporations) as they were before 1993
- Commercial and investment banks should be separated and capital requirements should be at least 15-to-1.
- Nos. 9-10-11 were some of the underlying causes of the 2008 recession
- Expand globalization which has helped more people out of poverty and raised the standard of living for millions.
*adjusted for inflation
We don’t think there is a real solution to income inequality as we believe incomes always were and always will be unequal for a variety of reasons. In fact, we think it’s a false argument that’s designed to divide and create resentment and discord. There’s always been someone who lives in a bigger house on a higher hill driving a more expensive car, and that won’t ever change.
What can change is perception. If folks believe that their lot in life can and will improve; that their children will live a better life; that the culture and community will give them a fair shot at a safe and worthwhile life, then what someone else earns or how much better they live won’t matter. That’s the dialogue and spirit that’s missing from the messages coming from the disparity advocates and our current leaders.
A leader who inspires, rather than one who divides, could go a long way to helping each person make the most of their lives.
Free market capitalism here in America offers more opportunity than any other system, past or present, for those who want to enjoy the fruits of their labor. It has raised the standard of living for more people than any other economic system.
We hope you have enjoyed or found our seven blogs on income and wealth disparity interesting. We enjoyed digging into this complex subject with many subtexts.