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Right Turn
Posted at 05:30 PM ET, 04/11/2012

How to lessen income inequality

There is a certain irony — some would say hypocrisy — in President Obama saying his opponent is only for rich guys and he is for opportunity for “everyone,” as he likes to put it. Except in D.C. And except when it comes to poor, minority kids.

The Post editorial board reminds us: “When President Obama reached a deal with Congress last year to reauthorize for five years the District’s program of federally funded school vouchers, families in the program and those who hoped to participate breathed easier. Tired of the political gamesmanship that annually threatened a program offering low-income children the chance of a better education, they welcomed the certainty. They may have celebrated too soon. Mr. Obama’s fiscal 2013 budget requests zero funding for the D.C. Opportunity Scholarship Program, which allows children from low-income D.C. families to attend private schools with federal vouchers of up to $12,000 annually.”

Of course, one of the main ways to promote income equality and to encourage upward mobility is to help poor kids get a good education. Here the Republicans aren’t on the side of the wealthy; They are n the side of helping the poor. It’s Obama who’s siding yet again with his Big Labor allies.

House Speaker John Boehner’s communications director, Kevin Smith, told Right Turn: “This program has an excellent track record in giving underprivileged D.C. students access to a lasting, quality education, and rest assured the Speaker will save it if he has to. But it shouldn’t come to that.” He urged the president and the Democrats in the Senate “to save this successful program. Instead of targeting it for elimination, [Obama] should exercise that power at once.”

The entire inequality gambit is a bit of a farce for Obama, of course. As Phil Gramm and Steve McMillin wrote recently in the Wall Street Journal: “While income distribution has become a source of protest and political debate, any analysis of taxes paid in high tax-and-spend countries shows that the U.S. has the most progressive income tax system in the world. An inconvenient truth for the advocates of higher taxes on America’s rich is that big governments in developed countries are funded not by taxing the rich more than the U.S. does, but by taxing everybody else more.” They argue that income inequality is, in part, caused by “the expansion of liberty and the development of new technology and new products.” (You’d think then that voucher programs that improve lower income individuals’ ability to perform jobs in a high-tech economy would be good idea.) Moreover, the entire notion that higher taxes on the rich lessen income inequality is a canard:

In an eternal irony unique to large welfare states, it is the expansion of government in the name of the poor and middle class that always costs poor and middle-class families the most. When the U.S. collects 16.1% of GDP in income taxes, the top 10% of taxpayers pay 7.3% and the other 90% pick up 8.9%.
In France, however, they collect 24.3% of GDP in income taxes with the top 10% paying 6.8% and the rest paying a whopping 17.5% of GDP. Sweden collects its 28.5% of GDP through income taxes by tapping the top 10% for 7.6%, but the other 90% get hit for a back-breaking 20.9% of GDP.

Indeed the Romney camp is right when it points out that futile efforts to promote income equality by expanding government and soaking the rich don’t work. In his 1999 paper “Inequality, Growth and Investment,” economist Robert J. Barro of Harvard University demonstrated: “For growth, there is an indication that inequality retards growth in poor countries but encourages growth in richer places.” He concluded: “The results mean that income-equalizing policies might be justified on growth promotion grounds in poor countries. For richer countries, active income redistribution appears to involve a tradeoff between the benefits of greater equality and a reduction in overall economic growth.” In other words, if Obama had his way and pushed through his redistributive policies, there would possibly be less income inequality but also less growth.

Romney and conservatives need to make the case that Obama is pushing policies that expand government and solidify the expanded welfare state in the name of “fairness,” and point out that these policies wreak havoc on our economic recovery. If we want to do something to lift up the poor, then spurring job growth, expanding school choice and promoting small business start-ups would be the place to start.

But Obama’s not very interested in any of that; Rather, his eye is on expanding and then cementing a more active federal government that takes in more and more of our resources. Alas, that makes for lower growth. And, eventually, you know, we have to pay the money we borrow back. And to do that, we have to tax many more people than the ”rich.”

By  |  05:30 PM ET, 04/11/2012

 
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