The top 10% of Americans control roughly three-quarters of the nation’s wealth, and the minority of Haves are continuing to accumulate more than the majority of Have-Nots.
This is wealth inequality in the United States. And though it doesn’t attract as much attention as income inequality, it’s arguably far more important, imposing economic instabilities and social strife.
To decrease wealth inequality, pundits, politicians, and economists often suggest raising income tax rates on top earners to as high as 50, 70, or even 90 percent.
The idea sounds plausible, but according to a new study published to PLoS ONE it probably won’t work in practice.
[…]In their model, income inequality was tied to a metric called the Gini index, a statistical measure of inequality used for decades. They found that altering income inequality to a Gini index of 0.1 (very low inequality) resulted in the top 10% controlling 78.6% of wealth in 2030, while raising income inequality to a Gini index of 0.9 (very high inequality) resulted in the top 10% controlling 79.3% of wealth in 2030, hardly a significant difference.
Do you know what does work to help people – growing the economy so that everyone can find work. It’s actually been done before.
President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.
At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.
It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.
In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.
The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.
Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:
GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.
The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy.
Please note: revenues actually went up as a result of the tax cuts, because more economic growth means more taxes are collected on the income that is generated.
Whenever people with savings take risks to grow their wealth, there will be jobs created. The solution to helping the poor isn’t giving them someone else’s money. The solution to helping the poor is to let productive job creators keep their own earnings, so that they use their money to create more jobs. That way, people who want to work have multiple job offers and can pick the best one. Productive people are not the enemy. Productive people give you money to work for them. That’s good for you.
Almost everywhere the left is in control — in California, for example — the economic news is awful. But this has no effect on the ruling Democrats, the Los Angeles Times editorial page, New York Times economics columnist Paul Krugman or others on the left.
There is one overriding philosophical reason and one political reason for this.
He lists a number of the economic problems in California – a state that is controlled top to bottom by Democrats.
Why doesn’t it bother Democrats that economies decline when they are in control?
Why do these state-crushing economic statistics — nearly every one of which is the result of left-wing policies — have no effect on California’s Democrats, the Los Angeles Times editorial page, New York Times economics columnist Paul Krugman or almost anyone else on the left?
The answer is that they don’t care.
Yes, of course, as individuals with a heart, most people, right and left, care about people losing their jobs.
But in terms of what matters to the left and the policies they pursue, they don’t care. The left and the political party it controls do not care if their policies force companies to leave the state (or the country).
They don’t care about the coming high inflation caused by quantitative easing (printing money) — Krugman calls it the inflation obsession — or the job-depressing effects of high taxes or energy prices that hurt the middle class or compelling businesses to leave.
They don’t care because the left is not interested in prosperity; the left is interested in inequality and in the environment.
Furthermore, the worse the economic situation, the more voters are likely to vote Democrat. The worse the economic situation, the greater the number of people receiving government assistance; the greater the number of people receiving government assistance, the greater the number of people who will vote Democrat.
Therefore, both philosophically and politically, the left has no reason to be troubled by bad economic news. And it isn’t. It is troubled by inequality and carbon emissions.
He could have done the same analysis in Detroit, where Democrats govern unopposed by Republicans, and have for years.
The main problem of the left is “inequality”. If they put in place policies that make everyone earn minimum wage, regardless of what they do, that would be a great victory for them. If the price of prosperity is “economic inequality”, then so much the worse for prosperity. If you tax people who produce more value than a minimum wage worker so that they make the same as a minimum wage worker, you can forget about the kinds of businesses that produce cars, computers and appliances. People invent these things and start businesses in order to make a profit. That’s why they spend their savings and take the risk to start a business. But if everything they earn is taxed away, then we will have to do without new products and services. This is understood in the private sector, but not by the government, nor by the low-information voters who vote for bigger government.
We have to stop allowing the Left to pain themselves as saints because they talk about the poor. What they don’t like about the poor is the rich. If everyone were poor, they wouldn’t talk about the poor – because everyone would be equal. That’s their goal.
Jay Richards, Ph.D., is a Senior Fellow of the Discovery Institute where he directs the Center on Wealth, Poverty and Morality, and is a Visiting Scholar at the Institute for Faith, Work & Economics. Most recently he is the co-author with James Robison of the best-selling Indivisible: Restoring Faith, Family, and Freedom Before It’s Too Late”.
In addition to writing many academic articles, books, and popular essays on a wide variety of subjects, he recently edited the new award winning anthology, God & Evolution: Protestants, Catholics and Jews Explore Darwin’s Challenge to Faith . His previous book was Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem (HarperOne, May 2009), for which he received a Templeton Enterprise Award in 2010.
[…]In recent years, he has been a Contributing Editor of The American at the American Enterprise Institute, a Visiting Fellow at the Heritage Foundation, and a Research Fellow and Director of Acton Media at the Acton Institute. Richards has a B.A. with majors in Political Science and Religion, an M.Div. (Master of Divinity) and a Th.M. (Master of Theology), and a Ph.D. (with honors) in philosophy and theology from Princeton Theological Seminary.
Jim Wallis (born June 4, 1948) is a Christian writer and political activist. He is best known as the founder and editor of Sojourners magazine and as the founder of the Washington, D.C.-based Christian community of the same name. Wallis is well known for his advocacy on issues of peace and social justice. Although Wallis actively eschews political labels, he describes himself as an evangelical and is often associated with the evangelical left and the wider Christian left. He works as a spiritual advisor to President Barack Obama. He is married to the Rev. Joy Carroll, who was one of the first female priests in the Church of England. He is also a leader in the Red-Letter Christian movement.
[…]In 2010, Wallis admitted to accepting money for Sojourners from philanthropist George Soros after initially denying having done so. When conservative writer Marvin Olasky pointed this out, and that Soros also financed groups supporting abortion, atheism, and same-sex marriage, in a WORLD magazine column, Wallis said Olasky “lies for a living”; he subsequently apologized to Olasky for the comments. In 2011, Wallis acknowledged that Sojourners had received another $150,000.00 from Soros’ Open Society Foundation.
[…]In regard to the 2011 United States budget proposal, Wallis described Congressman Paul Ryan and his congressional allies as “bullies” and “hypocrites.”
Wallis just came out this month in favor of gay marriage. He is also a strong supporter of Barack Obama, who is radically pro-abortion. Some pro-lifers have argued that Barack Obama has the same views on abortion as Kermit Gosnell.
The format of the debate
20 minute opening speeches
10 minute rebuttals
10 minutes of discussion
Q&A for the remainder
I use italics below to denote my own observations.
Jim Wallis’ opening speech:
My goal is to spark a national conversation on the “common good”.
A story about my son who plays baseball.
The central goal of Christianity is to promote the “common good”.
Quotes “Catholic social teaching” which values “human flourishing”.
The “common good” is “human flourishing”.
Is the purpose of Christianity is to make sure that everyone has enough material stuff or to preach the gospel?
When Christians go on mission trips, it’s good that they focus on things like human trafficking.
Democrat John Lewis is the “conscience of the U.S. Congress”.
John Lewis gets a 0% rating from the American Conservative Union in 2012.
John Lewis gets a 8% rating from the American Conservative Union in 2011.
John Lewis gets a 2.29% lifetime rating from the American Conservative Union.
Nothing is going well in Washington right now except comprehensive immigration reform.
Does he think that Christianity means giving 12-20 million illegal immigrants a path to citizenship, while skilled engineers cannot even get green cards, even though there is a shortage of them? Does he think that the other people in society who earn more than they receive from the government ought to be taxed more in order to provide more services and benefits to those who earn less than they take from the government?
Jay Richards’ opening speech:
Two topics: 1) what is the common good? 2) what should Christians do to promote the common good?
Catholicism defines the “common good” as “Indeed, the common good embraces the sum of those conditions of the social life whereby men, families and associations more adequately and readily may attain their own perfection.”
We have natural ends that we are supposed to be achieving and some places, like South Korea, are better for allowing that to happen.
The common good is broader and prior to any sort of political specification.
It’s not the political good or what the state is supposed to do.
It’s not about the communal good, as in Soviet Russia, where the communal good was above individual and familial good.
The common good is the social conditions that promote the things that we humans have in common as individuals and members of family.
The common good takes account of who we are as individuals and in associations with other individuals, e.g. – families.
Christians don’t have to be doing the same things to promote the common good, e.g. – pastors, entrepreneurs, etc.
The church, as the church, has as its primary goal making disciples of all nations.
But even in that capacity, the church should be interested in more than just conversions and saving souls.
We also have to care about God’s created reality including things like physics, education, etc.
How should Christians promote the common good in politics?
Question: when is coercion warranted?
In Romans 13, Paul says that the state does have power to coerce to achieve certain ends, like justice.
Most Christians think that there are some things where the state can use coercion, for example, to prevent/punish murder.
It is OK for the police to use coercive force to maintain public order and the rule of law.
But we need to ask whether other things are legitimate areas for the state to use coercive force.
We should only give the state power to coerce when there is no other way to achieve a goal.
We need to leverage the science of economics in order to know how to achieve the common good.
Henry Hazlitt: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
For example, what happens if we raise the federal minimum wage to $50. What happens next for all groups? That’s what we need to ask in order to know which policies achieve the common good.
When it comes to economics a lot of things have been tried in other places and times.
We can know what works and doesn’t work by studying what was tried before and in other places.
Many things are counter-intuitive – things that sound good don’t work, things that sound bad do work.
Principle: “We are our brother’s keeper”. Christians have an obligation to care for their neighbors.
We all agree on the goal. But how do we do things that will achieve that goal?
We have to distinguish aspirations from principles and prudential judgment.
Principle: We should provide for the material needs of the poor.
Prudence: Seeing the world as it is, and acting accordingly.
Example policies: which minimum wage is best? None? $10? $20?
We decide based on seeing how different economic policies achieve the goal of helping the poor.
Jim Wallis’ first rebuttal:
Jesus commanded us to “care for the poor and help to end poverty”.
Actually, Jesus thought that acknowledging him and giving him sacrificial worship was more important than giving money to the poor, see Matthew 26:6-13:
6 While Jesus was in Bethany in the home of Simon the Leper,
7 a woman came to him with an alabaster jar of very expensive perfume, which she poured on his head as he was reclining at the table.
8 When the disciples saw this, they were indignant. “Why this waste?” they asked.
9 “This perfume could have been sold at a high price and the money given to the poor.”
10 Aware of this, Jesus said to them, “Why are you bothering this woman? She has done a beautiful thing to me.
11 The poor you will always have with you, but you will not always have me.
12 When she poured this perfume on my body, she did it to prepare me for burial.
13 Truly I tell you, wherever this gospel is preached throughout the world, what she has done will also be told, in memory of her.”
It’s not clear to me whether Jim Wallis thinks that preaching is more important than redistributing wealth to address material inequality.
I like what Jesus said in a TV series, even though it’s not in the Bible when an actor playing Jesus said to “change the world”.
Jesus never said to “change the world” in the Bible. Should we be concerned that he is quoting a TV actor playing Jesus instead of Jesus.
Here is a terrific story about Bill Bright.
I love Catholic social teaching.
Quote: “All are responsible for all”.
I go to the World Economic Forum at Davos, Switzerland every year. I spoke once at 7 AM on the 4th floor.
It’s a funny place for a Christian to be if they care about the poor – rubbing shoulders with leftist elites. He must have named a dozen high-profile people that he spoke with during the debate, as if he could win the debate by some sort of argument from name-dropping. He mentioned the Davos thing several times!
The greatest beneficiary of government actions to deal with the economic crisis was Wall Street banks.
I’m going to tell you a story about what a Washington lawyer says to Jesus.
I’ve had conversations with business leaders where I tell them to integrate moral truths.
I talk about the Good Samaritan parable.
Quote: “Do you love your undocumented neighbor?”
Quote: “Do you love your Muslim neighbor?”
Jay Richards’ first rebuttal:
Who is responsible for your own children? Who knows the most about them?
Parents should have more discretion over their children because they have more knowledge about their child and what’s best for them.
The Good Samaritan doesn’t show that government should confiscate wealth through taxation and redistribute it.
The Good Samaritan emphasizes voluntarily charity to help people who are not necessarily your immediate neighbor.
Some of the things we do should be for the good of other people in other countries.
But then we are back to leveraging economics to know what policies are good for those other people in other countries.
The principle of subsidiarity: if a problem can be addressed by a lower level of society (family) then we shouldn’t make higher levels (government) address it.
The best place to take care of children is within the family.
Only if the family fails should wider and wider spheres get involved.
Although we want to think of the common good in a global sense, we don’t want to lose sight of the fact
The financial crisis: we need to integrate moral truths, but also economic truths.
We don’t want to assume policies based on intuitions, we want to check our intuitions using economic principles.
Why did we have a financial crisis in mortgages, but not in commodities futures or technology, etc.?
Greed is a contributing factor in all areas of business.
Something more was going on in the mortgage markets than just greed.
There were specific policies that caused the mortgage lending crisis.
The root cause of the problem were “affordable housing policies” that lowered lending restrictions on low income people.
The policy ended up degrading the underwriting standards on loans.
Government intruded into the market and undermined the normal ways of
People were getting massive loans with no income, no jobs, no assets and no down payment.
The federal government created a market for risk loans by guaranteeing
There was a government imposed quota on mortgage lenders such that 50% of their loans had to be given to high-risk borrowers.
That is what led to the financial crisis. Not the free market, but intrusions into the free market.
These policies were well-meaning and implemented by people from both parties. But they had bad effects.