Wednesday, June 18, 2014

GOP Should Not Concede the Democrats’ Anti-Income Inequality Premise

President Obama has pushed income inequality to the political forefront, saying inequality is a problem that needs to be “fixed” by government. Some Republicans have responded by conceding his premise. Fox News reports on education reforms proposed by Republican Senators Lamar Alexander and Tim Scott, which the senators peddle as a way to help “close the income inequality gap.” “A good education,” Alexander claims, offers “the most opportunity in helping you move from the back of the line to the front.”

Republicans are right to seek education reform. Education is critical to economic success, and the current government-run school system has failed to provide a good education for millions of children, particularly poor and inner-city children. Alexander and Scott offered proposals to increase parental school choice. This is a good start, though their method—government vouchers—is wrong in the longer term, as I have strenuously argued. Rather than advance toward free market education, vouchers would lead to the opposite result, effectively bringing private schools down into the government orbit.

The senators' education reform is not the only problem: Their rationale is flawed. Republicans shouldn't be competing with Obama on ways to close the income gap, as more and more of them are doing. They should be challenging the very idea that income inequality is a problem.

In a market-based, capitalist economy, money is earned by producing a value, whether a good or a service, and voluntarily trading it for money that was in turn earned by the buyer in the same way. Any disparity in incomes is the result of differences in the respective market value of the work product, or in the number of people who willingly buy it, or some combination of both. For example, the “gap” between a fortune made by an entrepreneur who creates a business that serves thousands or millions of consumers and a modest income earned by a janitor who serves one “customer” (his employer) may be huge, but it is perfectly just. Each is paid according to the number of buyers and how much those buyer(s) value his product or service. From a low wage to a fortune, income earned in this way is not made at the expense of others, but by adding value to the lives of others. A person’s “place in line” in income terms is irrelevant.

Granted, our semi-capitalist mixture of free markets and cronyism creates opportunities for some people to “make” money by, as Ari Armstrong puts it, “wield[ing] political power to seize subsidies and hamstring their competitors.” 

And granted also that many roadblocks to economic upward mobility and success exist, thanks to government policies like minimum wage laws and other labor laws that increase the cost of employment, occupational licensure laws, and other government interventions into the economy. To the extent that these statist government policies exist, they contribute to income inequality—by keeping people down, economically. Income inequality, to the extent it is driven by government policy, is not the problem. It is a symptom. The problem is government policy, and the solution is to remove the governmental cause. Empowering parents and ultimately replacing a failing public education system with a free education market should be at the top of the target list.

But to the extent that a voluntary, money exchange economy operates, income inequality should be celebrated. It is a sign of a just society that leaves people free to advance their own economic lives as far as their ability, ambition, productiveness, and personal circumstances will carry them.

The Republican Party should reject Obama’s immoral egalitarian crusade against achievement in the name of “fixing” income inequality. Instead, they should defend each person’s right to his own earned income and achievements.

Related Reading:

The Left’s Egalitarian Trap (and Why Republicans Must Not Step In)

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