A Fairer America? No, a poorer America
Mortimer Zuckerman's fractured view of economics
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In the classic book, Atlas Shrugged, the government begins a program in which wealth is distributed based on need rather than merit. This requires that wealth is confiscated by those who are producing it to be handed to those who aren't. The more productive a citizen you are, the less of what you produce you get to keep. The less productive you are, the more you receive. Eventually, the producers of America go on strike and the country collapses.
The points made in the book are stunning for their obviousness -- government doesn't make wealth, people do.
In the October US News and World Report, Editor-In-Chief Mortimer Zuckerman has an editorial entitled "A fairer America" with the point "The income gap between the richest and poorest Americans is wider than at any time in history and we must take urgent measures to begin closing it."
Who's 'we'?
What Zuckerman fails to realize is that the only way to close the gap is to make everyone poorer. If you want a society in which everyone is equal, it will be a society in which everyone lives in misery. The question, therefore is, how much poorer do you want everyone to live in order to satisfy some arbitrary statistical result?
The people who produce the items that enrich our lives -- homes that are very inexpensive per square foot despite having a wealth of features we take for granted, personal computers, cell phones, automobiles, televisions, Internet services, you name it, can be classified as the top 5% or so of the economic population.
When those top 5% are targeted by the government, they adapt and everyone else faces the consequences. These consequences, are amazingly ignored by Zuckerman who behaves as if some of today's realities (outsourcing, automation, downsizing) were somehow inevitable. But I'm getting ahead of myself.
Zuckerman writes that in the late 1800s there was a huge gulf between the rich and the poor. And yet somehow, most Americans were far better off than their parents were. (By magic one presumes).
"Capitalism played a big role, but government did too, with the passage of the Homestead Act of 1862 giving 160 acres to settlers who would live on the land for at least five years.."
The government was very generous with other people's lands weren't they? I am not condemning the Homestead act, but I would not be quick to praise the confiscation of millions of acres of lands from one people to hand to another. Nor would I be quick to claim that "giving" 160 acres unearned helped the economy anywhere near what free market did.
Perhaps Zuckerman should take a look at a map of the United States and look at the areas that were covered by the Homestead act. Was providing 160 acres, unearned, to settlers the cause of the economic boom of the late 1800s? Was Colorado, Wyoming, Montana (for example) the center of the industrial revolution? 372,000 farms were created but is anyone going to argue that this is what made the average American better off than his parents?
Zuckerman, who as a reminder, is promoting the concept of closing the income gap, notes that the 1970s were known as "the great compression" where the income gap between rich and poor shrank sharply. Does anyone want to go back to the 1970s?
In the early 80s, Ronald Reagan was able to get through massive tax cuts and massive deregulation of industry. Most adults alive today know the results -- a great increase in the real world standard of living. But laments Zuckerman, the gap between rich and poor increased.
Let's be clear: The gap between rich and poor is a measurement of how regulated an economy is. Period.
It is not about "fairness". If you have two runners in a marathon, the gap between them will grow over time as one runs faster. The only way to shrink that gap is to force the faster running to run more slowly.
But since the 1980s, the government has increasingly meddled, especially in the area of corporate taxes. If my company makes $100,000 profit, almost 40% of that profit will go to the federal government. Moreover, the federal government has opened US companies up to "free trade" by enabling foreign competition in (which is good) but forced companies to continue to have to face mounds of regulation and taxes compared to those companies (that is bad).
But what does Zuckerman conclude of the obvious result:
"Today, however, the wealth escalator doesn't work. In fact, while many families thought they were going up, they have actually been going down. In sectors of the economy where jobs could be mechanized or automated, tens of thousands now have no work. At the same time, most of the income gains we have reaped from productivity went to just the top 1% of Americans..."
Well DUH.
First off, families thought they were going "up" because they were. They don't pay attention to CPIs. They pay attention to how they are living -- bigger houses with air condition, nicer cars, computers, better food at lower prices, etc. Clothes that don't look and feel like a now-illegal method of interrogation.
Secondly, the guys at the top 1%, let's call them what they are -- business owners -- faced with foreign competition thanks to "free trade" but still faced with a myriad of government imposed costs in hiring human beings (there is no payroll tax on machines) did the only sane thing -- they replaced low skilled labor with machines. And who's fault is that?
The problem with people like Zuckerman is that they think that the government has something to do with the production of wealth. It doesn't. It merely sets the rules. And business follow those rules (in general).
Business owners are motivated by profit. Profit is not the same as greed (greed is a term used by class warriors to smear the productive class). Profit to them is merely the measure of how effective they are.
So if you make it more profitable for business owners to either replace human beings with machines / hire the same work force that the foreign competitors are using instead of hiring Americans because you've made it impractical to do so, that is what they'll do.
Zuckerman, whose article reads almost as a parody of one of the sad sacks in Atlas Shrugged makes some startlingly illogical conclusions:
"Even college graduates, who have long enjoyed a big edge in wage and benefits, are feeling the pinch because of soaring costs of tuition..."
And why are college tuitions "soaring"? Most universities are publicly funded. Name a single privately produced product that has not changed in quality or quantity and is not in short supply whose costs have "soared"? Only a government run system could function in an environment in which it charges more while producing inferior results.
But Zuckerman's prescription? (and I'm not kidding, it's in the same article):
- MORE support for education at all levels
- A major effort to brake soaring healthcare costs
- A NEW minimum wage
I'm serious. After making a fantastic case (unintentionally) for getting the government out of education and for decreasing its interference in the private workplace he recommends the opposite.
And why are healthcare costs going up? There's a lot of reasons. $10 co-pay? What the hell were they thinking? How about 10% co-pay. There's no incentive right now for competition based on price in the healthcare market and we're paying -- literally -- the price.
And we Americans demand ever more sophisticated medical technology. You want cheap healthcare? Then let's go back to 100 years ago when Asprin was the treatment. That was cheap. Or maybe just 30 years ago where you had antibiotics but if you got anything serious (heart disease, cancer, or any chronic illness) the prescription was for you to die. That was pretty cheap too.
Here's a clue to Zuckerman: More stuff costs MORE than less stuff. Especially if there's no incentive ($10 co-pays) for that top 1% to produce drugs based on price as opposed to effect.
If any American reading this thinks they are worse off today than they were 30 years ago, I can only wish they could find a time machine to go back to 1976. Land of lead smelling air, obscenely expensive air travel (before adjusting for inflation even), no cell phones, no computers, no DVD players, 8-track, no air conditioning if you lived in the North, no Internet and if you got cancer or had heart problems, or any other serious medical condition, you died. Yea, those were the days. And it was a "fairer" America too!
Amazingly, Zuckerman ends with "Inequality and insecurity have simply become too pervasive a feature of American life. The American Dream shouldn't be just a dream."
Apparently, to Zuckerman, who must have emigrated from the former Soviet Union, the American dream is for everyone to live equally, presumably in state mandated housing because, you know, if someone has more than you, it hurts you -- it's at YOUR expense. And job security is a god-given right that can only be provided by the government one supposes.
Automate low-skilled jobs