Income inequality: Households are not people

Distinguished Harvard economist Martin Feldstein penned a recent column in the Wall Street Journal making the point that economic differences are less drastic than advertised.

He writes:

The Federal Reserve recently estimated total household net worth in the U.S. to be about $80 trillion, including real estate and financial assets. And data from the Fed’s Survey of Consumer Finances imply that the top 10% of households by net worth hold about 75%—or $60 trillion—of this total. The bottom 90% of households therefore have a net worth of about $20 trillion.

But, as he notes, this picture “leaves out the large amount of wealth held in the form of future retirement benefits from Social Security and Medicare”:

'The most honest three and a half minutes on television, ever'?

A few years ago, an anti-American television tirade went viral. Typically, such a rant would not escape the boundaries of Hollywood, but this one has collected millions of YouTube views and has been hailed as the “most honest three and a half minutes on television, ever.” But it’s propaganda.

The harangue aired on the popular TV series, “The Newsroom.” Will McAvoy, fictional news anchor, is asked by a college student, “What makes America the greatest country in the world?” Here is his response:

What's wrong with democracy?

My piece on the problems of democracy is up at the Daily Caller.

A few snippets:

America is a democratic republic. But today, any mention of the republican nature of our democracy has all but disappeared from the public square. Indeed the very idea of a republic has fallen into disrepute. 

Why? 

Misinformation on economic inequality

A recent piece of mine titled "Bernie Sanders’ Inequality Fallacies" created confusion among readers. Typically, those who disregard an argument and reply with misinformation can be ignored. But given the pervasiveness of misinformation among the intelligentsia and general public, it merits a response.

My article pointed out that a widespread fallacy about economic inequality is drawing conclusions based on statistical categories rather than human beings. This point seemed to escape many commenters:

“So the fact that real wages have been flat or declining while GDP triples and productivity doubles in the past four decades are meaningless?”  

“Wages have been frozen since 1969, but actual physical productivity has increased approximately 90 % over that time period.” 

“The result of more than forty years of conservative driven economic policies is that wages have stagnated for forty years, not six. That is just a fact.”

The economic spending fallacy

One cannot help but marvel at the pervasiveness of the misguided idea that spending is good for the economy.

The other day, for instance, an acquaintance lamented that his weekly restaurant expenses were hard on his pocket book, but he then quickly rejoined that at least his lavish dining habits boosted the economy. Such thinking is hardly uncommon. Indeed most cultural and media elite attribute upticks in economic growth to surges in spending and the opposite to reductions in spending. Presidential aspirant Bernie Sanders has gone so far as to suggest $1 trillion in public infrastructure spending over five years partly to “help the economy.”

On its face this thinking appears to make sense, but when examined it does not wash. Consider the following scenario.

America does not have an economic inequality problem

Language manipulation is nothing new in politics, but describing economic differences as “economic inequality” is a linguistic act we should reconsider. It not only falsely suggests unique unfairness in economic life, but the notion itself rests on an unfounded assumption.

No aspect of life—economic or otherwise—escapes unfairness. Height, strength, birth place and natural talents are all largely determined by the luck of the draw. More than that, chance is at least partly responsible for our discovering our talents. While luck first blessed Michael Jordan with basketball prowess, he was twice lucky for deciding to pick up a basketball in the first place (and thrice lucky for being born into an environment that allowed him to do so). Yet, we resist describing the unfairness in our natural height differences or in the talent gap between Michael Jordan and the rest of us as “inequality.”

Inequality Fallacies

My op-ed on economic inequality is up at the Daily Caller. Some snippets:

Fallacies abound about economic inequality, but one of the worst is confusing income categories with human beings.

Presidential candidate Bernie Sanders recently perpetrated this confusion: 

“Our economic goals have to be redistributing a significant amount of [wealth] back from the top 1 percent … Unchecked growth – especially when 99 percent of all new income goes to the top 1 percent – is absurd,” he fulminated. 

But the “top one percent” and the “bottom 99 percent” are statistical categories — not living and breathing human beings. Confusing the one with the other encourages fallacious thinking.

You didn't build that

“There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. … You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” – Elizabeth Warren

Provocative remarks—famously repeated by President Obama during his 2012 re-election campaign and stressed by the left today—but unpersuasive.

America is losing its moral roots

For most of our history, political thought was rooted in values. But in recent years, emotion has replaced these roots. The effects of this change have been momentous.

First, it has diminished the importance of learning from the past. Why study our predecessors for insights into truth, virtue and wisdom when the heart provides these ideals? If something offends us it is wrong, and if it makes us feel good it is right. Hence the decline of value-oriented subjects such as history, ethics and logic, and the rise of emotion-oriented subjects such as women, minority, and transgender studies at our universities. Graduates are fluent in emotional mantra on oppression and inequality, but clueless on American history and moral ethics.

Why the minimum wage promotes discrimination

Despite lofty rhetoric to the contrary, minimum wage laws increase the likelihood of racial discrimination.

According to black economist Walter Williams, it is “for a number of socioeconomic reasons that white youths, more often than their black counterparts, have higher levels of educational attainment and training,” and thus tend to be higher-skilled. While reasons for this are beyond the purview of this article, interested observers can read Williams’ Race and Economics.

Do right and wrong exist?

Popular culture increasingly encourages the idea that belief in universal principles—fixed notions of good and evil, right and wrong, moral and immoral—prevents “progress” and promotes intolerance. We must be “open-minded,” we are told, and eschew such rigidity. Yet “openness,” or relativism, is a path to national suicide.