In a previous article, I criticized, on philosophical grounds, those who view income inequality as the most critical political issue of our time. The philosophical flaws of the economic egalitarians’ viewpoint undermine the ultimate success of their policy proposals, and these flaws are no better exemplified than in the proposed economic solutions of this election cycle.
This past election cycle, the issue of income inequality became central with the rise of a popular figure, Vermont Senator Bernie Sanders, whose policy proposals reflect the modern progressive movement. In a speech at the Vatican on April 15th of this year, Sanders declared, “The issue of wealth and income inequality is the great economic issue of our time, the great political issue of our time, and the great moral issue of our time.” His campaign centered around policies meant to decrease income inequality and strengthen the middle class.
Ironically, his policies, as with similar progressive fiscal policies, would actually hurt many of the most vulnerable people in America.
Sanders touted his tax plan as a targeted remedy of income inequality, promising to use it as a tool for redistribution and shrinking the income gap. While his tax policy may have been able to successfully transfer wealth, its effects on the economy as a whole and on those in poverty would have been devastating. It is one thing to have a tax policy that moves wealth around; it is another to have a tax policy that incentivizes wealth creation.
As promised, the plan would reduce inequality in the purely monetary sense: after-tax incomes of the rich would decrease much more than after-tax incomes of the poor and middle classes. The problem is seeing that decrease as some sort of justice or success. In the face of the shortcomings of the plan, a smaller income gap becomes increasingly difficult to justify. Not only does an analysis of his tax policy disprove the notion that decreasing inequality would necessarily alleviate poverty or improve the lives of the poor, it highlights the crucial flaw in focusing on the discrepancies of wealth rather than whether or not people have enough.
The effects of the plan span beyond just a decrease in the so-called income gap. An analysis by the Tax Foundation assessed the economic impact of the proposal:
|Economic Impact of Senator Sanders’s Tax Reform Proposals|
|Full-time Equivalent Jobs (in thousands)||-5,973|
Decreases in gross domestic product (GDP), the wage rate, and the number of jobs would negatively impact the country as a whole, but the greatest impact would be on those who are already struggling.
Growth of GDP is a strong, if imperfect, indicator of the economic health of a country and the standard of living therein. In a piece arguing that revitalizing economic growth should be the central political issue today, economist John Cochrane claims, “Long-term robust economic growth is the only way to deliver sustained improvements in the lot of average Americans, and the less fortunate in particular.” Cochrane, and many others, see growth and capital investment as important because these measures roughly representing the emergence of new or cheaper products and technologies. Growth and incentives to produce more efficiently and cheaply ensure that those who cannot afford products today will be able to afford them tomorrow. Since economic growth is the most dependable way to both create enough wealth to sustain a compassionate safety net and raise the living standard of the poor, tax policy should encourage growth rather than inhibit it. As I mention in my article on the merits of capitalism, the benefits of free market incentives that lead to growth and innovation are visible today. Negative GDP growth would devastate those who already lack necessary material goods and ensure that the next generation will be no better off, and perhaps worse off, economically than the current one.
The decrease in the wage rate and number of full time jobs will similarly hurt those in poverty and those who struggle in the current economy, while also ignoring a crucial element of human happiness—meaningful work. A -4.3% decrease in the natural wage rate, coupled with Bernie’s call for a substantial raise in the national minimum wage, ensures that those with low skills, little experience, or criminal records will inevitably struggle to find a job. The decrease in natural, market wages will make their skills worth less than the mandated wage, making it so no employer would rationally hire them. Vulnerable people already face barriers to employment, the minimum wage among them, and a tax policy that decreases the natural wage and the number of jobs ensures a scarcity of opportunity for those who need it most.
There is also considerable proof that employment contributes to a sense of happiness and fulfillment, while unemployment increases the likelihood of a host of other social and economic ills. Comments social scientist Arthur Brooks:
“…relieving poverty brings big happiness, but income, per se, does not. Even after accounting for government transfers that support personal finances, unemployment proves catastrophic for happiness. Abstracted from money, joblessness seems to increase the rates of divorce and suicide, and the severity of disease.”
Brooks has found in his research over the years (chronicled in his popular books Gross National Happiness and The Conservative Heart) that earned success is essential to personal happiness. To price people out of the job market and force them onto the public dole or provide them with short-term public works projects that they may not even have the requisite skills to work on is nothing short of cruel.
Unfortunately, this is the reality of the egalitarian fight against income inequality. Every economic plan has trade-offs, and those who choose to fight inequality sacrifice the opportunity to seriously focus on policies that lift the poor out of poverty; create a climate of creativity and entrepreneurship; encourage prosperity and a larger economic pie; and provide all Americans with the opportunity to find meaningful work. Policies that are built on the erroneous assumptions of inherent value in material equality and a shallow view of the human person will never succeed in their goals. Redistributive policies will make good on their promise to create more material equality, but will ultimately fail to increase happiness and well-being and solve economic and social problems. It is one thing to slightly reduce material burdens; it is another to create an environment where humans can flourish, having abundant opportunities to find work and deriving personal satisfaction from creating value for others.
Sanders and other progressives seem honest and genuine, and their policies hold true to their promise—they pledge to decrease income inequality, not poverty or need. His policies in particular are true to the egalitarian vision. They are also a tangible example of the way that those who the government has a sincere moral duty to support, the truly indigent, fall by the wayside or are reduced to dependency in the fight for income equality. The idea that it is preferable for Americans to be equally poor rather than disparately prosperous and that ensuring material equality is the end of government offends the very principles on which this country was founded. For, ultimately, this is a country committed to freedom, prosperity, and justice, with a primary goal to enable the pursuit of happiness rather than the pursuit of sameness or material equality. Disavowing income inequality as a pressing issue, while encouraging an economy of growth and culture of freely-pursued opportunity, is not to ignore justice or equality, but to reaffirm their true definitions.
Dismantling egalitarian philosophy and solutions is useful, but it is also necessary to explain the proper alternative to egalitarianism. In my next article, I will attempt to outline a conservative approach to alleviating poverty and pursuing true social justice that accords with our Founding principles.