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Paul Ryan on Income Inequality and Upward Mobility
In October, the CBO released findings from a study on income inequality that revealed that income inequality had grown significantly in the period between 1979 and 2007. This caused a mass wringing of hands among the liberal punditocracy and emboldened Democratic policy makers to demand increases in marginal tax rates for top income earners.
Though some conservatives –principally our own Richard Epstein– have dared to make the case that income inequality is actually a good thing, Republican policy makers have seemed sheepish in debate over the topic. Paul Ryan’s recent 17-page paper on the subject of income inequality proves the notable exception here.
Rep. Ryan’s aim isn’t to defend of income inequality, but rather to promote upward economic mobility. To that end, he explains the factors that contribute to inequality and discusses their relation to mobility.
Some of these factors are beyond the scope of anything the government is equipped to address. Take, for instance, the demographic changes that have led to more income inequality over the past fifty years. From Ryan’s paper:
[T]he size of the typical American household has been shrinking over the past half century, moving away from the once-ubiquitous married-couple household to single-parent or so-called “non-family” households. Fewer children are being born, fewer parents are getting married, and fewer couples are staying married. This shift to smaller households with fewer earners, by itself, will tend to increase inequality.
Some factors that have contributed to greater inequality are socially desirable. In this category, Paul Ryan lists increases in individual freedom alongside decreases in institutionalized discrimination.
Going back further, since the 1950s and ‘60s, an advance toward greater individual freedom and a decrease in institutionalized discrimination has increased competition in the labor market, as large numbers of individuals from previously discriminated-against groups joined the workforce. For instance, between 1950 and 2005, the labor force participation rate for adult women nearly doubled…[T]he addition of women to the labor force has increased the number of dual-income households, which has had an especially pronounced effect at the top of the income distribution. This incidentally contributed to growing income inequality, as millions of empowered women assumed greater control over their work and family decisions.
Other factors that lead to greater income inequality also hamper upward mobility. Lumped into this category are the transfer payments from younger, poorer Americans to older, richer Americans.
The share of transfer payments going to middle- and upper-income households increased. The CBO found that “Rapid growth in Medicare, which is not means-tested… tended to shift more transfer income to middle- and upper-income households.
[…]
The younger generation is already starting from a tough position. Fresh Census data shows that the wealth gap between the elderly and the young has reached an all-time high as households over 65 have net wealth that is 47 times higher than households under 35. This wealth gap has doubled since 2005, fueled by the economic recession. Demographers think that this gap could be as wide as it has ever been, even in those times that pre-date government records. The looming entitlement crisis, with younger Americans responsible for financing the shortfall, promises to worsen this trend.
Where government has gone into the business of equalizing incomes through taxation, Ryan argues, it has produced a bevy of unintended consequences. And where government has gone to great lengths to provide income support to those who don’t need it, we’ve only seen an increase in income inequality. What’s needed now more than ever is meaningful reform to the tax code and the kind of entitlement reform that Paul Ryan has been persistently calling for.
Published in General
Big government Ryan, fails to come to grips with the fact that income distribution is not a proper concern of government. Taxpayer money should not be used to fund CBO studies of this type nor analysis of them. Two simple questions need to be asked. Who are best equipped to take advantage of government largesse, the rich and powerful or the poor? The answer to this question provides you with the answer to the next. Which group benefits proportionally more as the size and scope of government increases? No studies are necessary! The really problem is not ideology. DC has morphed into more of a criminal enterprise than a governing entity and MR Ryan has been a faithful member for two decades of one of the two crime families responsible. It would be nice if some of the parasitic pom-pom shakers would begin to acknowledge how corrupt the system is.
I wish people would stop using the words “gap” and “inequality”.
Gap implies that the distribution is bathtub-shaped, with a bunch of people at the low end, nobody in the middle, and a bunch of people at the high end.
There is no gap.
In fact, it is more like a really long waterslide: high at the “poor” end, sloping downward but then becoming more gradual until it almost flattens out at the “rich” end. The whole thing is packed full of people from one end to the other, almost in a continuum.
And “inequality”…good grief. These hand-wringers would be happier if they could just compress the entire income distribution into a single narrow band, even if most people ended up with less income. So much for diversity.
More accurately two bands… one with themselves at the top, serving as masters, and riding upon the backs of their subjects at the bottom carrying their masters.
Anybody in favor of a general moratorium on “great stuff by Paul Ryan” until after the election?
The contrast between him and the contenders is just too painful.
Margaret Thatcher explained this during her last speech in the House of Commons in 1990.
I cannot hope to improve on Lady Thatcher.
In the early 90’s the Powerline guys Scott and John produced a “white paper” for the Center of the American Experiment about income inequality. If I remember correctly a major point was that people change income quintiles all the time. For example second quintile for a few years, then moving up to the middle quintile. One can imagine the external factors that might change income level down: divorce, job loss, poor investments, illness, accidents, etc. Rising income levels depend more on the individual: hard work, saving and wise investing, and luck…the old adage of the right person at the right time! Forbes list of the richest has new people all the time with others falling off the list.
I sympathize with the sentiment, but I disagree. Government better well be aware of how its tax and transfer schemes are affecting the country. If we’re funneling money from younger, poorer Americans to older, wealthier Americans through the Entitlement system, don’t you think this is something our legislators should know about? Often times, quantifiable analyses like this one are the only things that hold that lot accountable.
Goodness, gracious, King Banaian; this one brought a tear to my eye!
Entitilement systems are not a proper function of government. The sole legitimate function of taxation is to pay for government. If the government is limited to its proper role, taxation would have little effect on commerce. Ryan and most Republicans want big government and the perks and power that come with it. Ryan is called heroic because he called for continue deficit spending for another decade. He is closer to a big government leech.
Exactly. Not only that, but no administration governs successfully without political support, and this is the kind of issue that undercuts popular legitimacy. Often perception is more influential than reality, which is why Axelrod works so hard at deception. We let it go at our peril.
I’d love it if we could just establish sound principles once and for all, then never have to worry about rot in the body politic. Life doesn’t work that way.
“Big government Ryan”? (facepalm)
You stole my thunder! I was just now getting the link to that video. Great minds think alike. ·Nov 29 at 11:49am
Why do I feel as if the theme song to “Rocky” should have playing in the background of that video? :)
Diane Ellis, Ed.
Ok, granted. But the fact of the matter is that they exist, and if conservatives are to have any shot at persuading the public that entitlements need serious reform, they’ll have to arm themselves with data and analyses like the ones Ryan has drudged up here.
You stole my thunder! I was just now getting the link to that video. Great minds think alike.
Entitilement systems are not a proper function of government. The sole legitimate function of taxation is to pay for government…….
LJ, where does the Constitution say that? We may not like such things- I sure don’t like them, especially as presently assembled- but I don’t see any words about the “proper function of government” other than “promote the general welfare” in the Preamble. And if the peoples’ representatives create a system that is not unconstitutional, it is ipso facto not an improper function, even though it may be a dumb, badly managed, unsustainable function.
Even Ronald Reagan supported some form of “social safety net”. Incidentally, so did Hayek.