Owning the Income-Inequality Issue


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Jul 11, 2004
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Well? Obama's and his comrades in arms policies are KILLING us and driving us into the poorhouse while his picks (like green energy cronies) are getting filthy rich off us taxpayers.

The GOP approach should focus on using competition and markets to fight cronyism.

By James Pethokoukis

Democrats are obsessed with income inequality. They are determined to exploit the issue in this midterm-election year. It is a strategy that will no doubt be aided and abetted by the media. Pope Francis was named Time magazine’s “Person for the Year” for his critique of what he called “trickle down” capitalism.

The likely Republican response, to the extent there will be one, should note the lack of hard evidence that income inequality (as opposed to, say, family breakdown) hurts economic growth; argue that income inequality is a crass political attempt to distract from a continued weak job market; and offer a worthy substitute to what President Obama has labeled the nation’s “defining challenge.”

On that last point: The problem is not too much income inequality, the GOP will say, but too little upward mobility that endangers the American Dream. As Senator Marco Rubio said last week in an important anti-poverty speech, “upward mobility and equal opportunity is not a partisan issue, it is our unifying American principle.”

Rubio is right. It would be a political and policy mistake, however, for the GOP to let Democrats own the income-inequality issue. In his speech, Rubio tossed out a couple of dramatic statistics on the growing income gap and then commented, “These are indeed startling figures, and they deserve attention.”

They do deserve attention. But what kind, exactly? Democrats, predictably, blame the growth in high-end inequality on greedy CEOs and bankers — and on their tax-cutting, union-smashing, minimum-wage-suppressing Republican allies in Washington.

Well, no. Inequality has increased across advanced economies. Macro factors such as globalization and technology deserve most — but maybe not all — of the “blame.” Big Government loves to pick winners and losers in the private sector. Some lucky ducks owe their place in the 1 percent or 0.1 percent or 0.01 percent to federal favoritism.

Conservatives shouldn’t mind at all when value-creating innovators and entrepreneurs strike it rich while crony capitalists do not. The precious tax breaks and subsidies that go to rent seekers, such as those in the agriculture and alternative-energy sectors, should get the ax. Sorry, Big Sugar and Big Solar.

At its core, such an anti-cronyism, anti-inequality agenda would use competition and markets to fight Washington’s natural bias for elite and entrenched interests. What might such an agenda look like?

First, no strings-free bailouts for Big Business. If Obamacare causes huge losses for insurers, taxpayers shouldn’t ride to the rescue of their complicit CEOs — if at all — without pro-market health-care reforms in exchange.

Second, no more “too big to fail” subsidizing of Wall Street. Despite Dodd-Frank — maybe because of it — Big Finance continues to grow in size, complexity, and concentration. Bankers shouldn’t get rich because they can privatize profits while socializing losses. The federal safety net — deposit insurance and the Federal Reserve’s discount window — should be exclusive to traditional commercial-banking activities. And to avoid using that safety net, make megabanks fund their loans much more heavily with unborrowed money, or equity capital.

ALL of it here
Owning the Income-Inequality Issue | National Review Online

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