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The Truth About Income Inequality

Nothing, it seems, gets the left more worked up these days than the specter of growing income inequality, the gap between the income of the poorest quintile and the highest, and, especially, the gap between the incomes of the top one-percent and the rest of us.

The New York Times has one of its usual editorials this morning:

Republicans are indeed in growing trouble as more voters begin to realize how much the party’s policies — dismantling regulations, slashing taxes for the rich, weakening unions — have contributed to inequality and the yawning distance between the middle class and the top end.

One wonders how “slashing taxes for the rich” contributes to income inequality. There are only two ways it could do so, as taxes don’t diminish income, only disposable income. Either the money taxed away would be given to the less-rich, swelling their incomes, or cutting taxes on the rich stimulates the economy, increasing the incomes of the rich (and everyone else). I vote for the latter. I doubt the Times does.

The Times argues that the growing inequality is stoking tensions across class lines, which the AP also claimed. “Two-thirds of Americans now say there is a strong conflict between the rich and the poor, according to a Pew survey released last week, making it the greatest source of tension in American society.”

But as James Taranto of the Wall Street Journal pointed out on Thursday, that’s not what the Pew survey said:

In fact, Pew does not claim to have found, as the AP falsely asserts, that “tensions between rich and poor are increasing.” It finds, rather, that “perceptions of class conflict” and “the belief that these disputes are intense” have become more prevalent, especially since 2009.

The Times’ editorial board, apparently, does not read the New York Times, which got the story right on Wednesday.

In fact, of course, the growing gap in incomes between the very rich and the middle class is a product of the extraordinary technological revolution the global economy is in the midst of, thanks to the microprocessor. Powerful new technologies (the steam engine, railroads, the telegraph, petroleum, the telephone, automobiles, the movies, etc.) always cause an inflorescence of new, huge fortunes, which automatically increase the gap between the very rich and the middle class.  Just look at the Forbes 400 list to see how many gigantic fortunes have been created thanks to the microprocessor. Some of those fortunes were created by people still in their 20s.

The hyperventilating on the left over income inequality is almost entirely self-interested: an excuse for transferring the new wealth from the people who created it (and made us all richer thereby) to politicians who will use it to buy votes.

Margaret Thatcher was on to their game (hat tip: Instapundit), as she made more than clear in her last speech in the House of Commons.



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