20 – Income Inequality

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Let’s begin with a disclaimer: Your first reaction to what you’re about to read will probably be to think that it’s un-American or unpatriotic. I promise you it isn’t, and if you’ll continue reading, I’ll prove it.


The most fundamental precept of the American Dream is a phrase contained in the Declaration of Independence: “…all men are created equal.” And yet…anyone old enough to go to kindergarten knows it’s not true. Some people are born to wealth, others are born into poverty. Some people are born with intelligence that allows them to make straight A’s all thru school and become rocket scientists. Others struggle just to earn a high school diploma.

Some people are born with the ability to hit a golf ball 250 yards straight down a fairway. Others (that’s me waving my hand) accumulate a triple-digit score for a round of golf—and that’s for nine holes.

So what did Thomas Jefferson mean when he wrote that all men are created equal? Having read much of what Jefferson and the other Founding Fathers wrote, I believe I know exactly what he meant. Furthermore, I believe everyone who was living at that time knew what he meant.

First, he meant that all men are born to equal opportunity. In the late Eighteenth Century, England (and in fact all of Europe) was still a feudal society. The land was owned by the nobility, whose great-great-great-grandfathers had received title to the land from some king in payment for “service to the Crown.” Ninety-eight percent of the population were peasants who either worked the land as share-croppers or performed other services the nobility needed, such as blacksmithing or cobbling.

In that society, the vast majority of people lived and died in the stations to which they were born. If your father was a farmer, you would be a farmer. If he was a blacksmith, you would learn the smithy trade from him and spend your life pounding on an anvil. For most of the population, opportunities to escape the life they were born into simply didn’t exist.

The Founding Fathers envisioned a nation in which people were free to pursue their dreams. The sons of farmers could aspire to be doctors or lawyers, and the sons of lawyers could become farmers. They wanted to build a classless society in which there were neither nobles nor peasants—just citizens with the freedom to be whatever they wanted to be.

The other thing the Founding Fathers envisioned was a nation in which every citizen had an equal voice in how his nation was governed, without regard to how much money he had or who his ancestors were. The words didn’t appear in either the Declaration of Independence or the Constitution, but the oft-repeated objective was “one man, one vote.”

We all know that objective hasn’t worked out, but it wasn’t because the Founding Fathers didn’t try to create a system in which it would be possible.


So what does this have to do with the topic of income inequality?

Anyone who has been paying attention knows that the Democrats are going to make a 2016 campaign issue out of “income inequality.” They want to more than double the present minimum wage, from $7.25 an hour to $15.00 an hour. At the same time, they speak harshly of corporate CEO’s and hedge-fund managers who make 100 times more in a year than their average employee.

They would have you believe those CEO’s and hedge-fund managers didn’t rise to their exalted positions due to any special talent or ability. They got there through a combination of luck, knowing the right people, going to the right schools, and perhaps a little (or a lot of) ass kissing.

If we accept that as being true, it would follow that we could reach down into the corporate ranks and bring up any secretary, bookkeeper, or warehouse worker, put them behind the CEO desk, and the company would continue to function without a hiccup.

Except we know that’s not true. Just as some people are born with the ability to hit a golf ball 250 yards straight down a fairway, other people are born with the ability to successfully manage a company that employs thousands of people and does hundreds of millions of dollars a year in business. Turning the company over to someone without that special ability would soon result in the company going bankrupt and all those thousands of employees losing their jobs.


So if it’s so potentially destructive to the economy, why would the Democrats promote such an idea? I believe they have two objectives. The first, of course, is to buy votes. There are tens of thousands of minimum-wage workers, but only a few hundred CEO’s and hedge-fund managers. If the Democrats can get those tens of thousands of minimum-wage people to vote for them while only losing a few hundred votes from people they’ve alienated, it’s a good trade-off.

The other reason is more subtle, but potentially more damaging to the society that the Founding Fathers wanted to create. Income equality can only be achieved by government regulation. It would require a new government agency. For purposes of this discussion, let’s call it the Department of Income Equalization (or DIE).

The DIE would issue regulations saying that entry-level jobs had to be paid at least $X a year. CEO’s and hedge-fund managers could not be paid more than (let’s say) $4X a year. Every other job—yes, including the one you’re doing—would be spread in between. They might dictate that bank managers could not be paid more than $2.5X and attorneys weren’t allowed to make more than $3.2X.

Let’s pursue that thought a little further. Many of the occupations in our society, from the guy who mows your lawn to your doctor and your attorney, are sub-contract occupations. That is, they don’t draw a pay check from any one employer. They get their income from dozens or even hundreds of different people for whom they perform services. So if your doctor is limited to making $3.5X a year, the DIE will have to monitor his income to make sure he’s not cheating and making more than he’s allowed.

We’ve all dealt with the government enough to know what that means. Forms to fill out. Reports to file. The service providers—doctors, lawyers, even the guy who mows your lawn—will have to hire people to help them keep up with the paperwork.

Their cost of doing business will go up, which means they will have to charge you more for their services. You’re going to be squeezed from both sides. Your income will be limited by government regulation, but you’ll have to pay more for healthcare, legal advice, and to get your lawn mowed. You’ll have to pay more for plumbers, electricians, and carpet cleaners.

Let’s not forget that your taxes will necessarily increase, too. The DIE will need thousands of employees to write all those regulations and keep up with the paperwork. And who pays the bill when the government’s expenses go up? Why, taxpayers, of course.

And what’s the one thing you can absolutely count on with any government agency? Correct—it will grow. In the beginning it might issue a regulation saying that lawn-mowing services can’t make more than $1.8X. Before long, though, they will issue a revised regulation saying that the guy who runs the string trimmer can’t make more than $1.6X, the guy who runs the mower can’t make more than $1.8X, and the guy who runs the blower can’t make more than $1.3X. That’s more paperwork and more employees needed at the DIE. Your lawn-care costs will continue to go up, and so will your taxes.

But does the government care? Of course not. They’ve increased the size, complexity, and cost of government, while at the same time increasing their control over the population. They’ve taken a giant step toward George Orwell’s world of Nineteen Eighty-four.