Here’s a simple quiz to determine whether you should support a candidate like Bernie Sanders or Elizabeth Warren: Would you embrace a policy that increased income for poor Americans by 10 percent if it also happened to increase income for rich Americans by 15 percent?
Some of our left-leaning friends (including at the IMF!), however, are so fixated on inequality that they are willing to deprive the poor so long as higher-income people have even larger losses (Margaret Thatcher nailed them on this issue).
Let’s look at some analysis of this issue.
The Wall Street Journal has an editorial that starts by highlighting some good economic news.
It then makes to all-important point that policy makers should fixate on growth rather than inequality if the goal is to help he less fortunate.
Democrats focus on income inequality… What really matters for a healthy democratic society, however, are economic opportunity and income mobility. …The Obama policy mix, which Democrats want to return to only more so, put a priority on reducing inequality rather than increasing economic growth. But higher taxes, hyper-regulation and income redistribution resulted in slower growth and more inequality during the Obama Presidency. …This is a lesson for the left and those on the big-government right who want to use tax policy and subsidies to redistribute income to reduce inequality. Policies that hurt growth hurt lower-income workers the most.José Ponce, in a column for FEE, sagely observes that “Gini” numbers can be very misleading because they tell us nothing about a society’s overall prosperity.
Let’s close with a chart from Mark Perry showing that ever-greater numbers of Americans are climbing the income ladder.
data from China is the most powerful and persuasive that I’ve seen on why growth matters far more than inequality.
P.P.S. This bit of satire also illustrates why inequality numbers are grossly misleading.