Wednesday, March 11, 2009

The Obama Budget - Ending Income Inequality

SO got the ball rolling on President Obama's budget below, and I'd like to take a look at another aspect. The gap between the rich and the poor in America is the largest it has ever been. The chart below from the Heritage Foundation begins to tell the story:

This may be hard to read (you can find it online here), but the top one-fifth of income earners in America own about one-half of the wealth. The bottom two-fifths combined own about one-eighth of the wealth. But it is even more extreme, as the following chart from Think Progress shows:

This may again be hard to read (and you can find it online here), but you will see that the top one percent of Americans own twenty percent of the wealth, those between the top five and one percent own about fifteen percent of the wealth, and those between the top ten and five percent own about twelve percent of the wealth. This is the classic example of the rich getting richer and the poor getting poorer. The powerful are consolidating their power and the powerless are losing power. We cannot seriously call this either freedom or democracy.

The budget that President Obama proposed recently is the first major step shrinking the gap and assuring equality, opportunity, true freedom, and the American dream for every American. As SO mentioned in his post, the budget cuts taxes for 95% of Americans and allows the Bush tax cuts to expire on those making over $250,000 a year, which essentially puts the tax scheme back to Reagan-era levels.

The budget makes it easier for people to get unemployment benefits. It also temporarily increases food stamps and offers assistance to low income families to pay utility bills. Remember, over four million people have lost their jobs in the past year. We cannot simply ignore the fact that America is the wealthiest nation on earth while all around us are good, hard-working people struggling to put food on the table and pay the heating bill.

As for education, the great equalizer in America, the budget offers a new $2,500 credit to make college more affordable and replaces the old college student loan program with a new program run through the Department of Education which makes more money available for cheaper, including more Pell Grant money. My wife and I would never have made it through college with two bachelors degrees and one graduate degree without government assistance, and we are more than happy now to contribute to a system that allows expanded reach for others that are in the same situation we were in.

A substantial amount of money also goes to preschool programs, raising academic standards and test scores, and performance-based pay for teachers.

One of the greatest forces driving the separation of the rich and poor is also addressed in the budget: health care reform. Not only are the rich more wealthy (clearly) and more powerful, they are more healthy. While the poor delay medical care because of the cost and lose more work hours because of illness, the rich have ample health care opportunities. The budget lays out over $630 billion over the next ten years for the health care overhaul while suggesting guiding principles for Congress.

America can only be great if we are all great together. Opposing unchecked free market principles that only reward the elitist wealthy at the expense of the remaining 95% of the population is not socialism, it is a way to ensure freedom to all Americans in reality, not just in principle. The budget proposed by President Obama begins our progress toward more equality for all our citizens.


Josh said...

Capitalism at it's finest!!!

peter said...

What was your purpose in using a graph from the Heritage Foundation to demonstrate the stark disparity between high and low incomes that came from an article explaining the inaccuracies(uneven quintiles, etc.) of that exact graph and showing how the disparity, though still existing, is not as wide as that particular graph shows? That seems a bit misleading. Also, the graph is for income, not wealth. The terms are not interchangeable, are two separate measures, and would have separate graphs. In fact, the same people would not be in the same quintiles because retired people who do not work and don’t have income would be represented in the lowest income quintiles, but could have a great deal of wealth. That being said…

Your post made me stop and think…why do I have a knee-jerk reaction to disagree with the idea of income equality? I like the idea of helping those truly in need, I agree with doing that. I agree that having available assistance (while not being completely free) for college and graduate education is important. I also agree that everyone should have access to affordable health care. But what is the real problem with income inequality? Why do we vilify those who make more money than we do? Of course if that money comes through illegal or unethical practices then there is a problem, but if it comes because of hard work and choice, then where is the evil?

Everyone is free to choose what profession to pursue, what and how to handle their family situation, what to spend their money on, etc. People value this ability to choose. Some people choose to be lawyers, some mechanics, some teachers, some firefighters, doctors, lobbyists, farmers, etc. You get to choose but there are consequences that come with those choices and one of those consequences is pay scale. You know when you choose your profession that lawyers generally make more than teachers and dentists make more than mechanics. Now, we could argue that this is wrong…everyone’s contribution is equally valid and should be equally rewarded. You could argue this in theory, but it doesn’t take into account the amount of education, hours worked, and a number of other factors. Why shouldn’t people earn more income for different types of work? What is the incentive, even if they love what they are doing, for someone to do eight plus years of post-high school education and work 60-80 hours a week if there is no extra compensation over those who work 40 hours of week straight out of high school? People, unfortunately, just aren’t that altruistic. The first graph you showed did not take into account that the people in the top quintile worked an average of twice as many hours per week as the lowest quintile.

You might say that this is an easy argument to make coming from a doctor’s wife, but both my husband and I grew up on the lower end of the income scale. Peter’s father is a farmer and his mom went to work to make ends meet. My dad worked for the government, raised six kids in a 1400 square foot home and we went without many things. But those were the choices that our fathers made; they did what they loved and were able to provide what we needed. They knew that their choices precluded many luxuries and didn’t expect anyone else to provide them with more money just because that person made more money than they did.

Unfortunately, many people do not have the family background that we did; both parents in the home and an emphasis on education. Many low-income families are single parent families. Many kids don’t understand the importance of education and therefore don’t make the sacrifice necessary to become educated. These are social issues that need to be addressed, but the tools necessary to better yourself are still available to all if they are willing to pursue them. Anyone can reasonably choose any profession that they would like to use to earn their living.

President Obama has a lot of idealistic plans…I don’t agree with the means in many circumstances, but I agree that they are desirable goals. I worry about how he is going to find the money for everything he has already pledged to accomplish. I think it is naive to believe that just repealing the Bush tax cuts are going to generate enough revenue to cover everything. And I would submit that our current progressive tax already does a lot for equalizing income. I know that there are many people who need help and times when it is appropriate, but it isn’t the government’s job to take away the consequences of everyone’s choices.


Jake's Wiser Older Brother said...

I lose significant sleep at night knowing that my younger brother is a socialist. I believe the French brainwashed the poor boy during his two-year mission. Had he been diligent in obeying the mission rules, he would have been protected and blessed.
By making everyone equal, Americans will lose their desire to be entrepreneurial. America is what it is today because of those individuals that worked harder than others and were in turn justly rewarded for it. By taking out monetary incentive for people being successful, you liberals are destroying what made this great country what it is today. Shame on you!!

Jacob S. said...

Nice of you to join us, Wise Older Brother. I'm not sure I see, though, how raising taxes by 3% on five percent of the population, while simultaneously lowering taxes for the remaining 95% of Americans, while again simultaneously providing specific incentives and relief to small business owners, will destroy America's proud entrepreneurial spirit. I could logically come to the exact opposite conclusion as you.

And does this make Reagan a socialist? Because this is his tax structure.

And if the price to pay for eating fine French cheese is being brainwashed, I will pay that price every day of the week.

peter said...

I lived in France, too, and I'll admit that French cheese is a powerful motivator...


Iliana said...

im now getting more sleep at night knowing Jake has a wiser older brother who hasn't been brainwashed. I've been scared for the who Schip brood for a while now. Good to know theres one out there who thinks a little more like me. :)

Josh said...

To Jake's brother:
That is the funniest thing I've read in quite a while.

Jake, you have got to be kidding. Stop using the term "income equality." That term does not imply simply taxing the "rich" - if you call a small business owner with an annual gross income of $250,000 rich, that's crazy. It implies that a guy like you, for example, that spent the better part of a decade busting your butt in college to get where you are, and a guy that quit high school and is now flipping burgers, should take home the same amount of money. How can that make sense to you?

I know that you really do care about those that are less fortunate than you, but you can't just give people something for nothing (don't give the dog the bone until he does a trick). Also, we should not be pushing for a government that wants to give out so many handouts. I believe it was Benjamin Franklin who said, "A government big enough to give you everything you want is strong enough to take it all away."

Jacob S. said...

Josh, I am not arguing that everyone should make the exact same income. I have never said that and I don't think that should be the case. "Ending Income Inequality" was just an artful and concise title. The idea would be more accurately titled, but less catchy, ending extremely income inequality.

The point is that by making a small change, in this case repealing the Bush tax cut on the richest 5% of Americans, increasing their rate by just 3%, again, back where it was during the boom years of Reagan and Clinton, with just that small change we could provide more opportunity to those with less power and influence.

If we make it easier for poor people to pay for college for their kids, provide a little more of a safety net for those millions that have lost their jobs in the last year, and do a little more to get people back on their feet, I think this will be a better and more just country.

So it's not about making sure everyone earns the same income, it is about making sure that the top 1% don't run away with all the wealth and power at the expense of everyone else.

Josh said...

My question is why? Why should those at the top support those at the bottom? When has taking away from the rich to give to the poor ever worked? In Disney's Robin Hood! That's it, that's the only time.

Do you want to to solve the "income inequality?" Focus on programs to get people working, and stop enhancing programs that allow them to not work. Wait, lets use the cliche. Teach the lazy slobs to fish, and stop giving them the freaking salmon for free.

Here's the thing. I understand Capitalism. It is not the best system, by a long shot. However, we have now interjected so many Socialist ideals that our Capitalist system has lost it's spine. True Capitalism does not allow for laziness - but we now encourage laziness; it exploits the greed and envy to make competition - we now teach our children that competition is evil. Competition is the backbone of a healthy market, the spinal cord of Capitalism (I'm really into metaphors today for some reason). Laziness is a break in that cord, causing the paralysis we're in.

If you truly want to end the inequality, then stop giving free handouts. Stop teaching children that it is okay to fail and that, since everyone is equal, there are no winners or losers. Stop affirmative action, and put a value on hard work again. Punish those that need a punishment and reward those that deserve a reward. Stand up to the world and proclaim that we are once again the most powerful nation on earth, and give the UN the finger and a full moon. In short, give confidence back to America, and pride back to her people.

SO said...

Josh, one main flaw I see in your argument is that "hard work" does not guarantee high income. If hard work is 40-60 hour work weeks, constant focus on the task at hand, and commitment to the job, then why is there such a ridiculous difference in wages earned. Why is it that Wall Street and Big Business execs get monster parachutes, but hard working blue collars get the free fall?

Don't even start to argue about the level of education or training required to obtain a position. Don't say that the rich did more to get themselves ahead. If wages were seriously based on effort/training/education, then why is it that professors average starting salary is around $60k? I'm not talking about the humanities either, these are professors in applied science (biochemistry, pharmaceutics, bioengineering, etc.). You spend 4 years to get a BS, 5 for a PhD, 2-4 for a post-doc, and only after all of that do you get to apply for your first real job.

We are not talking about lazy versus hard working here. We are talking about the grand canyon of gaps between the upper and lower class. A middle class barely even exists now.

Equalizing income is just that - do good work for good pay. I'm not saying that all should get the SAME pay, but if we both do everything we can to improve ourselves, benefit society, and support our families, then why should some scrape along at $30k while others sack millions?

Which has a stronger contribution to day to day society - the garbage man, the inventor of new drugs, or the broker?

Josh said...

I have now typed two long-winded responses to you. I have decided to be brief. The only flaw in my argument is that I am arguing for Capitalism. I wish this world were a better place, that I were a better person. I wish we could live the true manner of Government. Consecration would solve the world's problems, there truly would be equality. No one would work harder than anyone else, and everyone would be justly rewarded.

You have come up with a ridiculous example, and completely took my comments and put them to your own context. Have teachers ever been highly paid? Why in the world would someone spend 10-15 years to get into a profession with a long historical record of low pay, and then complain about the low pay? I stick by every thing I said, in the manner I said it (I did not say that hard work guarantees high wages, nor did I say that education or training are a guarantee).

SO said...

Actually, since that is the first time I have written a comment, it would be impossible for you to write "two long-winded responses."

You said "put a value on hard work again. Punish those that need a punishment and reward those that deserve a reward."

My comments were meant to ask you exactly how you define hard work? Who is it exactly that deserves a reward? I feel that many people ARE working hard, but are not being rewarded for anything. According to your inference the person with a 10-15 year education with low pay, should just suck it up and accept the medicore pay, is foolish. Basically you are arguing that only the people that work hard are the ones that get the jobs that pay millions, and are the ones that deserve to have the money.

You'll have to forgive me for not having the talent to play in the NBA, nor the aptitude to engage in big business. I have this crazy idea that maybe society has a need to rethink who they pay what.

Josh said...

I didn't clarify, but what I meant was that I spent quite a bit of time, wrote two very long responses, and erased them both in favor of a shorter post. I appologize for the lack of clarity, and that it came off rather insulting and hauty.

The funny thing about it is that when you talk about NBA talent and Big Business aptitude, that is exactly what my longer responses were about.

I am not getting my point across well, if you think I am arguing with the statements you made in your latest response ("I have this crazy idea that maybe society has a need to rethink who they pay what). I agree that some professions are woefully underappreciated. My point is, how is taxing people that have money, just because they have money, going to change that fact? It won't. If I pay 3% higher taxes, do you really believe that teachers will see a pay increase? They will not.

Also, yes, I think, like I said before, if someone chooses a profession with historically low pay, that is their choice and they need to deal with it, without complaint. That is not foolish. The foolish thing is to expect to be paid a high wage, only because you have a 10-15 year education, no matter what the job is. Your example about professors is where this all comes from. As you mentioned they did all of the necessary schooling, so my question is why go into teaching, when you could easily double that salary in the field? The answer is, it was a personal choice to teach.

Now, back to agreeing. I agree that the way we are paid in this society is out of control. The entertainment industry makes the vast majority of the money, that's WRONG. I only disagree that taxing the richer will help the poorer make more money. It will, however, tighten the richer folks up, and they will, in turn, spend less. How does that help the struggling economy stay out of depression?

peter said...

I know this is old, but, well said, Josh.