There is a lot of talk these days about income inequality—the growing gap between the incomes of the rich and poor. Arthur Brooks, president of the American Enterprise Institute, acknowledged in a recent speech to our Economic Club that the ”recovery” is working only for the rich: The poor are seeing no benefit from it, and income inequality is growing.
But income inequality is just a symptom of the real problem: the loss of upward mobility, formerly a hallmark of the American economy.
President Obama boasted in his recent State of the Union address about “the lowest unemployment rate in five years.” Congresswoman Cathy McMorris Rodgers responded that more people stopped looking for a job in December than found one.
In reality, the percentage of Americans working or looking for work is lower than at any time since the Carter years, and the unemployment rate drops when people drop out of the search for work. Income mobility for the poor is almost nonexistent.
Data from the U.S. Bureau of Labor Statistics shows that a high school diploma significantly improves a person’s likelihood of having a job and earning more than the minimum wage. A college degree further improves his chances.
Clearly, the solutions are growing the economy, creating more jobs for workers at all levels; improved educational opportunities; and incentives that encourage work rather than discourage it.
What has the administration offered?
Tax the rich. This reminds me of my mother’s exhortation in my childhood to clean my plate, because children were starving in Europe. I naively believed that if I ate all my food, the children in Europe would be less hungry. We are told that this “redistribution” will help the poor, but it only plays on the emotions of the non-rich without improving conditions for the poor or middle-income.
Increase the minimum wage. What’s the likely result of the increase proposed by the president? Increased costs would lead to cuts in low-wage jobs, depriving those at the bottom of the chance to gain work experience and move up. A significant minimum wage increase will hurt the very people it purports to help.
Extend unemployment benefits. Sen. Dan Coats proposed, to no avail, sensible restrictions on extending benefits: requiring a real job search, and prohibiting concurrent receipt of disability benefits (the two should be mutually exclusive). Being out of work over time makes one less employable, but some are bypassing jobs as long as the benefits last. The incentives are wrong.
Obamacare. Obamacare’s 30-hour “full-time” definition is causing employers to reduce employee hours. Democrats like Sen. Joe Donnelly support a 40-hour definition of full-time, but the administration isn’t listening. Further, the Congressional Budget Office opines that the Obamacare subsidy structure will “create an incentive for some people to choose to work less.”
Keystone XL Pipeline. Administration opposition continues despite the pipeline’s promise of thousands of jobs and billions in economic impact, and despite the State Department’s conclusion that it would not increase carbon emissions.
School vouchers. Opposition continues despite clear evidence that vouchers for poor parents are their children’s best path to a decent education and a ticket out of poverty.
Presidents Thomas Jefferson and Franklin Roosevelt warned against continued dependence on government. Roosevelt called it “fundamentally destructive to the national fiber … [and] a subtle destroyer of the human spirit.”
Why is their party’s president doing so much to increase dependence, and decrease income mobility, while spouting populist theory? Only one answer makes sense: the 2014 elections.•
Daniels, a partner at Krieg DeVault LLP, is a former U.S. attorney, assistant U.S. attorney general, and president of the Sagamore Institute. Send comments to firstname.lastname@example.org.