I worry about growing income inequality. But I worry even more that the discussion is too narrowly focused. I worry that our outrage at the top 1 percent is distracting us from the problem that we should really care about: how to create opportunities and ensure a reasonable standard of living for the bottom 20 percent.
Our passion about the widening disparity in wealth and income is easy to understand. After all, studies often find that unequal incomes reduce happiness. Of course they do: Jealousy and envy are strong emotions. They are also very basic ones that develop as early as 4 months of age. There is even evidence that great apes are averse to inequality. And though there is debate about that point, at least it produces enjoyable videos. Our outrage at inequality is primal.
But primal emotions are not always noble ones. Of course, when I see a colleague receive some award, I covet it. But this is not me at my best, and these are not the feelings we would instill and promote in our children. So why would we want public policy to cater to such feelings?
[I]f generous aid to the poor perpetuates poverty, the United States — which treats its poor far more harshly than other rich countries, and induces them to work much longer hours — should lead the West in social mobility, in the fraction of those born poor who work their way up the scale. In fact, it’s just the opposite: America has less social mobility than most other advanced countries.
Reihan Salam, a writer for The Daily and National Review Online, has calculated that a Danish family can move from the 10th percentile to the 90th percentile with $45,000 of additional earnings, while an American family would need an additional $93,000.
The actual data show that higher government expenditures increase upward mobility. That's why countries like Denmark have much higher levels of mobility. We find the same correlation at the local level within the U.S.: Higher government spending leads to more mobility.
- Bill Gates is worth $76 billion. Presumably that should be sufficient to cover every conceivable health care expense he may incur. Can anyone conceive of even an outlandish scenario in which Bill Gates receives an extra billion dollars and then proceeds to purchase additional health care with it because the $76 billion he already had was apparently insufficient to meet his needs? Does that even begin to make sense?
- Conversely, if giving Bill Gates an extra billion dollars would result in someone being deprived of health care, then doesn't it also logically stand that taking a billion dollars away from Gates and dumping it into the ocean -- thus reducing inequality -- would then pave the way for someone previously denied health care to obtain it? Is that at all plausible?
- Even if Gates did want to spend his extra money on health care, does anyone really think that the US is currently at its health care production possibilities frontier and that it would be impossible to create additional health care resources to meet additional health care demand from other people? That any additional demand from Gates would come at the expense of others? When pressed on this, McElwee just notes that there are limited resources and that scarcity is the central tenet of economics. True enough, and maybe someone would have to give something else up to obtain additional health care (for example, spending on a vacation or a new television), but the idea that we have already created all of the health care resources we possibly can is nonsense.
- Let's also note that if we are currently at our health care production maximum that Obamacare is essentially an exercise in futility, as it is totally pointless to extend health insurance to more people if there is no more health care to be obtained.
- Lastly, if billionaires buying up all the available health care, and thus denying it to others, one would think this issue would have been raised by the left during the great health care debate which proceeded the passage of Obamacare. It was not, presumably because it is not true and anyone who seriously made such a claim would have been laughed out of the room.
That The Economist is libertarian will no doubt come as a surprise to those active in libertarian circles. Let's note, for example, that the publication has endorsed Democrats in the last three US presidential elections and, in a 2012 economic "report card", gave President Obama an A- for his bailout of GM and Chrysler and a B+ for the 2009 stimulus package. Say what you will about either policy, they can't be accurately described as libertarian.
"I'm going to say something, and it's probably going to get me in trouble, but there are some people who are just too rich," said party secretary Daraka Larimore Hall in a last effort to rally the rank and file before delegates dispersed. "If we don't solve the problem of income inequality we will lose our souls and we will lose our republic."