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Gone are the days when a man could enjoy his gold plated garbage can and $6,000 shower curtain in peace. The only thing that sours my caviar faster than a discussion on wealth inequality is how badly our side responds when it is brought up.
Why are we always on the defensive when discussing these gaps? In my experience, our responses follow one of two patterns:
- Trying to explain that wealth distribution is not important because even the poorest in America live relatively well compared to world standards. If James Pethokoukis wants to have an academic discussion on this in the halls of Ricochet – go for it – but it is a political loser. It may have worked back in the Nineties when all income levels were rising but, with those on the lower side stagnating or falling, it does not message well.
- Having tactical arguments with the other side on stupid programs that focus on symptoms. They bring up raising the minimum wage or increasing capital gains taxes and we respond that it would hurt the economy. This may very well be true, but it plays into their game on their turf and makes us look like we are backing up the trust fund kids living off their portfolio dividends.
My recommendation is to end the defensiveness and attack the other side’s ultra-loose monetary policies that lead to wealth disparity. These policies have this impact for several obvious reasons.
- Zero Interest Rates: What was your savings account earning ten years ago and what is it earning now? Warren Buffet is unlikely to hold a CD from First Omaha but the little old lady on the corner of your block might have one. This one is a double whammy for wealth inequality since the working class stiff with a savings account is losing interest income while the Wall Street tycoon can finance the leveraged buyout of the local teddy bear factory for almost no interest cost.
- Juiced Stock Market: I’m as happy as anyone when I open my quarterly 401K statement these days, but do people really think that this multi-year rally is based on fundamentals? A lot of the easy money that is sloshing around is making its way into the market. Since high income households are more likely to have a large portfolio this is further contributing to wealth differences.
- Inflation: Find me a non-Ivy League educated economist who believes that inflation is really under 2%. All this loose money is seeping into the economy and the guy making minimum wage is unlikely to benefit from the new iPad with more memory at the same price as the old model but is very likely to be hit by a doubling of beef prices. Since staples consume a smaller portion of higher end budgets than lower end ones, inflation is driving larger wealth disparities.
So, the next time the other side brings up wealth inequality, do not fall for the game of arguing tactics. Ask them why they endorse policies that are at the root of many of those gaps. This is not an argument for jacking up the Federal Funds Rate to 5% tomorrow; that would collapse the house of cards we have created. However, this is to say that playing defense is not effective politically and pointing out the other side’s bad policy decisions would be much more productive. They can talk about the 1% all they want but these policies most benefit the 0.1% and it is time to call this out.
You will have to excuse me as I have to leave it at that because my chauffeur is here to bring me to the club.Published in