The Virtues and Necessary Evils of Income Inequality

Brian Williams

The contemporary crusade for some mythical “income equality,” is in reality, a dunces parade. Worse still, it is doomed to fail.

Ironically enough, just as black unemployment under G W Bush was lower than that under Bill Clinton, income inequality has widened under Obama, over that during G W Bush’s tenure.

Interestingly enough, all this talk about “income inequality” makes it (1) appear as though government can do something about, like legislate it out of existence by decree and much worse, (2) makes government’s failure to do so appear to be that government’s, more aptly, that President’s fault.

Truth is some skills are simply more valuable than others and some people are, through holding superior skill sets, far more valuable than others. For instance, people who speak four or more languages well tend to be very valuable...valuable to international Corporations and to governments. People who can’t read beyond a third grade reading level tend to have far less value in terms of their employment options.

More daunting still is the fact that a rising level of income inequality is actually a hallmark of highly developed economies. In basic hunter/gatherer economies there is virtually NO income inequality, everything is shared equally with the tribe, because everyone in the tribe is mandated to do the SAME work. In more the slightly more advanced agrarian economies there is more income inequality because those who consistently produce more crops do better than those who don’t, but here income inequality, at least between farmers, is pretty minimal. However, even in the agrarian economy, we see the rise of the middleman – the seller who buys as cheaply as he can from the farmer to sell for as much as he can get from the consumer. The agrarian society also sees the rise of the mercantile exchange, where the base price of grains and other commodities are set by democratic action between brokers. These create even more income inequality even in the basic agrarian economy.

In basic, or heavy industrial societies there is greater productivity, leading to greater prosperity and of course, greater income inequality. Miners and heavy equipment operators earn significantly more than unskilled laborers and a small but growing professional class (physicians, engineers, attorneys, financial planners, etc.) earn even more.

In even more advanced industrial and especially in technological, or information-based economies this inequality is even more pronounced as those with only marginal skills are left in a position where such skills do not even pay enough for a subsistence living. Those economies are clearly saying, “DON’T rely on such skills.” We do so at our own peril and eventually the negative consequences drive most people to simply develop new skill sets and seek advancement on their own.

There is really very little, if anything that government can do about that problem, as the “problem” is an advanced economy.

In America today there are many jobs going begging, especially among cryogenic truckers, commercial electrical workers (people who work on high voltage power lines) and “tree toppers” (people who cut trees for those power lines) largely because such jobs, even though they require less technological, or “professional” acumen, are extremely physically demanding and dangerous. Cryogenic truckers cannot even have a speeding ticket on their record to be hired for those positions...and the work requires a virtual laser focus because any misstep will almost certainly be that driver’s last, given the product their dealing with is stored at over 240 degrees BELOW zero and some, like liquid oxygen make asphalt surfaces shock sensitive (explosive when impacted). In our society the number of these positions are growing, so it’s incumbent upon poorly paid laborers to try and develop the skills necessary to do those high stress, high-turnover, highly paid jobs.

Viva income inequality! For it creates the incentives for poorly paid workers to be willing to do those highly skilled, very dangerous jobs that most people wouldn't want to touch.

Another anchor around the neck of this inane crusade is that many of its inherent are, well, a BIG part of the problem, by their very own definition.

NBC's Brian Williams, who reportedly earned $13 million a year in 2012, quoted Karl Marx while hyping a news report on global income disparity: "...the staggering news out today about the growing gap between the haves and the have nots."

Williams went on to recite the findings: "Some new figures came out today....And they are so shocking, it takes a while for them to sink in. A study commissioned by Oxfam says the world's richest 85 individuals have the same wealth as 3.5 billion people around the world. Once again, 85 people on this planet have the same amount of wealth as the poorest 3.5 billion people on this planet."

Tim Graham (of Newsbusters’) reported in 2008, this is the same Brian Williams who "lives in one of New York's swankiest addresses in Manhattan with the chic restaurant Le Cirque on the ground floor, which offers high priced cuisine like an appetizer of terrine of foie gras with Gewurtztraminer gelee for $38. 'It's better than having an Applebee's in the lobby,' he joked to the New York Observer in 2006."

It’s hard to take a $13 million/year news reader seriously, on the topic of income inequality, absent that guy’s taking a cut to say 2% of that “obscene” income.

You can take it to the bank that Brian Williams doesn’t see HIMSELF as the part of the problem he really is, instead he sees Hedge Fund managers and others who actually create value as “the problem.”

Then there’s Representative Rosa DeLauro (D-Conn.), who is worth an estimated $20 million dollars, according to her congressional financial disclosure statement, claiming that Congress needs to tackle income inequality because it “poses an existential threat to our nation and our way of life.”

According to her congressional financial disclosure statement for 2012, DeLauro is worth between $5 million and $25 million. (The form’s requirements allow members to state ranges of value for their assets rather than exact values.)

In November 2013, the website Celebrity Networth listed DeLauro’s fortune at $20 million in its “Richest Politicians” category.

Note to these 1%ers; IF you really care so much about income inequality” STOP taking so much money for doing these rather mundane jobs. Simply STOP being so much a part of the problem!

The WRONG Way to Look at Income and Wealth

(A Poorly Crafter Viewpoint, and My Response)

Inequality has run Amok. Do Leaders Care?


NY Daily News
Be Our Guest
By DMITRI IGLITZIN & STEVEN HILL
Posted Wednesday, June 27th 2007


When pets are poisoned by imported pet food or U.S. attorneys are fired under suspicious circumstances, Congress gears up hearings and vows quick action. A far greater scandal, however, has hardly gained the interest of legislators or the presidential candidates. That is the increasing wealth gap between the rich, the middle class and the poor, which is reaching alarming proportions.

The top 10% of income earners in the United States now owns 70% of the wealth, and the wealthiest 1% owns more than the bottom 95%, according to the Federal Reserve. In 2005, the top 300,000 Americans enjoyed about the same share of the nation's income - 21.8% - as the bottom 150 million.

New York is an especially bleak case study. The top fifth of earners in Manhattan now makes 52 times what the lowest fifth makes - $365,826 annually compared with $7,047 - roughly comparable to income disparity in Namibia.

Meanwhile, the ratio of average CEO to worker pay in the U.S. shot up from 301-to-1 to 431-to-1 in 2004. The average CEO now earns substantially more in one day than the average worker earns all year. Adding insult to injury, taxpayers actually give tax breaks to corporations for those salaries, to the tune of hundreds of millions of dollars.

In a country founded on the principle that "all men are created equal," this stark and growing economic inequality has become a third rail. Almost no one in political leadership touches it for fear of being accused of inciting class warfare.

Government has more than a right to confront the problem. It has an obligation to do so.

A small first step would be passing the Income Equity Act, denying corporations a tax deduction for excessive CEO salaries (defined as pay greater than 25 times the company's lowest full-time worker). They could still pay CEOs whatever they wished, but taxpayers would no longer subsidize it. That would create downward pressure on executive income while saving taxpayers hundreds of millions of dollars.

More substantive would be a fix to Social Security's dirty little secret of favoring the rich: Annual wage income above $94,200 is completely untaxed by Social Security. While an average worker pays 6.2% of her income to Social Security, a CEO earning $1 million pays only 1% of his salary. As is, only 83% of all wages are subject to Social Security taxes, so this would increase annual revenues by nearly 20%, or $100 billion a year.

Other worthy proposals include providing child care for working parents, expanding health care and lowering college costs. But the most direct way to address inequality is to reimpose higher income tax rates. Under President Dwight Eisenhower's Republican administration, the maximum marginal tax rate was 87%. The Reagan tax cut of 1981 dramatically lowered this to 50%, then again to 28% in 1986. Since then, no surprise, our nation has seen a steady rise in wealth disparity.

It is long past time for our political leaders toput aside the scandal du jour and take urgently needed action to slow if not reverse our nation's growing economic inequality.



Iglitzin is a labor law attorney. Hill is director of the political reform program of the New America Foundation and author of "10 Steps to Repair American Democracy."




Income Isn’t Wealth and Income Equality Isn’t the Answer

JMK

Mr. Dmitri Iglitzin and Mr. Steven Hill both subscribe to the “fixed pie” view of the economy.

The inane view that “there’s only so much money in the economy at any given time, so one person earning a lot of money, means many others will have to earn a lot less.”

That’s a view that’s been proven wrong since the 19th Century, when that idea first came into being. Today it’s folly is a staple of all first semester economics courses.

The fact is that the market determines what any given skill is worth. Skills that are particularly difficult to attain and master skills tend to be valued much higher than those that are more mundane.

Income disparities are not actually a sign that an economy is extremely healthy, NOT the reverse.

Moroever, income, contrary to what Mssr’s Hill and Iglitzin would have us believe, is NOT wealth.

In fact, there is virtually no overlap between the richest 1% of Americans and the top 1% of income earners! The truly “rich,” the Teresa Heinz-Kerry’s, the Tom Keane Jr.’s and the Kennedy’s don’t rely upon income as a major source of their wealth. Ergo, income equality is NOT the same as wealth equality, not that the latter is a good thing either.

In their article, Inequality has run Amok, they take issue with CEO “pay,” comparing CEO “pay” (total compensation) to average salaries.

That comparison conveniently does NOT count the full “compensation” of teachers, police officers, construction workers and firefighters, for instance, their healthcare and pension programs, their 457s and 401-Ks, etc., BUT it does very much count CEO “stock options.”

In fact, CEO stock options are investments, NOT mere “compensation.”

Just as we don’t count an employee’s 457 and 401-K contributions as “compensation,” a CEO’s stock options shouldn’t be counted as raw “compensation” either.

The reality is that there’s no way for any educated person today to argue in favor of the “fixed pie” economic model and because of that, there’s no way to argue, as Mr. Hill and Mr. Iglitzin do, in favor of higher marginal tax rates.

For one thing, higher across the board tax rates ALWAYS result in lowered government revenues, as more higher income earners (those Hill and Iglitzin would like to target) simply defer more of their compensation in various tax exempt vehicles, leaving the bulk of the tax bite to fall upon those earning lower incomes, those least able to defer income in order to avoid the full impact of the tax increase.

If either Mr. Hill or Mr. Iglitzin really cared about those earning lower salaries, one or both of these men would be supporting replacing the income tax with a consumption tax, along the lines of the Fair Tax, which would kick in after the first $30,000 spent each year, exempt medicines and basic foods like milk, bread, meats, etc. and tax luxury good slightly higher, having the effect of not only taxing the truly “rich” and the highest income earners more, as they all spend much more, but it would also tax the huge and growing underground economy of “off-the-books” workers, etc.

Instead the Steven Hill’s and Dmitri Iglitzin’s of the world still espouse 19th Century solutions (higher income tax rates) to deal with a problem (wide disparities in wealth and in tax burdens) that’s really not about income at all!