Forlines on Income Inequality

John Forlines has written a very good post about income inequality.  His take on why it’s a bad thing is two-fold, #1, it may lead to social unrest, and #2, it is fundamentally unfair, in a “oh, the humanity” kind of way.  Very reasonable.

He starts by pointing out that the .01% (although he mistakenly refers to them as the 1%) at Davos recognize that economic inequality is a potential issue for them.  I wish everyone would get that whole 1% thing out of their vocabulary, it’s the 01%!

Then he shows an interesting graph, which explains exactly why the .01% have been doing so well and everyone else, not so much:

His main idea for solving the problem is tax code reform.  I agree, to a point.  Certainly, tax code reform could go a long way toward encouraging productive investment and helping reduce poverty (both through subsidies such as EITC and through improved business conditions leading to more and better jobs).

So, if government benefits do get cut—and I’m suggesting there is no long-term fix to the U.S. economy without this—then there has to be a corresponding investment in activities that drive incomes of the 99 percent higher. More specifically, investment needs to come from both the private and public sectors.

The only way around this deep set notion of “fairness” is to create growth through investments—lower taxes; federal spending targeted to state and local needs and requirements; and the use of regional as opposed to federal infrastructure banks.

The middle way is especially painful to die-hard liberals and conservatives. But we need to end up there before our infrastructure rots away and institutions other than Wall Street get occupied.

There is no sugar-coating the fact that our “investing” class is way up on the “working” class the last few years. We capitalists may not like the “fairness” outrage, but we can’t wish it away.

My guess is American workers don’t want to be saved by liberals and don’t want handouts.

They want better schools, businesses that are growing and hiring, and roads, airports and bridges in working order. I, for one, am wishing more would join me in embracing the middle way.

If, in fact, he is correct that the Davos crowd not only recognizes but also wants to do something about this economic inequality, then they will also have to give up some of their legal advantages.  These are not only built into the tax code, but include things like TBTF and unequally applied rule of law.  Many in the .01% have worked way too hard to get it all set up to their liking to allow it to change now.  The debate here is not between liberal and conservative, but between .01%’ers.  I’m not sure what it will take for the basic changes Forlines is discussing here to be a real possibility – I think a majority of .01%ers would have to believe that it somehow became in their best interest to make the changes reducing their enormous economic advantages.  What makes that happen?  Will it require the social unrest they have identified as a possible issue going forward?  Let’s all hope not.

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