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The Right Way to Reduce Inequality

The most recent Gallup poll, which shows a majority of Americans believe that some of their neighbors have too much money and that the government should therefore confiscate and redistribute some of it, is likely to please the president, who based his reelection campaign on class resentment. Though Gallup paints this as vindication for the president on the message, it does expose the problem with how we tend to conduct the conversation of basing policy on that message. Gallup pronounces:

Inequality is and will continue to be one of the most important domestic political issues. President Barack Obama has consistently pushed for measures that he believes would provide those at the bottom end of the socioeconomic spectrum a fairer chance to succeed, and has coupled that with consistent arguments for higher taxes on those with high incomes and wealth. At this point, the American public would generally agree with Obama that wealth should ideally be more evenly distributed — and a modest majority, consisting mainly of Democrats and independents, appears to support the idea of bringing about that redistribution through heavier taxes on the rich.

There are generally two weaknesses with how liberals talk about inequality. The first is that they usually begin by assuming inequality is detrimental to society without establishing that it is. They may be right, but it would be unwise to build redistributive policies on class warfare and demonization instead of data. An exception in this regard is the Washington Post’s Brad Plumer, who wrote an interesting piece a few weeks back about new research into “trickle-down consumption.” One example, according to Plumer: “In cities like New York, the wealthiest are competing for the most valuable apartments and bidding up prices — which has broader ripple effects.” The concept is not new, but Plumer’s post adds some interesting context.

Trickle-down consumption, of course, is really a problem in unequal spending which is enabled by, but not the same thing as, unequal income. Additionally, there are advantages to having the wealthy consume instead of save: they support businesses owned by the less wealthy, which increases the income of less well-off, and when they purchase property that will often result in an increase in their taxes. The latter is a result those on the left claim to want, and it comes about through consumption and sometimes job creation (construction, etc.) instead of confiscation. Nonetheless, the discussion is worth having and Plumer’s piece brings hard data to the table instead of stories about Warren Buffett’s secretaries.

Yet it also raises the second issue with how inequality is too often discussed: how it should be rectified. Gallup demonstrates this perfectly when it only proposes one way to redistribute income: by taxing “the rich” more. But there are all sorts of ways to try and level the playing field. Gallup is noticeably vague in giving Obama credit for proposing ways to give the poor a fair shake. There’s a good reason for that.

As I noted in December, referencing an important article on taxing the rich by Joel Kotkin, Obama’s soak-the-rich approach to taxation can easily exacerbate existing inequality. Many high-earners live in cities, where there are also a large number of low-income residents. As Kotkin explains, this makes these economies heavily dependent on the consumption of the wealthy, and raising taxes on them would hit the very industries that typically offer income-class mobility to the poor.

There’s also the issue of education. Obama sought to end the D.C. Opportunity Scholarship Program, which was designed to give low-income youth stuck in D.C.’s failing schools a chance at a better education. His party remains broadly hostile to school choice, siding with public union bosses instead.

And no discussion of inequality should omit crime. The successful policing innovations in New York City have benefited low-income neighborhoods above all. Yet politicians and leftist activists are falling all over themselves to find ways to undo the incredible work of the NYPD. As Fred Siegel wrote recently in the New York Observer:

The Kimani Gray case may fade, but the intertwined issues of crime and race will remain high on the electoral agenda. If the politicians fail to thread the needle, the danger ahead is that New York could regress to a Chicago-like situation, where the well-to-do areas are reasonably well-policed while the minority areas are left to fend for themselves regarding crime. The liberal champions of equality will have once again produced greater inequality.

So by all means, let’s talk about rectifying inequality. But Gallup’s refusal to connect any issue other than taxation with inequality mirrors the left’s own, and ensures that so many worthy policy objectives remain ignored.


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