In his recent State of the Union Address, Mr. Obama emphasized his fight to equalize our incomes. Apparently, his advisors convinced him he can breathe fresh life into tax and welfare programs by hijacking the word “opportunity” from the other side of the aisle without bothering to understand what it means.
The deeper the left becomes mired in failed attempts to reengineer large swathes of the American economy, the more deceptively it promotes central planning. So, no matter what kind of mess the government makes in trying to nationalize health care, banking, education, energy, or housing, equality activists will not rest until every citizen has an income, education, health care, housing, possessions, and lifestyle narrowly distributed around the mean—and the impacts of birth, talent, upbringing, character, luck, behavior, industriousness, and personal choice are all neutralized. If economic growth has to be sacrificed a result, so be it.
Of course, income equality advocates never frame it this way. But is it possible to reach any other conclusion based on the policies they promote?
Contrast this with the classic Equality Before The Law formulation in which the government of a true opportunity society treats all citizens the same, leaving it to private, voluntary interactions to determine life outcomes just as private, voluntary charity cares for the unfortunate. Of course, this leads to disparities between society’s least and most successful members. But it also creates a set of incentives and disincentives that allows freedom to do what it does best—deliver progress.
In most developed democracies, economic intervention, overregulation, transfer payments, and monetary manipulation have become the new normal. Sadly, the United States no longer ranks among the top 10 economically free nations. And when governments get bloated and policies get capricious and unpredictable, economies stop growing. Although government GDP figures show the economy eked out a percentage point or two of growth, these are highly suspect because government expenses are falsely counted on the positive side of the GDP ledger and inflation rates are grossly understated. For all intents and purposes, the Western world has gone flat.
Despite lofty Teleprompter rhetoric, equality of outcome and equality before the law are opposing concepts. The former can only be accomplished through government sanctioned theft, vitiating the latter. And in doing so, we disable the most potent engine ever developed to improve the lot of the poor – innovation, material progress, and economic growth driven by self interest and delivered by free markets.
Is it any wonder that in stagnant societies, political economics gets reduced to a fight over a fixed pie? Policies that disproportionately reward government cronies feasting on bailouts and cheap money certainly generate poster children for the “income equality” movement, denigrating the accomplishments of both innovators and honest captains of industry. How can we be surprised when these leaders of the productive economy become risk-averse and hunker down?
In my six decades, I’ve lived through many different economic eras, from Eisenhower to Obama. I’ve climbed from the lowest income decile to the highest, now making my way back down again. My parents’ journey was even more dramatic, rising from dirt poor children of immigrants to solid members of the middle class. And the abject poverty that drove my grandparents across the ocean to seek a better life would be unimaginable to today’s poorest Americans.
When income equality advocates rail against the free market policies that fostered this kind of progress, exactly what is it that they hope to stamp out? How would my life have been better if my grandparents got hooked on welfare or were made unemployable by minimum wage laws or onerous regulations? If even steeper progressive income taxes prevented my father from buying me a great education, how would society be improved?
Now that I am winding down from helping young entrepreneurs build new products and companies and, instead, spend my time in the policy arena, Uncle Sam only extracts a fraction of the taxes he used to from me. Sure, as my income descends toward the mean inequality has gone down – Hurrah! Tell me how society is better off for it.
How is society better off when the scientist who dreams of getting rich by curing cancer decides to take a comfy academic sinecure living off government grants instead? How are poor teenagers with no skills given their first step up the opportunity ladder when minimum wage laws make it unprofitable to employ them? How does having to hire armies of lawyers and accountants to comply with all the impediments young companies face help us revitalize moribund industries? How does forcing foreign engineering graduates from U.S. universities to leave the country make us more competitive? How will increasing taxes on capital gains lead to more capital investment, the mother’s milk of growth?
Finally, how will demonizing success and championing identity politics create a culture of excellence? How can all of these measures designed to reduce “income inequality” not kill the goose that lays the golden eggs?
The word equality, like the word rights, needs to be precisely defined and vigorously defended. Ceding these powerful totems to class warriors, central planning commissars, and populist demagogues – just as the bills for their unfunded entitlements come due – is a guaranteed recipe for equality. The equality of the graveyard.
About the Author: In the 35 years since Bill Frezza graduated from MIT with degrees in electrical engineering and biology he has been a scientist, an engineer, a product manager, a salesman, a consultant, an entrepreneur, an author, a technology evangelist, and a venture capitalist. His early career on high-tech’s bleeding edge included the development of first generation electronic newspapers, home banking, home shopping, cable modems, multi-user videogames, wireless LANs, and wireless email, all of which became a success – for someone else a decade later. His 15 years as a venture capital investor working with early stage telecom, semiconductor, and biotech startups taught him humbleness, risk aversion, and the ability to identify ten fatal flaws out of five in any startup business plan. Frezza is a frequent guest on CNBC, FOX, and CBN News where he is challenged to reduce complex economic and policy issues into thirty second sound bites. More writing by Frezza can be found at BillFrezza.com. This article originally appeared in Forbes and appears here with permission from the author.