It's Not Inequality, Stupid
WashingtonTimes.com
Decrying income inequality is growing more
popular with the shrill voices on the left as their
policy nostrums, including the stimulus that didn’t
stimulate, have left crippled the economy, with more
than 40 million Americans looking for jobs.
Standard and Poor’s, one of the three major
credit-rating agencies, joins this chorus, cutting
its 10-year forecast of economic growth of the
American economy from 2.8 percent to 2.5 percent and
blaming it on “income inequality.” S&P urges more
spending on education and infrastructure to fix it.
But S&P misreads the fundamental nature of the
stagnation, so it’s hardly surprising that its
solutions miss the mark.
The credit-rating agency ventures into new
territory, reading off the same page as French
economist Thomas Piketty, warning of declining
social mobility in the United States. It points a
quivering finger at the share of wealth the top 1
percent control in America. There are fundamental
problems with this analysis of what’s wrong.
Harvard economist Raj Chetty and his colleagues have
documented a decline in social mobility in America,
but to emphasize the wealth of those of the 1
percent, most of whom are productive and have earned
the wealth they control. To ignore the damage done
by federal, state and local governments to small
entrepreneurs — from hair-braiders and Uber drivers
to craft brewers — is to worry about a hangnail on a
man in the midst of a cardiac arrest.
Government holds far more people from moving up the
income and wealth ladder than wealthy people do. S&P
recognizes the damage a higher minimum wage could
cause, but it nonetheless urges policies that would
encourage more young people to go to college even in
the face of underemployment, mounting student debt
and growing job opportunities in skilled trades that
go unfilled.
The increasing mismatch between jobs and skills is a
problem that can’t be solved by funneling great
numbers of 18-year-olds into four-year colleges and
encouraging them to take on debt that might be
larger than a mortgage on a house.
State governments are guilty of restraining
Americans of modest means with dreams of owning a
business. Expensive licensing requirements demanding
endless layers of permits make it difficult to start
a small business. Occupational-licensing laws are
pernicious in their effect on the poor trying to
bootstrap their way into the middle class. Easing or
eliminating these laws would do more good than
subsidizing college loans, but pork-mongering that
does little good continues. Spending on public
schools has increased steadily since the 1970s and
test scores remain flat.
Lowering the tax and regulatory burden is the most
effective way to get the economy going. Economic
growth and job creation go hand in hand. The most
effective way to reduce poverty is to provide jobs
for those who want them and don’t have them. That
will do far more for everybody than making speeches
about the sins of the filthy rich. Jobs are the
start of reducing inequality.