On Inequality

The latest poll-tested platitude being purveyed by the politicians is the notion of “income inequality,” a pernicious idea that only leads to harm. Consider: In 2010, Joe earned $50,000 and Bill earned $100,000, a gap of $50,000. The following year saw a boon for both: Joe and Bill both doubled their earnings, to $100,000 and $200,000 respectively. Great news for both, right? Not according to this theory, which saw the disparity in their incomes also double. They each might have earned more money – a lot more money – but they should presumably be unhappy because the income gap rose from $50,000 to $100,000. Are there people who really think this a bad thing? Yes; these are the politicians and their spinners trying to agitate the public to serve their own purposes.

Are normal people bothered by this? One would think not, but in fact studies have shown that most people would rather not have their earnings increased if it meant that their neighbors’ earnings increased even more. The problem then is not “income inequality,” but “character inequality.” People who let envy dictate their moods and happiness and begrudge the success of others will usually lead over-competitive and miserable lives, never able to enjoy their bounty, and only because someone has the same or more. That weakening of society’s moral fiber threatens more than opportunities for all to prosper; indeed, it threatens our ability to relate to each other properly and respect the rights of all.

The President and his PR advisors surely know this, but what has made “Income inequality” today’s buzzword is the sheer outrageousness of it. There has always been income inequality, and there will always be income inequality. Even if every person was a millionaire, there would still be people in the bottom 20% and the top 1% of earners. That is simple arithmetic. If we posit – as the liberals seem to – that the bottom 20% is almost always the victim of the top 1% (or top 10%) then there is no hope of ever moving forward because logic is then the greatest impediment to progress. There will always be a bottom 20% – in income, education, accomplishment, talent, etc., and there is no way to avoid that.

Thus, the “income inequality” gambit is a shameless plea for votes, and nothing else, by stirring up class warfare – by arousing the jealousy of the less fortunate (who are more numerous) against the more fortunate. But note the selectivity of the thinking: inequality troubles the Chief Executive only in one narrow area of life: industry and the professional class. That CEO’s, doctors, attorneys, bankers and similarly situated people out-earn (and by far) the average worker is held to be some sort of crime perpetrated by them against the masses. But those groups of people are also more educated and (generally) spent far many more years of their lives studying and preparing for their careers. They are also the ones who take risks, start businesses, build factories, manufacture products and invest their money in enterprises that will employ others. With risk comes the possibility of failure but also the possibility of great reward. Why should they be begrudged their successes when their counterparts who invest and lose money are not compensated for their losses? (Of course, some are –like the big banks that failed – and blame the politicians for that cozy relationship that uses taxpayer money to bail them out so – among other things – campaign donations could keep flowing).

But that is the only kind of inequality that troubles the President. Oprah far out-earns her competitors, as does Lebron James who out-earns the 12th man on his team. Chicago Cubs fans suffer from championship inequality, certainly in comparison to Yankee fans. How shall that be rectified? The pay scale in Hollywood is wildly disparate, certainly between the lead actor and the “best boy” (I’m unclear what he does and I am afraid to ask.).

Life presents a series of inequalities: of intelligence, talent, opportunity and family stability. Across the world, there is a gross disparity in equality of freedom. These inequalities can be ameliorated but never fully eradicated. It is just life, in which we are placed in differing circumstances and forced to deal with a variety of challenges. Poverty is a challenge for some, and, frankly, wealth is a challenge for others. Indeed, wealth may be the greater challenge, if our guide is the young Hollywood star – there are a few such wretches every year – who comes into wealth early and self-destructs before our eyes but to the delight of the celebrity media.

The idea that taxing the wealthy more will improve the financial situation of the poor has been tried, tested and failed repeatedly. The war on poverty has spent trillions in fifty years with no appreciable impact on the poor; the percentage of poor people –but poor, not just relative poor – remains the same.  And why would we think it should? Poverty is here to stay. “For the destitute shall never cease from the midst of the land; therefore I command you that you shall surely open your hand to your brother the poor and to the destitute in your land” (Devarim 15:11).

In a healthy society, the existence of different classes is a phenomenon that binds people together, that enables each group to interact and make its unique contribution, and allows the wealthier to share their G-d-given bounty with the less fortunate. Taxation is not charity, and government is not an instrumentality of charity. Taxation is coercive, and therefore tax avoidance (not evasion, of course) is part of the American system; charity is voluntary and therefore ennobles the giver, as well reminds him of the simple justice involved in helping the needy. When government tried to displace the individual of the dispenser of charity, it not only does it more inefficiently but it also deprives the donor of the opportunity to refine his character.

None of this wins votes. What win votes are the promises to take money from Bill (by one mechanism or another) and give it to Joe. That is why the true solution to the income gap – due to the diminished opportunities available to some – lies within our reach but is unlikely to be embraced or even widely discussed outside a small circle of interested people. The problem is not the dearth of money for some but the dearth of values for too many.

It is well known that the greatest indicators of financial success in life are completing school (even just high school), getting married, and having children after marriage, not before. One can extrapolate from this and readily perceive the causes of poverty in American life: the poor are generally those who fail to finish high school, have children before they are married, and who even fail to marry or marry repeatedly. Those who stay in school and stay married are rarely poor, and usually their strained economic circumstances are the result of some trauma or untoward event.

There was a time when married couples received tax advantages in recognition of the government’s interest in encouraging stable homes. Although it still exists in modified form, there are other inducements to the anti-social behavior that produces or prolongs poverty. Children born out of wedlock to unmarried women are generally subsidized by the government – their births, their health care, their education, even their food. There is little incentive for a male breadwinner to stay behind, and so they don’t. Lingering poverty almost directly correlates to the epidemic of out-of-wedlock births, but it is considered uncouth and offensive even to use the term “out-of-wedlock,” as if there is some benefit to births that occur within a marriage as opposed to outside a marriage. News flash: there is a benefit, both moral and financial.

And couples who marry and stay married are more successful financially than those who do not. While we cannot impose love on those who do not love each other, we can encourage people to think long and hard before marrying and divorcing, especially if they have children together. Some communities have more of a safety net than others, but children – and the single parent who raises them – do tend to wind up on the bottom rungs of the economic ladder.

It is easier just to raise taxes on the rich. It sounds like the problem will soon be solved, but only fools believe that money is somehow conveyed to the poor. The poor are useful to the politicians for their votes, and the rich as the cudgels by which those votes will be extracted from the poor. But a true leader would not play the envy game. Instead, he would lead a campaign – not just give a speech – to revive traditional values in American life – of education, family, faith, stability, hard work, industriousness, and contentment with one’s lot in life. The true leader would also encourage many wealthy people to lose their obsession with material acquisitions, and certainly not to define their moral worth by their assets. In fact, what they give to others is a greater indication of their moral standing than what they spend on themselves.

Within a short time, “income inequality” will occupy no one’s time or thought. But because that canard has legs and votes, this approach is easier said than done. The effort alone would transform society in untold positive ways.

12 responses to “On Inequality

  1. Audrey Fredericks

    This was right on target, very insightful.

  2. “. Taxation is not charity, and government is not an instrumentality of charity. Taxation is coercive, and therefore tax avoidance (not evasion, of course) is part of the American system; charity is voluntary and therefore ennobles the giver, as well reminds him of the simple justice involved in helping the needy.”

    Doesn’t beit din force people to give charity if they are not giving an amount appropriate to their means?

    • You are correct. Bet Din has a limited right to seize assets pursuant to Hefker Bet Din Hefker. But does the person fulfill the Mitzva of tzedaka? Probably yes. But does he gain the perfection of one who gives tzedaka? No. Chazal made the choice to take the money, period, and let him worry about his own perfection.
      Of course, seizure of the money of the recalcitrant rich man was an extreme and rare case, not a part of normative practice.
      Shabbat Shalom?,

  3. Outstanding post, as per usual. Your legion of admirers grows daily.

    E-mail : drdan@santamonicacardiology.com
    Office phone : 310-315-0101
    Sent from my iPad

  4. Your argument is exactly the one I have been making and I get blank stares from my highly educated friends (many PhDs). Their lack of understanding of the purposes and history of government is shocking. Their lack of insight into what makes us morally justified is even more shocking. They know they shouldn’t lie; well, sort of. They know they shouldn’t steal; well, sort of. But, they have never been asked or educated about what makes a just life. I don’t think they even know to ask the question. They seem to think such questions are anachronisms from the 20th cen… I mean from the 19th centur… no, from the 18th century. Surely not the 21st century.

    With so few “educated” people belonging to churches or synagogues, how do we reach this secular wasteland with a message that makes sense to them, because anything that has the metaphysical attached “makes no sense.”

    I was raised Catholic, am now secular, but still fully understand the need to examine my life by asking and answering the question, “What makes a good life?” The answer has nothing to do with my bank balance or possessions.

    How do we reach this secular wasteland?

  5. Have you seen this famous video of Margaret Thatcher exposing the falacy of the income inequality theory? http://youtu.be/okHGCz6xxiw

  6. Rabbi Pruzansky for President!

  7. While I’m not a fan of resentment economics (nor of resentment politics or theology for that matter), I find that your piece is reflective of the disconnect that exists between the Conservative/Republican camp and the Average Joe (to borrow from your presentation of Joe and Bill above). If only the disparity between the Joes and Bills of America could be reduced, as you presented it, to a model where both have seen their salaries doubled. The reality, however, is quite different. The Economic Policy Institute estimates that the average CEO compensation was 202 times that of the average worker in 2012 as compared to 20 times in 1965. But more importantly is the perception, one validated time and again, that the average worker is held to a greater level of accountability (and hence has less job security) than the corporate machers. And to top it off, even in cases where management fails and is held accountable there is the guaranteed Golden Parachute that assures more than ample remuneration for a job poorly done. Rest assured that the average worker receives no such benefit. And remember that the vast majority if CEOs are what John Bogle coins “managerial CEOs”, meaning that they are company employees just like the average Joe.

    I won’t even go into how the average American investor (i.e. the ones who unlike the average CEO have actually risked their own money on these companies) has been bamboozled by the present-day corporate culture. I think it is safe to say that the CEOs on the whole came out much better than the average investor in the last market meltdown.

    I understand that the Democrats and the Occupy Wall Street types include many who hate capitalism is any form. What I believe most Americans are seeking is a more sensible form of capitalism than the one that currently exists.

    • Well, I agree with you in part. It outrages me that CEO’s of companies that suffer losses or are failing (or have failed) are voted extravagant salaries, bonuses or golden parachutes. It just seems to reward mediocrity. But I remind myself that they do not seize the money but are awarded by boards that are authorized to do so. The shareholders, if displeased, have a number of ways to register their objections, as does the consumer. Often, though, they are simply entitled to the money as part of their contract, negotiated freely by boards who sought their services and outbid other companies. Other times, the company might have lost money but – who knows? – maybe it would have lost even more money under other management.
      I don’t buy into the disparity of salary argument. It’s a free country. Does it bother you that last year Albert Pujols earned 30 times more than Mike Trout? That Brad Pitt out-earns some extra or bit actor on the same movie by 600 times? That Oprah out-earns other talk show hosts by 800 times? Certainly the average CEO made out better in the recent downturn because they have a bigger nest egg, and often they are the ones taking the risk. But when they lose their jobs, they arguably suffer a greater loss psychologically because they are living so large, even if the suffering of the worker is more intesne because he can’t pay his bills. It is no great joy for anyone to lose their jobs.
      Salaries usually bear a rough similarity to productivity. If a worker produces $50,000 worth of goods, it is hard to justify paying him a salary of $100,000 (that type of economic inequity is a union specialty). In fact, that’s what causes corporations to go under. For CEO’s, it is just harder to measure their work contributions relative to a regular worker, just as with the athlete/celebrities noted above.

  8. Thanks so much for your reply. Just a final thought from me on the matter:

    As I said, I am not an adherent of resentment economics, nor are most Americans (at least I hope not anyway). I don’t think that the average American begrudges the success of a Bill Gates or an Oprah Winfrey, but the absurd salaries and perks now given to most managerial CEOs – even in the face of a battered economy – is another story. The fact that these absurd contracts are negotiated between a board of directors and the CEO is of no solace to the individual investor, who may be able to register displeasure but generally has no influence on the outcome of negotiations. And it is certainly of no solace to the worker who must bear the brunt of corporate belt-tightening and downsizing. That the metrics for determining CEO success may differ from those of the worker hardly matters in a system which amply rewards the former regardless of outcome while the latter is treated as an expendable commodity.

    I truly hope that the Republican/Conservative camp finds a way to reconnect to the working class American. Circling the wagons in a ‘defend the rich’ posture or lecturing about the wonders of trickle-down economics just won’t do.