Government-Sponsored Inequality

Envy and Equality are recurring themes in Left Blogistan...

Shaw Kenawe is the latest to address it, and she does it in her usual expert way.  We rarely agree, but I respect her.

She opens her post by asking:

"Do We Really Want to Become a Third World Country?

Incredibly, we're on our way to that sorry situation because of our income inequality--the highest since before the Great Depression"

There are two sides to every story.  Of course we have income and wealth inequality.  What society in the entire history of the planet does not?  Are the rich making their gains at the expense of the poor? Studies have not shown that.

Inequality in Perspective

Matt Zwolinski at Bleeding Heart Libertarians does a good job putting it all in perspective. He goes point by point, and I won't reprint them here, but there is context behind the raw numbers that includes changing factors like household size, education, and immigration.

We are also an economically mobile society, with people moving both up and down. We commoners also enjoy a cornucopia of luxuries that were only available to the rich back in the 50's. Most measures of inequality also fail to take into account the direct government transfer payments to the poor in the form of food, housing and cash assistance.

Income inequality is a natural result of a free market where people of various skills participate and bring products of various values into it. The services of a doctor or plumber are more valuable than those of a janitor, so doctors and plumbers enjoy greater remuneration than janitors.

A Tale of Two Liberals

Inequality?  Try this on for size:  OWS protesters were swept up and jailed in cities all over America for the misdemeanor of stinking up the place and refusing to pack up their tents. Meanwhile, well-connected liberal Democrat Jon Corzine walks free and easy after "misplacing" billions of investor dollars. You can bet he's not nervously looking over his shoulder--Washington's got his back.

The real inequality problem we have is caused by government. Rich people, big biz, big education, big pharma and wealthy financiers now own the US government. Having bought and paid for it, these rent-seekers are enjoying the best government money can buy, while the rest of us are subject to Big Sis Brigades wanding our crotches and confiscating our possessions.

The Silverfiddle Solution

In good times and bad, high taxation and low, federal government revenue collection averages about 17% of GDP per year. We need to design the federal government around that number. Collapsing useless departments like Education, HUD, Labor and selling the buildings would be a good start.  Shrinking and combining the remaining gargantuan tangle of departments and agencies would be a good next step.  Budget to that 17% target every year and cut what don't fit. It's what responsible states do.

Set a flat tax. Wipe out all exemptions, incentives and special favors for everybody, across the board, and call off the regulatory hounds that only the rich can afford to keep at bay. Burn down the Code of Federal Regulations and restore the rule of law so that the law is understandable by all and applicable to all.

Cut away the comfy taxpayer-provided safety nets protecting the phony captains of industry. A system that welds the escape hatches shut, forcing them to pay for their irresponsibility and malfeasance, will do more to tame the gamblers and pirates than the libraries full of regulations we now have.

Get the government out of health care and education. These are the two markets most penetrated by government, and not coincidentally, the two most inefficient markets with the greatest rates of inflation.

We need economic liberty and an education system that is not gouging us at every turn. As Hayek reminded us, it is a fatal conceit to believe that since we can't imagine our economic future, the government must plan it. There lies failure. Entrepreneurship is the way out.

Walter Russel Mead explains the way out of this mess much more intelligently than I do. Please go read Post-Blue Jobs pt 2.

Holman Jenkins has a handy rebuttal to the Income Inequality charge as well:  The Inequality Obsession