Is the growing income gap a problem or an opportunity?

Is the growing income gap a problem or an opportunity?

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RANCHO SANTA FE, Calif., April 21, 2014 – We are a Nation that embraces diversity — at least when it comes to income levels. There is a growing gap between the “haves” and the “have nots” in our Nation. Some choose to ignore it while others choose to exploit it.

The problem is that nothing is being done to address it.

The income gap between middle class families and the wealthy has been widening for nearly 50 years. In addition, the middle class has recently been shrinking into to an ever-expanding welfare-dependent population.

In a 2013 research paper, Emmanuel Saez, an economics professor at UC-Berkeley, examined the problem of income diversity based upon 100 years of IRS data. He did something rather unique in his study: He applied the same definition to income over the entire period so his data would have a baseline for comparison.

It is unfortunate that this small step is considered to be so unusual. However, as our political Parties have routinely changed definitions to critical economic terms to better serve their “messaging,” it is refreshing to view data that is factually accurate rather than politically relevant.

The report showed that, in 1928, the top 1 percent of income earners received 23.9 percent of all pretax income, while the bottom 90 percent received 50.7 percent. Then, the Depression and World War II struck, shaking the very foundation of our economy.

As the end of WWII approached, the income percentages reflected greater parity. The top 1 percent dropped to 11.3 percent of all pre-tax income (less than half the 1928 percentage), while the bottom 90 percent received 67.5 percent (up approximately one-third). This suggests that the middle class had become more accessible and upward mobility was on the rise.

The ratio essentially remained stable for the next 30 years. It wasn’t until the mid-1970s that the gap began to grow. The rich became richer, the poor became poorer, and the middle class began to erode.

The Republican mantra suggests that the scale of the variance is immaterial and only reflects the natural operation of a free market which, in turn, rewards those who work harder. Democratic devotees argue that the trend is bad, disproportionately rewards the rich, and treats less-fortunate individuals unfairly.

In reality, these arguments are seriously flawed. They are little more than obfuscations designed to pander to the stereotypical positions the Parties have conditioned their core constituencies to believe.

The fundamental Republican hypothesis is predicated upon the misconception that we are actually functioning in a free market environment. There are about a million pages of agency regulations that would suggest our markets are far from free. While a significant portion of these rules operate to protect our general welfare, many others are politically based and principally operate to generate income for the Government, provide competitive advantages to certain core constituencies, or assuage other influential groups that provide political support.

The Republican Party also argues that the gap doesn’t matter. For a group that tends to oppose economic subsidization in any form, it’s amazing that an ongoing expansion of the impoverished class doesn’t seem to be of concern. Cutting Government expenditures won’t make the gap go away.

It’s also difficult to reconcile the Party’s anti-subsidization stance with its reluctance to strip away the subsidies it favors in the form of tax credits and deductions for the special interest groups that fund its campaigns.

Similarly, any assertion that the Republican Party is the bastion of fiscal responsibility flies in the face of what transpired by the most recent Bush Administration, which surpassed the National Debt of the prior 42 Presidential Administrations combined.

Of course, the Democratic Party is no more consistent than its counterpart. Its altruistic virtue fails short when compared to reality.

While the Democratic Party may claim to abhor the gap between the middle class and the rich and may allege that they care about the poor, its record is rather sparse on either count. Since the gap began to widen in the mid-1970s, the Democratic Party has controlled the Senate 50 percent more of the intervening years than has the Republican Party and 86 percent more with regard to the House. In addition, it has controlled both chambers of the Legislative Branch as well as the Presidency twice as many terms as has the Republican Party during that period.

If the Democratic Party is so keen on closing the gap, why has it failed so miserably when it has had a dominant control over our Government? Why do minorities and women continue to suffer from lower wages and higher unemployment? Why haven’t educational opportunities in minority communities improved or incarceration rates dropped? How does it justify the “gap” between what it says and what it does?

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TJ OHara
T.J. O'Hara is an internationally recognized author, speaker and strategic consultant in the private and public sectors. In 2012, he emerged as the leading independent candidate for the Office of President of the United States. Along the way, he earned the first Presidential endorsement of the Whig Party since the 1850s, his website was archived by the Library of Congress for its historic significance, and he won the first on-line “virtual” Presidential election (conducted by We Want You) by a commanding 72.1% and 72.7% over Barack Obama and Mitt Romney, respectively. His column explores our Nation’s most pressing issues, challenges conventional thinking, and provides an open forum for civil discussion. Learn more about TJ at his website and connect with him on Facebook, Google+, LinkedIn, YouTube and Twitter (@tjohara2012). To order his books, go to Amazon, Barnes & Noble, Smashwords or Sony Reader.