WASHINGTON, July 2, 2017 — As with any government policy that ultimately results in heavy government influence over markets, the ultimately cruel trajectory of “social justice” policies generally concludes at precisely the opposite point of the stated intent. The same is true for government programs that attempt to reduce income inequality. “Social justice” programs just end up making matters worse.
In the American economy, the existence of income inequality should not be viewed as a negative state. In a free market economy, an individual is paid according to the value of his or her output. Since the output value will vary for each person, it follows that incomes vary as well, sometimes by huge amounts.
The employees of a professional football team experience wide variations in their annual salaries. A quarterback may earn $20 million. A lineman might earn $2 million. The ticket manager earns $100,000, while each member of the grounds crew earns $40,000. Clearly, this is a demonstrably unequal structure. Yet arguably, it’s an equitable distribution of team income.
What is social justice? Michael Novak of the Heritage Foundation says that the term “social justice” originally meant, “the capacity to organize with others to accomplish ends that benefit the whole community.” Novak states further that progressive ideologues have altered the original definition to mean “uniform state distribution of society’s advantages and disadvantages.”
To progressives, a policy of uniform state distribution suggests there should be equality of society’s advantages and disadvantages. They further claim that social justice entails a redistribution of resources, “from those who have ‘unjustly’ gained them to those who deserve them.”
The progressive definition of social justice emphasizes equality and uniform distribution. But equal distribution conflicts directly with an equitable distribution. In other words: is equal fair?
This question has plagued societies for centuries. When Karl Marx was writing about his views on economics, he put emphasis on equality, noting that capitalist entrepreneurs earn their income “on the backs of labor.” This, Marx said, was a grave injustice.
Former President Obama’ policies made income inequality worse. For eight years under the Obama Administration, a concerted effort was made to reduce income inequality, which Obama viewed as bad, at least in more extreme cases. Obama said that prior to his election, income inequality had been widening, claiming that reducing income inequality was the ‘defining challenge of our time.’
Obama’s solution was to raise income and capital gain taxes on the most successful and highest income Americans and redistribute those earnings to low-income earners. In turn, he placed U.S. economic growth as a low national priority. He raised the minimum wage on federal contracts and encouraged others to follow. He said that workplace “fairness” should be a top priority.
Through the socialized medicine plan generally termed “Obamacare,” Obama gave out free healthcare to those without it, and tried to pay for it by raising even more taxes on the wealthy as he defined them. He also wanted to cut the cost of higher education for low-income people, expand the social safety net and extend unemployment benefits.
The result of Obama’s economic policies was that income inequality demonstrably worsened. It is clear that Obama should have made economic growth the top priority instead. Indeed, economic history has shown that income inequality will be reduced in a rapidly growing economy that provides opportunities for all Americans to earn more. In other words, push the bottom up instead of pulling the top down.
Equity will lead to inequality, and that’s good. Perhaps social justice should be defined as an equitable (rather than equal) distribution of resources. As such, economic policy should allow a minimum survival income for all, along with the opportunity to earn more. The basic premise is that individuals are paid according to the value of their output.
Individuals will contribute according to their abilities and be paid according to their contribution. This equitable distribution will lead to income inequality since the value of individuals’ contributions will vary greatly.
That explains why the quarterback of the professional football team earns 10 times more than the lineman, 200 times more than the ticket manager and 500 times more than those on the grounds crew.
This is good for the economic system because it encourages individuals to do what they can to become quarterbacks, where the demand is greater than the supply. It also encourages fewer people to become part of the grounds crew, where the demand is very low compared to the supply.
Economic growth is the key to reducing income inequality. The U.S. economy has not seen economic growth that exceeded 3 percent since 2005. And income inequality actually worsened during that period. Unlike his predecessor, President Trump has made economic growth his top priority. Assuming Congress will work with him, he will attempt to set policy that encourages economic growth of 3 or 4 percent or even higher.
To accomplish this, he intends to cut taxes for all Americans, reduce burdensome and counter-productive regulation on business, lessen the burden of health care costs borne by small businesses, streamline the government approval process where needed and reduce spending on social welfare programs that encourage generations of families to remain dependent on the government.
Real economic growth, the likes of which we have not experienced for many years, will provide opportunity for genuinely compassionate and equitable social justice which will help reduce the number of low-income earning Americans. That’s the real key to reducing income inequality.
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