The Antidote for Income Inequality is Economic Opportunity

Posted: Oct 21, 2014 6:04 PM

Recently, a great deal of emphasis has been placed on the worrisome and widening gap between America’s rich and poor. Policymakers ought to pay attention, because the circumstances are in fact tragic. Our nation’s youth are plagued by a 14.9 percent unemployment rate. The middle class is struggling to stay afloat. Average incomes are stagnating while the cost of basic goods continues to rise. The American public are keenly aware of the dismal economic situation: Polls consistently show that a vast majority of Americans still feel the recession isn’t over. 

Is it any wonder this is the case when government is fueled by cronyism? After transferring our hard-earned resources to their favored special interests in the name of “stimulus,” Obamacare, and other expensive exploits, politicians have not delivered the results they promised. After all, a giant government ruled by elites tends to favor its own. 

As economist James Pethokoukis has pointed out, a “too-big-to-fail” approach has primed our economy for just the kind of income gap that has grown along with the size of government. This bailout mentality, coupled with a complicated tax code that unfairly enriches corporations, a patent system that targets entrepreneurs, and a top-heavy bureaucratic system that favors established interests, has left average Americans in the dust.

These circumstances leave those who believe that politicians know how to manage your money more effectively than you do in a tough spot. Columnists such as Paul Krugman of the New York Times and Kevin Drum from Mother Jones, ever-apologists for concentrating more political power in the hands of a dominant few – as if the money won’t follow – have taken an interest in wealth gaps that seems tragically ironic given the policies they support. While they write about recent upticks in income inequality, they appear suspiciously ignorant as to how centralized power causes capital to rise to the top while the middle and bottom stagnate. 

The trouble is that lawmakers and pundits often play on people’s very legitimate worries and sympathies. They claim their policies are meant to help the most vulnerable when in reality, the rich are getting richer and the economy stagnates as the government continues to grow. What should concern all of us is not just an income gap, but the fact that politicians are using it as an excuse to expand their own power.

President Obama, for example, has taken to repeating slick lines about income inequality. It seems to be one of the few talking points he has left in his central-planning arsenal amid record disapproval ratings. In fact, such rhetoric was the centerpiece of his State of the Union address earlier this year. Naturally, the President failed to mention the fact that he supports egregious transfers of wealth from the middle class to the rich in the form of endless corporate subsidies and bailouts

After all, his signature health care law is corporate welfare on steroids. As research from the Mercatus Center demonstrates, health care costs are one of the main factors driving income inequality. Surely none of the government’s legally mandated cronyism in that area has anything to do with the rich getting richer, right?

If the “solution” you’re hearing to the income gap problem amounts to more governmental robbing of job creators and average taxpayers, be skeptical. When not prevented from doing so by bureaucrats, new middle class businesses spur economic growth. Instead of endlessly taking from the rest of the nation and concentrating record amounts of wealth in the hands of the Washington DC elite, politicians ought to let Americans keep more of what we earn. Rolling back red tape, giving consumers more power to make their own health care decisions, and making it easier to engage in entrepreneurial pursuits will help to revive our sluggish economy. 

Politicians, who are motivated first and foremost by money and power, want us to believe that they’re taking from the rich and helping the poor. In addition, they hope the American public thinks this will occur absent both adverse economic consequences and the corruption inherent in unwieldy government. Unfortunately, what ends up happening when lawmakers attempt this style of redistribution is that corporations work closely with their political partners at the expense of those without access to power. 

Ultimately, the only sustainable way to help the least privileged lift themselves up, is to create the circumstances under which they have economic opportunity. This will require an end to the government picking winners and losers in the business world, all the while robbing would-be entrepreneurs of their tax dollars. Unfortunately, anemic “post-recession” growth (coupled with intermittent shrinking) has provided little in the way of the freedom our nation needs to get out of this slump. Record high levels of government dependency reflect this sad reality.

Will we continue to allow legislators to exploit the wealth gap they’ve widened, to further concentrate their own power? Or will we finally force politicians to yield some of their control back to the people so we can restore the American Dream? Sustained economic growth will require a strict limit on the power politicians have to micromanage our daily lives. Giving Americans the chance to pursue our entrepreneurial inclinations, absent constant bureaucratic burdens, will allow for the universal upward mobility necessary to make rhetoric about income inequality deservedly passé.