I’m an American, and I believe passionately in freedom. I believe in the individual pursuit of happiness. So it troubles me when my president wants to take that away and starts sounding like a socialist.
In a socialist society, no one gets to keep the product of his work. Instead, the government redistributes money to force financial “equality” upon the people. Bush recently chimed in on the popular political notion of “income inequality,” claiming an increasing gap and the possibility that something should be done about it.
Something … like what? Federal Reserve Chairman Ben Bernanke gave us a clue.
"The tax code has an important role to play in generating more equality," Bernanke said, testifying before the Senate Banking committee. Bernanke’s comments reflected the classic Robin Hood approach – rob from the rich to give to the poor. It has widespread emotional appeal, until you’re the one getting robbed.
Many Americans are all for other people getting taxed more. They think of the “wealthy” as the people who are making more than they are – the ones who should pay more taxes.
As long as “the rich” are a faceless entity apart from me – and as long as we face the unfair income tax system – I can demand that they bear my burdens and cough up the cash for all my social programs.
And as economist Alan Reynolds pointed out recently, we have thrown a lot of cash at the attempt to equalize our society. He noted that “the source of most income of the bottom fifth” is the “more than $1.5 trillion of government transfer payments such as Social Security, unemployment benefits, the Earned Income Tax Credit, Medicaid and food stamps.”
Reynolds has spent most of his time lately arguing that income inequality hasn’t really increased. And there is compelling data on that point – the Joint Economic Committee said in January that there had been no change in that “gap” between 2001 and 2005.
We need economists like Reynolds getting these facts out there. But at the same time, we need to ask a much larger question. Should we even be having this conversation?
Massachusetts Democrat Barney Frank said in January that “Inequality is not a bad thing. It's necessary in a capitalist system, and I'm a capitalist.”
That statement was buried in Frank’s speech about what the government should be doing to mitigate inequality. I agree with him that inequality isn’t a bad thing. But it’s not the government’s job to dictate how much money Americans are making.
If I want to work hard and eventually rise to a higher income level, it is disheartening to realize that the more successful I am, the more the government punishes me by taking more of my money. Conversely, that same government is rewarding those who aren’t succeeding by giving them my hard-earned money.
One of the liberals’ misconceptions is that top earners stay at the top and those on the bottom are stuck there as well. This, of course, is not true.
In an excellent essay [1], economist David Henderson explained that Americans are indeed moving from one income level to another – and in fact, that movement goes both ways. Henderson cited a study that revealed “32 percent of men whose fathers were in the bottom 25 percent of earners were themselves in the top half and that 34 percent of men whose fathers were in the top 25 percent were themselves in the bottom half.”
That’s one of the great things about America – just because your parents weren’t wealthy doesn’t mean you won’t have the opportunity to be. At the same time, Daddy’s work ethic doesn’t automatically pass down to the next generation. America is a nation of individuals, and we must each make our way.
But politicians aren’t content to let us do that. If you work hard and earn money, they act as though that’s a bad thing. The media, too, demonize successful businessmen. They’ll use your success to try to make you feel guilty, and you know what comes next: another tax increase.
One news report described Rep. Frank’s agenda as holding hearings “into why the top income earners are making so much more than lower earners and what the government can do about it.” I think any elementary school student knows that some people make more money than others and could probably give you some reasons why. It doesn’t take a congressional investigation to figure it out.
And as for what our elected leaders should do about income growth: let us keep more of our money.
Herman Cain is the National Chairman of the Media Research Center’s Business & Media Institute. He is the former president and CEO of Godfather’s Pizza, Inc., and currently is CEO and president of T.H.E. New Voice, Inc., a business and leadership consulting company.