Opinion

How Wealthy Is Too Wealthy?

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Posted: Jan 18, 2020 12:01 AM
The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
How Wealthy Is Too Wealthy?

Source: AP Photo/Patrick Semansky

Editor's Note: This piece was authored by Young Voices contributor Nate Hochman.

During Tuesday night’s Democratic debate in Iowa, long-shot billionaire presidential candidate Tom Steyer made the case for a tax on the wealth of the richest Americans, explaining that he finds “the income inequality in this country” to be “unbearable, unjust and unsupportable.” The rest of the politicians on the stage — almost all millionaires themselves — nodded along in blissfully unironic agreement. 

The issue of income inequality is practically a raison d’être for candidates like Steyer, Elizabeth Warren and Bernie Sandersbut a similar sentiment regarding the immorality of the nation’s wealth distribution is often echoed by a wide range of progressive politicians. This indictment of America’s wealth distribution is relative rather than absolute. Meaning it’s not just that there is something objectively wrong with the living conditions of the working class, but rather that there is something unconscionable about the way that some live in comparison to others. For those who subscribe to this view, a particular level of inequality in a society’s economic distribution is wrong simply because it is. Subsequently, there’s a certain level of individual wealth that is inherently immoral. As the Twitter handle of a senior policy advisor for congresswoman Alexandria Ocasio-Cortez reads, “Every Billionaire is a Policy Failure.”

But exactly how much wealth, relative to the mean, is too much? And what exactly would a “just” distribution of income look like? These aren’t just hypothetical questions — they reveal a fundamental defect in the relativist view of the economy. The anger over the concentration of wealth at the top of the income distribution relative to the middle and working classes often stems from the notion that the economy is static, and that every dollar gained for Bill Gates is a dollar lost for less wealthy Americans. To view the economy in this way, however, would be a grave mistake.

Market economies are far from static, and the accumulation of wealth by the most prosperous individuals does not amount to a theft of income from the working class. To be sure, some people become wealthier more quickly than others during periods of economic growth, but the beauty of the free market lies in its ability to create value for everyone. Success in a market economy often stems from one’s ability to create a product or service that motivates consenting individuals to willingly part with their economic capital. Subsequently, many of the most affluent members of our society acquired their wealth by creating enormous value for others —  and not just those in the top quadrants. It’s no wonder, then, that standards of living have continued to improve for Americans in every income bracket, even as the gap between the rich and the poor has widened.

Ironically, this is the exact argument that Senator Sanders made when confronted with the fact that his personal wealth now situates him in that oft-denigrated top 1% of the country’s income distribution. How did Sanders become a millionaire? “I wrote a best-selling book,” he explained to the New York Times. “If you write a best-selling book, you can be a millionaire, too.” Of course, this is an inadvertent recitation of the argument often made by Sanders’ fiercest critics: he created a desirable product, which he then traded in exchange for money to consenting individuals in the market. It’s difficult not to be astounded by such an impressive exercise of cognitive dissonance: the Vermont senator continues to be unabashedly convinced that the wealth of his fellow one-percenters is damning evidence of an unjust, unfair system that needs to be corrected through massive redistributionist policies. But when it comes to the significance of his own income, he suddenly becomes uncharacteristically charitable. How odd.

The eccentricities of septuagenarian socialists notwithstanding, those who are concerned with the lot of the American working class should center their energies on material prosperity, economic mobility and wage growth rather than becoming mired in concerns over relative wealth distribution. There is still real work to be done in these areas, to be sure, but attempting to punish the successful rather than expanding opportunity for the least fortunate will likely exacerbate such issues. Contrary to what many contemporary progressives seem to believe, punitive wealth redistribution is not the key to a more prosperous or just America. Instead, policymakers should focus on increasing the polity’s ability to lead lives of purpose and dignity — something that’s rarely, if ever, provided by a massive new government program.