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Congressman John Campbell

Does Income Inequality Exist?

Last year, President Obama started raising the issue of “income inequality” as a new problem in America. He then proposed to fix this problem using the same “solutions” that he and other Democrats have been pushing for 40 years: Raise the minimum wage and increase unemployment insurance payments. He also used it to further advocate for wealth redistribution via the tax code.

Republicans generally responded that the issue was made up or trumped up by Obama and that this problem either doesn’t exist or is not as big a deal as he suggests. A few Republicans acknowledged the issue and proposed we fix it with tax cuts, which of course was the remedy said Republicans have been pushing for 40 years.

In my opinion, both sides are wrong. Obama is clearly using “income inequality” as a new reason to advocate for the same things he wanted long before “income inequality” ever entered the vernacular. In the same way, Republicans using it to advocate for our standard policy choices is equally inappropriate. So, what do I think we should or should not be doing about this?

First of all, we should probably define “income inequality”. To a true socialist, any disparity in income from one person to another based on a person’s achievements or contribution will be an “inequality” that should not exist. A socialist only allows disparate incomes on the basis of need, not work. I have little doubt that Mr. Obama and a number of his ilk hold this as a core belief. Obviously, however, incomes will be unequal on the basis of contribution in any society absent a totalitarian one.

So, what we are talking about here is really not income “inequality” (although that is the commonly accepted term now), which always will and always should exist. Instead, this is really about increasing income disparity. The incomes of those at the top-end of wealth are increasing much faster than those in the middle. Interestingly, incomes of those at the bottom have been less impacted because of increasing transfer (welfare) payments from governments. But, there is no question that “the rich are getting richer” and most everybody else is not. This is in fact truly happening and my fellow Republicans should not be denying it.

Next, I also want to debunk the idea you are hearing from both the right and the left that this trend in the U.S. is being caused by unemployment insurance being too low or taxes being too high. It is also a fact that this increasing income disparity is happening in every country on planet earth. It is occurring in the most capitalist of countries as well as the most socialist. It is happening in those with low tax rates or no minimum wage, and it is happening in countries with high tax rates and very lofty minimum wage laws. It seems that in government, we are so convinced of our own power and omnipotence that we assume any changes in society are because of something we did or did not do. Fortunately, government is not that supremely dominant…yet.

No, the worldwide nature of this phenomenon shows that something else is at work here not related to the issues usually being discussed in Washington. While glimpses of what that might be are rare, they do occur. One such instance was at a Joint Economic Committee hearing that took place at the end of last year on this very subject. The three witnesses before the committee all held PhD’s in economics – two invited by Republicans and one by Democrats. When Republicans want to disparage someone with a lot of income, we always choose Hollywood people. When Democrats do it, they always choose business executives. So, to make my question politically neutral, I asked the Democratic witness about sports stars. Clayton Kershaw of the LA Dodgers just signed a $215 million contract, the largest ever signed by a baseball pitcher. “Why,” I enquired, “do today’s athletes make many, many multiples more money, even adjusted for inflation, than they did just a decade or two ago, not to mention even farther back?” She answered that various factors were at work here that lead to the fact that marketing opportunities for sports figures worldwide are just greater than they were before the advent of the Internet and other technologies that make them accessible to a lot more people. She went on to say, however, that focusing just on the very top of incomes was “a distraction” to dealing with the problem of increasing income disparity.

Alleluia! Unlike the divisive and destructive rhetoric of this president, Tiger Woods’ increasing earnings do not come out of your or my pocket and, in fact, are more likely to put a little change in them than not. Sure, big contracts make big headlines. But, the problem of increasing income disparity is deeper and wider than just “the 1%” or even the 5%.

So, what are the real issues here and what is driving them? Stay tuned for the next week’s issue of this “Laptop Report”. “Same bat time, same bat channel.” (That’s an original Batman TV show reference for those of you under 50 who don’t watch MeTV.)

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