The rich are getting richer, and so are poor

Posted: Jan 28, 2003 12:00 AM
In a single salvo of withering British irony, Winston Churchill demolished the moral pretensions of socialism: "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries." Socialists and socialist-lite liberals so earnestly envious of success and eternally resentful of its rewards missed the humor and took Churchill's observation literally - so literally that finding themselves unable to redistribute prosperity without destroying it, liberals are content to settle for misery as long as they can redistribute it equally. Despite socialism's repeated failures, its ethos of "equal outcomes for unequal effort" lives on in the bosom of liberals today. The current federal tax system is living testimony to the liberal's political success at playing the politics of envy. Almost 30 percent of all tax revenues are paid by only 1 percent of the population in the top income brackets, the top 5 percent pay 50 percent and almost 35 percent of those filing an income-tax return have zero income-tax liability or actually receive a check from the government in the form of a "negative-income-tax" payment. The minute President Bush suggested giving an across-the-board tax cut to everyone who pays income taxes, the liberals' socialist impulse caused them to bleat "unfair to the poor; benefits the rich" - by which they meant the president's tax cuts are "unfair" because liberals think they won't increase the share of the tax burden borne by upper-income individuals. Liberals missed the irony again because every time the government reduces the tax penalty against work, saving, investing and entrepreneurial risk-taking by reducing tax rates, the rich end up paying a larger share of the total tax burden. Of course there is still poverty, and I saw it firsthand as housing secretary for President George Herbert Walker Bush. But wherever poverty exists in America today, it is due to government policies and taxes that punish work, discourage homeownership and restrict access to capital. Free-market economies are working just as Churchill described: The rich are getting richer, and so are the poor. Low-income Americans are healthier and live longer, eat better, have more leisure and enjoy a higher standard of living than ever before. A recent report by the Federal Reserve Board revealed that the net worth of Americans in the lowest income quintile (the lowest 20 percent) rose 25 percent between 1998 and 2001. Yet liberal class warriors who practice the politics of envy would have us believe the plight of the poor is worsening because income gains among those in the upper income tiers have been larger than those at the bottom. (That same Fed study found that the net worth of those with incomes in the top 10 percent rose 69 percent over the same time period.) What the liberals can't bring themselves to accept is the simple fact that people with incomes in the top 10 percent are where they are because they generally produce more and thus receive greater rewards. What appears to the socialist mindset as a "disproportionate reward" is really an appropriate reward for disproportionate productivity. That reward differential is a small price to pay by those at the bottom of the economic ladder so that they may have jobs, tools and technology with which to raise their own productivity and advance. The problem with these so-called "distribution studies" is that they deal with abstract statistical aggregations, not real individuals, and they fail to consider the great amount of income mobility that characterizes America. A study by the congressional Joint Economic Committee that corrects this oversight found a remarkable amount of churning as people constantly move up and down in the income distribution. It found that, "the degree of income mobility in American society renders the comparison of quintile income levels over time virtually meaningless." The study found that 86 percent of tax filers in the bottom quintile had exited this quintile by the end of a decade. According to Internal Revenue Service tax data, the study noted that "an individual who began the 10-year period under study in the bottom quintile had a greater chance of rising to the top by the end of the period than remaining at the bottom." Ten years ago, historian Harry Jaffa observed that, "Under the spurious banner of 'fairness,' socialistic propaganda - motivated by class hatred and envy of initiative, enterprise and individual success - seems to be enjoying a renaissance in our own midst even as it is being scorned to death in the erstwhile heartlands of Communism." Today, this attitude is changing, and capitalism is being democratized as an investment culture develops among workers at all income levels. (More than half of Americans own stocks and bonds, either directly or through their retirement accounts.) Class-warfare rhetoric is a discordant echo from the past, and if the liberals keep it up, they will become relics of the past themselves.