Sorry, Obama — Class Warfare is Still a Bad Idea

Income and wealth inequality are once again in the news on the heels of recent comments by President Obama. His statements were clearly meant to incite the nation as we approach midterm elections next year by fostering class warfare. My assessment is that the president is becoming increasingly concerned about an impending landslide victory for Republicans in November 2014, and the impact it may have on his agenda and legacy. 

As expected, the president’s comments about the current relationship between the rich and poor did not include an action plan — it was more of a continuation of his attacks on the most successful people in America. The reason for this may be the fact that he knows Americans would be appalled by the alternatives to capitalism, a system that rewards achievement and ambition. 

It’s time to consider objectively the differences between the “haves” and the “have-nots” (a terrible way to classify members of the most prosperous country in the world). After analyzing the problems, the nation must develop new strategies to improve the lot of those with little by showcasing the benefits of hard work and education. This, rather than the president’s plan to denigrate the affluent and transfer their wealth to others, would be the best course. No significant positive economic event in history has ever taken place without all classes participating in the upside. 

Income inequality is pervasive in the United States. The numbers are compelling and tell a sad story about our economic system. But when facts are taken out of context, presented without explanation, and/or provided without a plan to remedy the situation, they can create great hostility between Americans.

Here are the facts. The total wealth in the U.S. is $54 trillion. The top 1% of Americans (about three million people out of over 300 million) own 40% of this amount while the bottom 80% own 7%. Twenty-five percent of the increase in wealth since 1976 has gone to the top 1% while 6% went to the bottom 80%. CEOs earn 380 times more than the average employee. The top 1% consists primarily of lawyers, doctors, and executives (especially financial types).

The top one-hundredth of 1% (30,000 people) earns an average of $27 million, the top tenth of1% earns $2.8 million, and the top 1% earns $1 million . Between 1979 and 2007, the top 1% had net income increases of 120% while others showed very little gains.

Are you pissed off yet? Well, you shouldn’t be. These numbers represent opportunity for every hard-working American. 

In an article titled “To Fix Income Inequality, The Have-Nots Must Become the Do-Somethings,” Maura Pennington provides the flip side of the inequality issue. First, her title is revealing. To fight one’s way out of poverty and low wages, a person must try to improve himself. He must pick a field of interest, get trained, and apply for jobs. Wealth inequality is not a crime — it distinguishes those who have worked hard and have been successful from those that have not yet done so. Being needy is not a permanent condition unless a person takes no actions and continues to wallow in low-paying jobs or wait for assistance from the state.

The negative connotation of wealth inequality is meaningless. It is not a war between rich and poor, except in the minds of the president and his minions. Rather, the attainment of wealth is a goal that everyone should strive for. Poverty, social dysfunction, and ignorance are the real culprits that are responsible for the huge gap between people, along with a dearth of jobs for those who want them.

According to Pennington, we must “establish stable institutions to empower people to be free [from state support] and productive, and they will prosper. Redistribution of a static supply of revenues accomplishes nothing.”

Is redistribution of wealth the best way to close the gap between Americans? I think not. This process is socialism, a system where all members of society are in lock-step, and the government is the chief beneficiary of the system.

The state is the primary employer. People become totally reliant on the whims of their leaders and technocrats. The state sets prices and rationing is inevitable. It is an inefficient system, as history has proven so many times.

Capitalism, on the other hand, is not anyone’s enemy. It can enrich those with ambition and affords businesses a free market. It provides incentives and an environment where children can grow and prosper.

You may ask why the distinction between socialism and capitalism is so important. After all, Obama is only proposing to tax the rich and perhaps redistribute some of their wealth. It is important because these are the first steps that will lead to a radical change in our country, akin to the “small ways” that the federal government has taken away our civil liberties in recent years.

What is the solution? Taking money from the wealthy will destroy the only part of the economy that has been successful in recent years. Increasing state support is not the answer unless it is in the form of more jobs and responsibility. Our county must end the welfare state that is enslaving more people every year. Given that less than 50% of Americans pay federal income tax, the writing is on the wall. If the government supports so many people, it is not outrageous to believe that it will want to control them to a greater degree over time.

Full employment, education, and training are the keys. Put every able-bodied American to work now. Make jobs, force companies to create work programs, and get people into the workforce, regardless of the cost. In the long run, it will be cheaper than a 50, 60 or 70% welfare state with even worse income inequality.