Thursday, April 19, 2012

Great Thoughts On Income Inequality

Holman W. Jenkins, Jr. at the Wall Street Journal has a great article today about income inequality that should be contemplated as we start seeing a lot of accusations and policy ideas flying around about 'the rich' again.  Here are some key excerpts:

If it were learned that the car driven by the average American is 10 times more likely to burst into flames than the car driven by the richest 1%, what should the policy response be? Should it be to mandate that cars driven by the rich burst into flames more often?

Income inequality is a strange obsession, at least to the extent the obsessives focus their policy responses on trying to adjust the condition of the top 1% rather than improving the opportunities of everyone else.

Personally, I think this is how a lot of liberal thought plays out in the arena of policy.  Rather than seeking to bring everyone up to the highest level possible, liberal policies generally seek to bring everyone down until the misery is equally spread to everyone.

There's a misconception of inequality in America today that's brought about by a number of factors like this:

[the] result comes from choosing to look at income that leaves out transfers. Unlike the 1920s, Americans today have the opportunity partly to live off Social Security and Medicare. They can decide to do without reportable income. Also left out of the calculation is the large share of compensation accounted for by untaxed health insurance.

Too, the tax code has changed. Income is realized under today's code that wouldn't have been realized under previous tax codes. Owners of capital buy and sell much more easily, and the tax system creates much less incentive for them to sit on their holdings and report less income.

For the record, so sensitive are the inequality generalizations to how you define income, and whether household size is taken into account, that the claimed shift toward greater inequality can be made easily to disappear, especially when consumption rather than income is measured.

Numbers are just numbers, but they can be tinkered with to appear different than they really are.  A little omission here, and small fudge there, and you can make data say pretty much anything you want.  Just ask a pollster.  Or a billionaire:

As CNBC's John Carney has shown, Facebook founder Mark Zuckerberg could avoid ever reporting any income simply by borrowing against his assets to meet his living expenses. "Perhaps most bizarrely, Zuckerberg might be eligible for an Earned Income Tax Credit if he keeps his personal income under $13,000," writes Mr. Carney.

Still, a liberal will always come back to the idea of penalizing the rich rather than lifting up the poor.  As Jenkins asks, how does this help the rest of America?  It's also interesting to note how those who often denigrate 'the rich' are simultaneously improved by such denigration:

One factor is a certain human soul-sickness that's impossible to put a constructive gloss on. Why is the New York Times disproportionately given over to cataloging the consumption of the rich in a tone even more cringing for its pretending to be snarky? Why do some of our dreariest journalists spend all their time writing about Goldman Sachs, except to associate themselves with the status object they attack in order to raise their own status?

That goes doubly for the inequality obsessives.

Jenkins finishes with a perfect quote that encapsulates how a liberal views the subject:

As Freud put it, "Everyone must be the same and have the same. Social justice means we deny ourselves many things so that others may have to do without them as well."

Isn't that the truth?  And isn't that precisely the problem?

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