One of the favorite talking points of the left is so-called “income inequality”. This talking point is one that the left has used very effectively to rile up support from low-income, low information voters.
Te left has not been the only group to use income inequality as a talking point. In fact, during the 2004 election, The Heritage Foundation regularly attempted to use income inequality as a talking point to rally support for George W. Bush.
Post 2008, income inequality became a political talking point almost exclusively used by the left.
There are two key questions when assessing the political viability of income inequality, as a talking point. A) Does income inequality exist? B) Is income inequality a bad thing?
Income inequality certainly exists, but it is not a bad thing. The left insists that income inequality is a factor which correlates to the misery and unhappiness of the those who are poor. This insistence by the left is nothing more than a cheap lie.
In the 2003–2004 essay contest held by the Federal Reserve Bank of Minneapolis, the winner was a paper called “Income Inequality: Not a Government Issue” by Lisa Dahlen. This paper makes clear that income inequality is a big part of the essence of capitalism, and it is what motivates people to take advantage of the social mobility provided to them in a free economy.
Income inequality has a positive correlation with quality of life for those with the lowest incomes. If you were poor, and had the choice to live in a country with high income inequality or a country with low income inequality, the clear choice would be the country with high income inequality.
Income inequality is a very positive result of a free market economy. The economic concept of production is the operative one. Those who produce more than 99% of people are rewarded with the top 1% of compensation. Income is a result of individual decisions, talent, skill and luck.
The only way to “fix” income inequality is to utilize the full force of the government to cap the ambition and potential that individuals have. Forced equality results in less opportunity. Places with low income inequality, like Sudan, prove to be very horrible places to live.
Wealth Inequality — Wealth inequality is another simple corollary of a free market system. As someone’s income outpaces what they can spend, the begin to place the remainder of that money into assets (real estate, stocks, bonds, etc.). As someone places an increasingly larger sum of capital into assets, they begin to take advantage of compound interest, and their net-worth grows over time at exponential, not linear, rates.
For the wealthy, time is quite literally money, as they make increasingly large amounts of money with lower levels of production in order to do so. There’s nothing immoral about this. The rich get richer because they’re better with money than the poor. If you want to be rich, do what the rich do.
Luxury for All — When the first cell phone, the Motorola DynaTAC 8000X, was released in 1973, it ran buyers $4,000 and offered very limited functionality and practicality. Top 1% earners were really the only people that could afford the first cell phones. They were the “test buyers” that allowed for further innovation.
oday there are 7.19 billion active cell-phone subscriptions. Nearly 100% of people in the world have a cell phone, and today’s cell-phones offer people the ability to find the answer to nearly every question that they might have. Even in the poorest parts of the world, the innovation allowed by a free-market with high levels of income inequality has made for higher quality of life.
But I Don’t Want to Be Poor — If you live in the United States, and you a poor, you really only have to do three things to make sure that you enter the middle class. And no, one of them isn’t voting for Bernie Sanders.
According the Brookings Institute, a left-leaning think tank, 70% of people that follow these three rules make it into the middle class.
- Graduate high school
- Don’t have babies out of wedlock
- Get a job
Quashing income inequality is a fantasy of those who don’t want to follow these three simple rules. Instead, they hope that the government can simply take from those who do follow these rules in order to hand cash to those who choose not to.
Those who say “Get rid of income inequality” are actually saying “I don’t want to be poor”. These people can either take responsibility for their own decisions, or they can continue to pray that America becomes a Marxist economy. I recommend the former, not the latter.
A rising tide lifts all ships. Global extreme poverty has fallen below 10%, a drop of more than 75% over the past 25 years. If the left actually wants to improve the quality of life of their inner city constituents, they should promote income inequality, not try to stop it.
The rich get richer, and the poor get…. — One common myth that’s pushed by the left is that “the rich get richer, and the poor get poorer”, because “The system is broken”. The only problem with this statement is that it’s false, and the system is not “broken”. In reality, the rich get richer, and the poor get richer. The difference is that the rich get richer at a faster, geometric, rate, rather than a linear one, because of compound interest.
Markets are efficient — This is why even small government interventions, such as the implementation of a minimum wage, are quickly priced into the market and rendered worthless to everyone other than the politician that used it to garner votes.
Governments simply can’t provide people with a good quality of life. The only way people may achieve a good quality of life is by getting themselves into the economy and getting a job. Even the Brookings Institute realizes this is the case.
The left will likely continue to push the income inequality myth, so long as low-information constituents continue to buy it. The only solution to this is to provide people with an education on economics that isn’t politicized. If people are educated on the basics of economic, and how to read a basic graph, they will quickly realize that income inequality is not only NOT a bad thing, but is also one of the hallmarks of a great free-market economy.
About the Author: Jacob Wohl is the CEO and Head of Fixed Income and Interest Rates for Montgomery Assets, a proprietary trading and asset management firm based in Los Angeles, CA. Jacob Wohl is the host of the Offended America Podcast
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