The Truth About Income Inequality That Liberals Won't Admit
Recently in the magazine, “The Atlantic”, New York Times investigative reporter, Raymond Bonner, wrote an article entitled, “Massive Riots: Britain Today, America Tomorrow”? The article subheading read, “Joblessness, rising inequality, and a frustrated underclass are all being blamed for the violence that's sweeping the U.K.”
The gist of the article was that Britons rioters were largely the victims of societal injustices and were being made scapegoats of problems that they didn’t create. The rising inequality between the wealthy and the poor seemed to be the underlying theme of the article. Another implication was if America won’t fix its own wealth gap, rioting in America is inevitable.
Will Wilkinson, writing for the Cato Institute, has an entirely different view on the wealth gap. In his October 2009 article, “Economic Inequality and the Mirage of Injustice”, Wilkinson tackles the liberal collectivist view on inequality and how it applies to gaps in income.
Wilkinson makes three main points:
1. Actual economic inequality America is a lot less than is widely believed
2. Economic inequality is a poor indicator of injustice
3. The inequality issue diverts attention from the real injustices of society
Exaggerations
The focus of economic inequality is on gaps in income when the more relevant issue should be gaps in true standard of living. The Standard of living is more accurately measured in terms of consumption rather than by income levels. Levels of inequality in consumption have remained much more static than that of income.
There is now also considerable evidence of inflated statistics regarding income gaps. A number of recent studies have revealed that traditional methods of measuring price indices have inflated estimates of inequality. For instance, the prices of products used proportionately more by lower income consumers, fell considerably from 1994 – 2005, thereby increasing the buying power of the lower income group.
Contrary the popular narrative that poor and middle class income has stagnated for years, the truth is that from 1979-2005 real wages of the poor have risen 30%.
Inequality in Income is Not Injustice
Inequality in income may or may not indicate an underlying injustice. A country may have less income inequality than another country but have more injustice inherent in their institutions. For example a country with a demographic of an older population will show a greater income gap than other countries. An increase in entitlements for the poor inflates the income gap because much of what the poor consume is not counted as income.
Changes in Census surveys, have exaggerated income levels of higher earners. Recorded income increases of the top 1% of wage earners have been inflated by CBO miscalculations of corporate profits. Households with higher incomes had more people working for a greater numbers of hours than those of lower incomes. The poorest citizens in America are often wealthier than the wealthy in many African countries, America has the same income gap as Ghana in Africa, and does that mean there is a greater institutional injustice in America? I don’t think so!
Societies Real Injustices
If income inequality reflects an underlying problem in society such as institutional abuse by the wealthy or a pattern of minority exclusion from opportunities, then we should address those issues in very specific terms. To speak of inequality in general terms, as it often is by those on the left, is to indulge in political demagoguery.
The fallacy of the left is that they see a gain made by one citizen to be a loss by another. They can’t seem to comprehend that wealth is not a bad thing, that productive exchanges in the economy benefit everyone, as a rising tide lifts all boats. They seem to believe if everyone were poor there is a greater justice accomplished.
Another overlooked demographic is that there is a high level of economic mobility in America, many who are poor today, in ten years are often in very different circumstances and the same is true for those with high incomes who later on have substantial income loses. The Left inexplicably see the free market as a source of corruption and inequality when in fact a high level of accountability is built into the system. On the other hand, the same people will put their trust in an institution that least deserves it; the government!
Comments
Since you visited one of my hubs, I dxecided to reciprocate,and I am really glad I did. This is a great article. You have pretty clearly explained just why class warfare and envy is NOT a plan that will truly help anybody but could deeply injure scores of people. I am worried that if this gimme gimme gimme from the non-workers continues to be pandered to, the riots will be here sooner rather than later.
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SheriSapp- Thank you so much for stopping by! I read an article in The National Review that echo’s exacting what you’re saying! The riots in England is largely the product of a welfare state that’s run out of money. If you spend your life seeing the government as your provider and belief that it’s their duty to provide for you, you’re going to throw a temper tantrum like a child, when the well runs dry!
Excellent hub about the politics of class envy. You’ve said it all. I would like to add: Wealth and Poverty are the opposite sides of the same coin. The one cannot survive without the other. Somehow the one create (or destroy) the other.
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MartieCoetser- Thank you so much for your comments! Good point, so many talk about a wealth gap as being a terrible thing, nobody seems concerned about the beauty gap, intelligence gap or creativity gap. If everyone were the same the world would be a pretty boring place.-WBA
Great article!! I especially loved the last section where you brought it all to a crescendo so well.
You wrote: "The fallacy of the left is that they see a gain made by one citizen to be a loss by another. They can’t seem to comprehend that wealth is not a bad thing . . . They seem to believe if everyone were poor there is a greater justice accomplished. Another overlooked demographic is that there is a high level of economic mobility in America, many who are poor today, in ten years are often in very different circumstances"
Right on!! You are wise and discerning. Thank you for speaking the truth to power.
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Thank you James! I guess if God is not at the core of your belief system, insanity begins to creep in, I think thats whats happened here! If you allow yourself to become envious and bitter your going to see the world through distorted lenses.-WBA
Great hub, it's the story of the ages.
The rich get rich and the poor get marginally less poor.
Because you have a car an wide screen TV doesn't make you middle class. Just poor with some "stuff"
Poverty of the mind is the problem. Well said.
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molometer- Poverty of the mind sets in when poeple see the government as a benefactor! The government become a parent of sorts and the citizens cease to be adults who take responsibility for thier own lives! Thanks for your comments!-WBA
I love hubs that make me think! Great job! vote up!
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calico Stark- Thanks for your kind words.
The Rise and Consequences of Inequality in America
Great hub wba108, I like your understanding. Wealth is like (or is)energy in that the more you walk in, the more there is for others to enjoy.
Glad I came by to visit
To your victory Tony
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Tony L Smith- Thanx so much for your comments. Yes your right when something is actually produced wealth is created that is benificial to many.
Powerful words with lucid thought, WBA. Socialism is evil and many aspects of it can be explained by that premise: the sophistry, lies, contradicting God's Word, generating class warfare and envy, stealing people's money who earned it and giving it to those who did not earn it, distruction of parental authority and the family unit, dumbing down the Nation and animosity to our American culture, which was founded upon Christian principles are all part of the evil that socialism fosters. You can count on liberals and socialists to promote the antithesis of what Scripture teaches.
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Caleb DRC- Thank you so much for your comments! Very wise words, socialism is evil in its core, it subtley works to promote division and discord, while relying on half truths to back thier assertions. The left tries to justify theft and class warefare by glossing over inconvenient facts and because of thier belief that the ends justify the means.
As you so aptly articulated, the left's goal is to destroy the Christian foundations of the nation so they can remake the nation according to thier own twisted secular vision!
On the whole I tend to agree with what you say (particularly that the "poor" are very often not very "poor" at all), but...some facts and numbers, from a reputable, cited, source would be helpful.
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Wilderness thank you for stopping by and your valuable comments. I will take them to heart. In their zeal for social justice, the left fails to even ask the right questions so how can their answers be legitimate? Making the facts fit their philosophy is their trademark, finding facts to support their notions is their modus operandi.
"the "poor" are very often not very "poor" at all), but...some facts and numbers, from a reputable, cited, source would be helpful."
But the rich are very rich and getting richer every day to the point where many Americans are losing faith in our democratic free enterprise system. And there are plenty of very poor adults and hungry children in this country.
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Ralph Deeds- I read your link on "The Rise and Consequences of Inequality in America" and it seemed more like political propaganda than fact. Do you have additional sources because I feel mine are fairly credible? I have some scholarly studies done by some nationally recognized economists that I feel shouldn't be taken lightly.
Here are a few: https://hubpages.com/politics/Income_Disparity_Gro...
And here's a link to a relevant article from today's paper:
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Ralph- With all due respect to your research, I still haven't found any research in your material refuting what the findings of my hub. All I have found are op-eds and philosophical arguments lacking in hard data.
There was plenty of "hard data" in the articles
I linked from mainstream sources. For example here's a recent one from Fortune Magazine:
"9-1-13 Fortune Magazine reports and editorializes in an article entitled "The Income Gap" that liberal and conservative economists agree that income inequality has increased since the 1970s. Between 1979 and 2007 overall average real household after-tax income grew 62%. But for the top 1% of earners, income grew 275%, and for the bottom20% of earners, household income grew only 18%. The share of income from capital gains and dividend income has increased, while the share coming from labor income has decreased. Andy Serwer, Fortune's managing editor concludes that "I'm sure thata widening income gap is a negative...Big income disparities lead to fragmentation of a society, from gated communities with increasing security to, at the extreme, civil unrest and worse."
Another bit of "hard data:"
"According to an article in the 3-29-07 NY Times by David Cay Johnston ,income inequality grew significantly in 2005 with the top 1 percent of Americans--those with incomes that year of more than $348,000--RECEIVING THE LARGEST SHARE OF NATIONAL INCOME SINCE 1928.
"The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression."
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Ralph- What i'm looking for is is a reasoned argument that refutes the findings presented in this hub. This Hub is largely based on the article from the following link:
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Ralph- And I failed to mention that I am looking for your argument to be based on hard data
Cato is a far right libertarian organization founded and funded by David Koch. I don't have time to pick their ideas apart. There is plenty of "hard data" in the material I provided. The "hard data" clearly show that inequality of income and wealth have increased tremendously in the past 30 years or so. Nobody is advocating communism or even socialism. It's well recognized that income should be related to individuals' effort and contribution. However, much of today's wealth is accumulated, not as a result of effort, but rather as a result of various tax loopholes and untaxed inheritances. The average CEO of a S&P 500 company is paid $15 million. They arrange to pay themselves as if they were a Steve Jobs, Bill Gates or Henry Ford although they are suck-ups who never had an original idea in their entire career.
On Cato's points.
1. Inequality is much greater than most people are aware. http://www.utrend.tv/v/9-out-of-10-americans-are-c...
2. Inequality is a poor indicator of injustice. This is a matter of opinion. In my opinion, the current extreme inequality IS an injustice. The results are inadequate health care for millions, malnourished children, deficient public schools, poorly maintained roads and bridges and other infrastructure. Meanwhile the average CEO pays himself $15 million/year as if he were a Bill Gates, Steve Jobs or Henry Ford although he's a suck-up who's never had an original idea in his entire career.
3. Diverts attention from "real injustices." Some of the "real injustices" can be found in our tax code which is riddled with loopholes which allow profitable corporations and high income individuals to avoid paying taxes by moving their profits off shore. Perhaps the most egregious loophole is the "carried interest" loophole for hedge fund operators like Steve Cohen of SAC Capital. He was just nailed for systematized insider trading and is being forced to sell off $50 million of his art collection. The rich are getting richer while our schools languish and our health care lags the rest of the industrialized world.
Cato: "For now let me just highlight the finding that there has been no increase in income inequality within the bottom 99 percent of the distribution for more than a decade." (Not exactly a "hard fact." Actually, it's not correct.)
Tell that to Detroit auto workers where new workers are hired at $15/hour and no pension compared to $30/hour and a defined benefit pension before the bankruptcy and bailout.
Hi wba108@yahoo.com. What a thoughtful article you have here. I also believe that inequality does not really translate into injustice. Even in a free economy, there are still people who earn more than others, as it depends on the time and effort one puts into what they do. Voted up, useful and interesting.
Benjamin, do you think there is an optimum level of inequality? Or simply the more, the better?
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Ralph; Thank you for your valuable insights and opinions, I guess we'll have to agree to disagree.
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Benjamin Chege-
Thank you for taking the time to read my Hub and for your comments! All to often, politicians exploit people by catering to their prejudges and weaknesses to empower themselves. The radical egalitarianism promoted by the left accomplished this. In a booming economy everybody benefits but often those who created the opportunities for others benefit even more. For those who are envious and have a poverty mindset, this often looks like injustice!
Some "hard facts" from my morning paper today:
http://www.nytimes.com/2013/11/02/business/high-ea...
Yet the top 400 paid an average federal income tax rate of less than 20 percent, far lower than the top rate of 35 percent then in effect.
BTW, I haven't noticed that the Democrats under Clinton or Obama are promoting "radical egalitarianism." Closing tax loopholes for hedge fund operators is not radical egalitarianism.
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Ralph; Thank you for your valuable insights and opinions, I guess we'll have to agree to disagree.
Here's an article worthy of your consideration:
"Plutocrats vs. Populists."
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Hi Ralph- I read your article about three times and even looked up words they were using to make sure I understood what they were saying. Though I disagreed with both their premises and their solutions, I believe they’ve accurately identified some important trends.
First, I agree that politics have become more polarized and whoever is in power tends to be disrespected. I see this as a growing problem. The relationship between “we the people” and our elected officials has become increasingly dysfunctional on both ends. Our leaders have become more controlling and self-serving and the people have become more dependent, self-serving and disrespectful.
Secondly, the article highlights the trend of unelected technocrats replacing the “messy” political process to solve policy issues. I thoroughly agree that this may be the single most important trend in the American political system over the last 100 years. This is highlighted in the article as follows:
“Part of the appeal of plutocratic politics is their power to liberate policy making from the messiness and the deal making of grass-roots and retail politics. In the postwar era, civic engagement was built through a network of community organizations with thousands of monthly-dues-paying members and through the often unseemly patronage networks of old-fashioned party machines, sometimes serving only particular ethnic communities or groups of workers.”
And this quote:
“The age of plutocracy made it possible to liberate public policy from all of that, and to professionalize it. Instead of going to work as community organizers, or simply taking part in the civic life of their own communities, smart, publicly minded technocrats go to work for plutocrats whose values they share. The technocrats get to focus full time on the policy issues they love, without the tedium of building, rallying — and serving — a permanent mass membership. They can be pretty well paid to boot.”
If you’re interested, here’s an article that expresses my views on this issue. http://www.heritage.org/research/commentary/2010/0...
Yes, I'm interested, and thankyou for that link to The Heritage Foundation.
As the venom of socialism oozes through our nation as pus from an infection, both Dr. Spalding's article, and America's future can be summarized with a paragraph toward the end of that article:
" By feeding the entitlement mentality rather than promoting self-reliance and independence, administrative government encourages a slavish character incompatible with republicanism. Once self-governing citizens are degrading themselves slowly into passive subjects of an impersonal, bureaucratic nation-state, and once citizens have given up liberty for comfortable security and the responsibility of self-government for the ease of government-as-parent, democratic government can become a type of soft despotism — which is less coercive in its methods and more benign in its concerns than hard despotism, but perhaps more despotic for this very reason."
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Caleb DRC - Thank you for your keen insights! Not only is the government taking on tasks not sanctioned by the Constitution but in doing so they are slowly destroying the fiber of american culture.
Socialism is a cruel illusion used by tyrants to get the people to surrender their rights to the state in exchange for what they promise. Socialism is also a symptom of spiritual decay in a society, when people lose sight of God they also lose the courage to be self governing so they tend to turn the state for their answers.
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