Income Inequality

CNBC recently had Arthur C. Brooks (President of the American Enterprise Institute) as a guest host on “Squawk Box.”  Mr. Brooks spoke on topics relating to America’s economy.  He feels the claims that income inequality cause our economic problems is a political distraction.  The real problem he said is the increasingly diminished opportunity for upward mobility of those in the lower 20% of the economic strata.   Without opportunity, comes stagnation.

What we have done is to gradually substitute social programs for upward mobility opportunities.  We are thus creating a culture of dependency on social programs rather than inspiring individual initiative.  And that culture of dependency is spreading to more and more people.  We are being told it is all the fault of the evil 1%.  And it’s just not true.     

When Bill Gates first came on the scene as one of the world’s most successful and richest men, a survey was conducted about how people felt about him.   Americans typically thought “my son or daughter can be the next Bill Gates.”  The French on the other hand were highly jealous and felt they should burn his house down “and take his stuff.”  It is the subtle and barely noticeable shift in the direction of the European ethos that has spawned a political environment of class warfare — the heroic and virtuous 99% versus the evil 1% (which is evolving into the heroic and virtuous 50% who pay no taxes against everyone else). 

The United States is the most heavily-taxed and heavily-regulated country in the world.  Our policies on dealing with the 20% are missing the point.   We should want people to succeed.  Want people to learn.  Want people to become entrepreneurs.   Want people to achieve.  Incentive and opportunity are truly liberating concepts and not a substitute for social programs.     

To see Mr. Brooks’ interesting comments, check out http://www.aei.org/media/economics/arthur-brooks-guest-hosts-cnbcs-squawk-box-the-road-to-freedom

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