Solving the Income Inequality Conundrum

In a previous entry, I noted how liberal commentators and “experts” like Paul Krugman jumped on Paul Ryan for comments he had made regarding a culture of dependency that had developed among the poorer elements of society.  Naturally, in typical racist fashion, these liberals jumped on the comments and accused him of racism as if poverty is somehow intrinsic to minorities- a racist liberal assumption akin to the sexist assumption that all women must necessarily approve of abortion by virtue of their reproductive anatomy.

Yet, no one on either side can deny the gap between the so-called 1% and the rest of America.  This gap, despite the rhetoric, has widened most dramatically and ironically under Obama.  In a capitalist economy, there will always be income disparities by virtue of the economic system.  The alternative is an economically classless society where the preference is not to necessarily better oneself, but forcing those at the top to the middle while creating the illusion that those at the bottom are also in the middle.  The difference between liberal solutions and conservative ones can be summed up in two allegorical statements: (1)  “Give a man a fish and you feed for a day; teach a man to fish and you feed him for a lifetime”and (2) “A rising tide raises all boats.”

Let’s start with the latter statement first.  Obviously, the key to increasing one’s income is a decent paying job in a growing economy.  A growing economy ensures not only continued employment but access to health care, housing, educational opportunities and a host of other good things.  Thus, if the government is to do anything about this problem, they must first create the right economic environment for job creation.  The Obama administration’s prescriptions have had the opposite effects.  Obamacare alone is expected to cost thousands of jobs.  Meanwhile, the EPA is formulating regulations that will kill even more jobs in the energy sector while the NRC and other agencies hold up the construction and operation of nuclear power facilities with their high-paying jobs.  It is true, as George Will notes, that business is sitting on trillions of dollars, but unsaid is the reason why.  An administration that constantly vilifies and threatens these businesses and their leaders with more taxes or more regulation is playing a waiting game.

Absent this anti-business climate normally a business would be expending capital to expand their business.  This means they hire more people, give more people raises, promote more people to higher paying jobs, and purchase more equipment or products.  In a climate of vilification, there is no incentive to do any of these things.  Furthermore, the Federal Reserve’s policy of buying $85 billion worth of debt monthly certainly infused the economy with cash which was great for those with stocks, but did very little otherwise.  The Left is fond of poking fun at trickle-down economics, but what else describes the Fed’s policy which was endorsed by this administration?  The result is that those at the lower end of the economic ladder derived negligible gains from the policy while those already at the top reaped the most benefit thus making the “problem” even worse.  And all this happened in 5 years under Obama, yet he now claims the problem he helped exacerbate to be the “defining issue of our time.”

Regarding that first allegorical statement, there is no refuting the fact that an education carries with it certain statistical economic advantages over the lifetime of any individual.  To the liberal, this means that everyone is entitled to and should pursue a college education.  Unfortunately, the fact is that not everyone is qualified for a college education.  Despite the trillions of dollars thrown at public education (a propensity of liberals in general), very little has been gained.  In effect, since the federal government got into the business of K-12 education in the 1960’s, student performance on a variety of metrics is about where they were in the 1960’s even today.  Obviously, the liberal solution has done little.

Furthermore, there is an unneeded emphasis on a college education.  Despite the once-obvious advantages of a college education, it is no longer such a great guarantee of a higher income later in life, especially depending upon the person’s area of study.  For example, should a college graduate with a degree in Women’s Studies be entitled to the same income as a graduate with a degree in microbiology simply by virtue of a piece of paper?  The fact that most colleges today offer remedial courses to students is proof that K-12 education is not doing its job in all areas AND that not everyone is college material.

But, that is not such a bad thing.  There will always be a need for roofers, carpenters, electricians, plumbers, car mechanics and other jobs.  Given recent estimates and rates of labor, these are all fairly well-paying jobs that do not require a college education.  Should the government subsidize to the tune of $8,000 a year per person for that person to get a degree in African Studies, or should they spend about $2,000 a year to subsidize a electrician internship?

Unlike many conservatives who would like to see the federal Department of Education abolished, I would like to see it transformed by first getting it out of K-12 education.  Secondly, the plethora of grants and job training programs that require an “education-” be it formal college education, internships, apprenticeships, and vocational training should fall under its authority.  Regarding those people who are college material, the government should create grants to encourage college students towards degrees and occupations most in need.  For this, the creation of contractual quid pro quos are the means to achieve the desired goals.  For example, in France the government fully subsidizes a medical student’s education in exchange for certain things: (1) they must be a general practitioner, (2) they must practice in an under-served area, etc.  In exchange, provided they live up to their end end of the bargain, they receive a $55,000 a year salary,but pay no payroll taxes.  Domestically, we have TEACH grants that steer potential teachers to certain disciplines (math, science, ESL, special education) in needed geographical areas.  Provided the graduate teaches in these areas (both discipline and geographically) for three years, the grant remains a grant.  Fail the criteria and it reverts to a loan.  Another noteworthy domestic program that should be emulated elsewhere instead of restricted and denigrated is the military’s ROTC program which is highly successful in getting qualified college graduates into military service in vital areas.  The TEACH grant program has also been highly successful while the good effects of the French medical education program are well-documented.

Unfortunately, the liberal views a college education despite the major above everything else.  To them, the graduate and expert in Women’s Studies is somehow equal to the medical or engineering degree and certainly above those “lowly” occupations that do not require a college degree like electrician, plumber, carpenter or car mechanic.  Yet, I know many an electrician, plumber, carpenter and car mechanic who are doing just fine in life.  Are they as rich as Wall Street executives?  Of course not, but they certainly are not wanting for the basics in life and a few added frills.

Also, liberals exhibit their hypocrisy when the subject of private education is discussed.  As is typical of their mindset, the only solution to improving the educational system is more money.  It amazes me that they categorically ignore evidence to the fact that private schools often offer a better education at a lower per-pupil cost than public schools.  Yet it is the position of the Obama administration to categorically deny a private education to the very population that can most benefit- low income minority students.  What can be a more racist policy position from an administration headed by an African-American than keeping minority students with half a brain on the failing public educational plantation?  Private schools perform better for one simple reason: parents are more involved because they have a greater financial stake in the student’s educational performance and outcome.  With public education, those costs are diffused across the taxpaying public and the individual parent is less inclined to become involved.  Just helping- even partially- families to do what most affluent whites take for granted and a birthright would be the best use of state educational dollars for both academic performance and for the public school system.  Politically, it would also resonate with part of the electorate that has or is abandoning the Republican Party- African-Americans and Hispanics.

Furthermore, our social safety net apparatus is no longer a net and has become an entitlement.  Social security, for example, has become the be all and end all for retirement security.  Roosevelt himself never envisioned this.  Instead, it was but one of three legs of a stool with the other two being personal savings and pension plan participation.  In fact, one can make a truthful statement that Social Security is both racist and sexist since determination of retirement benefits is based on employment history.  For whatever reasons, minority workers have greater gaps in employment history and women often drop out of the workforce (thus decreasing their employment history) to raise families and have babies.  Furthermore, the current “rich” got “richer” by virtue of their investments which have done well over time and sometimes in a short period of time.  Yet, liberals draw the line at any notion of privatization of the program thus denying women, minorities and those at the lower end of the economic rung entry into the investor class.  In other words, they prefer the status quo even if safeguards are built into the system and even if it is an entirely voluntary system.

The nation of Chile, which had a social security system a decade before our’s, abolished the system similar to that of the current United States system and essentially privatized it with tremendous results.  In fact,they were so tremendous that most of Latin America followed.  What they discovered was that people were actually retiring earlier with greater retirement security.  And those that were retiring earlier under the old system were working longer.  Instead of the government dictating retirement ages and basically keeping those in poverty to remain in poverty after retirement, individuals were now deciding when to retire and then living a decent life after retirement.  Instead of Pelosi’s Utopia where people who lost their health insurance because they were no longer tied to their job and could now pursue their aspirations to poetry, literature and art, Chile did it the better way.  I am not asserting that Latin America is some economic retirement Utopia, but if it could be done in a country with a smaller GDP than here, then it could easily be done here.

One final point: it is true that the United States has one of the highest income disparities among developed countries.  So what!  We also have the largest economy and the highest standard of living when all is said and done.  People immigrate to the United States, not Sweden or Belgium.  The reason is simple: immigrants know they have a better chance of becoming the next Andrew Carnegie or Rockefeller or Vanderbilt or Steve Jobs or Bill Gates in the United States than in these other developed countries.

In the end, it comes down to creating the right business environment for job creation by looking to the states that have done the most to create good-paying jobs.  Part of it is tax reform, part of it regulatory reform and part of it eliminating confusion and fears within the job-creation community.  It is also true educational reform beyond the liberal mantra of “more money.”  And it is a reform of our social safety net system.  Today under Obama, we reward sloth and denigrate hard work.  Worst of all and perhaps most egregiously, we defy commonsense.  In the end,this may be Davenj1’s conservative Utopia that may need tweaking and modification along the way, but it certainly makes more sense than hope, change and an increase in the minimum wage.