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Income inequality and the elections

January 6, 2014

Everything old is new again and that goes for the “new” buzzword phrase, income inequality.

Long before the Democrats picked on this as an election issue, President Lyndon B. Johnson introduced the phrase “War on Poverty”  on January 8, 1964. Politicians have been trying to find a way to equalize earnings in the United States seemingly forever.

Before that we had “income inequality” issues, we had the New Deal and the four freedoms doctrine of President Franklin D. Roosevelt and the Republican party’s incentive to vote for Herbert Hoover promising  …”a chicken in every pot and a car in every garage” in the 1928 presidential campaign. Churches and community groups have been addressing the outward symptoms of poverty for centuries.

There is certainly no doubt that many people in the U.S. don’t make enough in wages to live at even the lowest middle class level. When President Johnson made his pitch to the nation in his State of the Union speech in 1964, 19% of the population was below what the government considered the poverty level. In 2013, 47 million Americans or 15% of the population were receiving government food assistance, and many were accessing nonprofit feeding programs. Many more were receiving some sort of direct monetary support such as unemployment benefits or government disbursed retirement income.

The questions are, what can the government really do about income inequality, and what is the motive for getting involved at the national level?  Should they simply set a national income and take all the money that is now paid in wages or acquired through investments and disburse it equally to every American?

Technically, the government income programs now in existence do not provide a middle-class income or standard of living. If they did, people on Social Security and unemployment would be getting far higher payments than they do at present. These programs merely add to whatever income or resources the people have at present. However, by combining benefits such as Medicaid, EBT cards, ADC (Aid to Dependent Children) payments and programs, rent controls  and all other direct cash payments, it is possible to survive fairly well.

Support for income redistribution, the basic funding mechanism for all of these programs, waxes and wanes according to the economic state of the nation. The basic premise that those who have a lot should be concerned with and willing to support relief for those that don’t have as much is not exactly a new premise.

In many cultures, going as far back in recorded time as you want, the hunters that were successful shared the kill with those who could not hunt for themselves or were unlucky in obtaining their own meat. This desire to help the helpless is hard-wired into our collective human psyche, simply as a function of survival of the species. At the most basic level, we understood that the females, the very young, the injured, and the very old were still contributing to the overall survival of the group. There were always a certain number of people that couldn’t participate in the hunt.

All that collective experience makes the image of ending poverty a very compelling one for all of us. In the past, hard times were usually the result of forces we couldn’t control, usually the weather and its effect on our surroundings, or disease.

The difference between 10,000 B.C. and 2014 is that we are now externally creating periods of prosperity and cycles of want. Boom and bust periods are almost totally the effect of government interaction with the economy.

When times are good and most people have jobs the hue and cry to provide more income through government means dies down. When time are bad, it picks up again. Just before the crash of 2007, even fast food businesses were paying $10.00 an hour for help, because everyone who could be and wanted to be was already working. The $10.00 an hour starting wage was in effect because that was the way to acquire enough hands to run a business, not because government mandated it.

In 2014, we are reaping the results of a long series of government programs that purported to level the economic playing field. Interestingly, the times when the fewest number of Americans were living in poverty coincided roughly with how many people had jobs instead of government payments.

The fact is, the more money or things the government gives away, the more money that it has to have. Since government is by nature parasitic, it has to get that money from us. For many years the government has created more and more programs to address poverty, and the end result has been…more poverty.

According to a report published in 2012 by the Federal Reserve, Americans saw their net worth decline by 39%. Still, if your net worth declined from the median $126,000 to $77,000 critics might say that you are a long way from starving. Most American net worth was in the form of a tangible asset, such as a house or a business.

The problem with that wealth metric is that unless you are a termite, you can’t eat a building. You need a job or other means of obtaining spendable income to buy groceries and clothes.

The government answer to that has been to take it forcibly from someone else and give it out as payments. Whether it was the 92% highest individual income bracket tax rate in 1952 or Obamacare, government has arbitrarily decided how successful you can be and then demanded that you turn the excess over to your government through taxes, fees, or regulatory compliance costs.

In 2014 and 2016 the campaigns will play on our prehistoric sense of justice and attempt to convince the electorate that Washington is best suited to provide for Americans.

Why we would voluntarily choose to introduce a parasitic organism into our personal economic system is somewhat perplexing. We all know that the more middle men you introduce into the chain of supply and demand, the more expensive the end product becomes, and the government is the ultimate middle man between people and incomes. Just redirecting the cost of running most of the so-called “essential” government poverty and social  programs would eliminate poverty.

Government is a necessity. Some things are uniquely suited to government control. Providing a living isn’t one of those things it does well. Free housing, free phones, free food and free money isn’t free. There have to be enough people making more money than they need for basic necessities to send a portion of it to Washington or a state capital. Unless the governments take it all (and perhaps even if they do), the number of people working has to significantly outweigh the number of people who aren’t working.

If we can’t look beyond the immediate reward dangled in front of us and structure our government to allow us to succeed, there won’t be a chicken in anyone’s pot. The legitimately poor will be cared for, because that who we are as people. Making us all poor won’t solve income inequality.

 In 2014, we have to decide whether we all want to live on a government mandated minimum income, or move the government back to its most effective place in our society. It can protect us, connect us with roads and utilities, and even provide a relatively small number of administrative jobs to accomplish its legitimate functions, but in the end it can’t support us. The best it can do is to let us support ourselves. 

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