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Thomas Sowell
Thomas Sowell
22 Apr 2014
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The High Cost of Liberalism: Part III

Comment

Income inequality has long been one of the liberals' favorite issues. So there is nothing surprising about its being pushed hard this election year.

If nothing else, it is a much-needed distraction from the disasters of ObamaCare and the various IRS, Benghazi and other Obama administration scandals.

Like so many other favorite liberal issues, income inequality is seldom discussed in terms of the actual consequences of liberal policies. When you turn from eloquent rhetoric to hard facts, the hardest of those facts is that income inequality has actually increased during five years of Barack Obama's leftist policies.

This is not as surprising as some might think. When you make it unnecessary for many people to work, fewer people work. Unprecedented numbers of Americans are on the food stamp program. Unprecedented numbers are also living off government "disability" payments.

There is a sweeping array of other government subsidies, whether in money or in kind, which together allow many people to receive greater benefits than they could earn by working at low-skilled jobs. Is it surprising that the labor force participation rate is lower than it has been in decades?

In short, when people don't have to earn incomes, they are less likely to earn incomes — or, at least, to earn incomes in legal and visible ways that could threaten their government benefits.

Most of the households in the bottom 20 percent of income earners have nobody working. There are more heads of household working full-time and year-round in the top 5 percent than in the bottom 20 percent.

What this means statistically is that liberals can throw around numbers on how many people are living in "poverty" — defined in terms of income received, not in terms of goods and services provided by the government.

Most Americans living in "poverty" have air conditioning, a motor vehicle and other amenities, including more living space than the average person in Europe — not the average poor person in Europe, the average person.

"Poverty" is in the eye of the statisticians — more specifically, the government statisticians who define what constitutes "poverty," and who are unlikely to define it in ways that might jeopardize the massive welfare state that they are part of.

In terms of income statistics that produce liberal outcries about "disparities" and "inequities," millions of people who don't have to earn incomes typically don't.

The more people who are in a non-income-earning mode, the greater the disparities with the incomes of those of us who have to work for a living, and who have to earn more to offset high tax rates.

Yet liberals often act as if this is an injustice to those who don't work, rather than an injustice to those who do work, and whose taxes support those who don't.

Actually, the liberal welfare state is an injustice to both, though in different ways.

Despite whatever good intentions some liberals may have had in creating the ever-growing welfare state, practical politicians know that more dependency means more votes for supporters of bigger government.

There are no incentives for either politicians or the bureaucrats who run the welfare state agencies to get people off their dependency on government programs. Moreover, the eligibility rules create a very high cost to individuals who try to rise by getting a job and earning their own money.

It is not uncommon for someone who is receiving multiple government-provided benefits — housing subsidies, food subsidies, etc. — to lose more in benefits than they gain in income, if they decide to take a legitimate and visible job.

If increasing your income by $10,000 a year would cause you to lose $15,000 worth of government benefits, would you do it? That is more than the equivalent of a 100 percent tax rate on income. Even millionaires and billionaires don't pay that high a tax rate.

Liberals don't talk — or perhaps even think — in terms of the actual consequences of their policies, when it is so much more pleasant to think in terms of wonderful goals and lofty rhetoric.

Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

3 Comments | Post Comment
Mr. Sowell you opinion want to blame innocent people and confuse. You wrong. You side are ones with lofty rhetoric and no care for people.

I copy this article below for you written byThom Hartmann he explain more to me and no lie.


Thom Hartmann
When we had heavily regulated and taxed capitalism in the post-war era, the largest employer in America was General Motors, and they paid working people what would be, in today's dollars, about $50 an hour with benefits. Reagan began deregulating and cutting taxes on capitalism in 1981, and today, with more classical “raw capitalism,” what we call “Reaganomics,” or “supply side economics,” our nation's largest employer is WalMart and they pay around $10 an hour.
You'll also notice that since marginal tax rates started to plummet during the Reagan years, income inequality has skyrocketed.

During those same 33 years since Reagan took office and started cutting taxes on the rich, income levels for the top 1 percent have ballooned while income levels for everyone else have stayed pretty much flat.

This is how quickly capitalism reorients itself when the brakes of regulation and taxes are removed – this huge change was done in less than 35 years.

when GM was our largest employer and our working class were also in the middle class, CEOs only took home 30 times what working people did. The top tax rate for all the time America's middle class was created was between 74 and 91 percent. Until, of course, Reagan dropped it to 28 percent and working people moved from the middle class to becoming the working poor.

Other policies, like protective tariffs and strong labor laws also help build a middle class, but progressive taxation is the most important because it is the most direct way to transfer money from the rich to the working poor, and to create a disincentive to theft or monopoly by those at the top.

Creating a middle class is always a choice, and by embracing Reaganomics and cutting taxes on the rich, we decided back in 1980 not to have a middle class within a generation or two. George H.W. Bush saw this, and correctly called it “Voodoo Economics.” And we're still in the era of Reaganomics – as President Obama recently pointed out, Reagan was a successful revolutionary.

This, of course, is exactly what conservatives always push for. When wealth is spread more equally among all parts of society, people start to expect more from society and start demanding more rights. That leads to social instability, which is feared and hated by conservatives, even though revolutionaries and liberals like Thomas Jefferson welcome it.

This is exactly what happened in the 1960s and '70s when taxes on the rich were at their highest. The Civil Rights movement, the women's movement, the consumer movement, the anti-war movement, and the environmental movement – social movements that grew out of the wealth and rising expectations of the post-World War II era's middle class – these all terrified conservatives. Which is why ever since they took power in 1980, they've made gutting working people out of the middle class their number one goal.

We now have a choice in this country. We can either continue going down the road to oligarchy, the road we've been on since the Reagan years, or we can choose to go on the road to a more pluralistic society with working class people able to make it into the middle class. We can't have both.

And if we want to go down the road to letting working people back into the middle class, it all starts with taxing the rich.
The time is long past due for us to roll back the Reagan tax cuts.
Comment: #1
Posted by: steveM
Mon Apr 21, 2014 2:50 PM
"Income inequality has actually increased during the 5 years of Obama's leftist policies". No kidding! Did the economy the Bush conservatives drove into the toilet create more or less inequality?More or less people on food stamps,welfare?More or less jobs? Was the red ink to stop after inauguration day?Did Bush conservatives show any responsibility?Perhaps if conservatives like Sowell took the responsibility they had in their hands and used it appropriately they wouldn't be here blasting those on welfare for a lack of responsibility.Criminals know best who the criminal is.Lead by example.To point at Obama's policies and blame them for your mess is the height of arrogance.The only conservative policy you can point at is,make the rich richer.
Comment: #2
Posted by: WILLIAM KELLEY
Mon Apr 21, 2014 4:37 PM
Re: WILLIAM KELLEY - Mr. Kelley writes, "Perhaps if conservatives like Sowell took the responsibility they had in their hands and used it appropriately they wouldn't be here blasting those on welfare for a lack of responsibility." I believe he has misunderstood what Mr. Sowell wrote. If he is "blasting" anyone, it is not those on welfare, but rather those head-in-the-clouds liberals in power who make it so much easier not to work, and so difficult to begin to work. Mr. Sowell's common-sense look at what is real is such a welcome change from the la-la land policies and practices of so many in Washington - and in many state governments as well. And who can deny that there really are many of the non-workers who prefer it that way? (The residents of la-la land do tend to deny it, but that is the law in that land.)

Comment: #3
Posted by: Gerry W.
Tue Apr 22, 2014 2:01 PM
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