Both income inequality and the public’s awareness of it are on the rise in the United States. An October report by the Congressional Budget Office specifically addressed the disparity between the top wage earners and everyone else. Similarly, the Occupy Wall Street movement, through demonstrations and slogans such as “We are the 99%,” has repeatedly highlighted growing income disparity and, implicitly, wage stagnation in America.
It would, however, be counterproductive and short-sighted for politicians to focus narrowly on reducing income inequality. Rather, the preeminent goal of public policy should be to ensure access to avenues for opportunity and to promote the rule of law. Such a course of action will strengthen the middle class, disavow the temptation of demagoguery, and avoid using the tax code to penalize those who are, or who are perceived to be, rich. Most importantly, it will allow for more Americans to advance economically, thus indirectly narrowing the income gap between the very wealthy and a stagnating middle class.
Policymakers worried about income inequality must recognize that a vibrant and financially secure middle class is the bedrock of a healthy polity. Policies must be designed not to penalize the wealthy for their success, but to allow all Americans to have their shot at the American Dream. Social mobility is quintessentially American.
Ending unnecessary corporate tax breaks for industries with powerful lobbyists will go a long way in restoring the middle class’ confidence that the system is rigged against them. Overly burdensome regulations that hamper small businesses should be withdrawn to foster entrepreneurship and policies that foster educational opportunity, such as what the G.I. Bill did after World War II, should be pursued vigorously. Those who work hard must believe that, with effort, they too can become the next Steve Jobs.
A rigid focus on income inequality can enhance class warfare. This rhetoric may serve some politicians, protestors, and pundits well, but it will do little to advance the real aspirations of working Americans justly concerned about their economic future. At its very worst, populist rhetoric that invokes class warfare can morph into anti-Semitism and other forms of bigotry.
Lastly, a too narrow focus on income inequality can lead to bad tax policy. The idea of imposing a millionaire’s tax makes for good sound bites on cable television. It does not necessarily make for sound public policy. It is not unreasonable to expect the wealthiest Americans to forgo some of the benefits of the Bush-era tax cuts, should that be necessary to pay down the national debt. It is unreasonable, however, to think that merely taxing the very wealthy at higher rates will fix the larger structural problems in the American economy. Focusing too narrowly on income inequality misses the bigger picture.
Income inequality in the U.S. is undeniably a problem, and merits serious consideration. Nevertheless, it behooves politicians and pundits to focus less on income inequality directly, and more on creating policies that foster opportunity for everyone.
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