Lawrence Lindsey explains how liberals make income inequality worse

Of all the ideas that are considered articles of faith among conservatives, few inspire more derision among liberals than the idea that government transfer payments disincentivize work. The liberal argument is that government benefits never offer a high enough quality of life to equal what you could get from a job, so the idea that anyone would sit around and collect welfare when a job would put them in a much better place is crazy. True? It seems like a sound argument at first glance, but the real impact of government-led class warfare is more psychological. It changes the way people think about how you get money. The more they listen to politicians telling them that businessmen are their enemy, or see trial lawyers on daytime television telling them the way to change your life is to sue someone, the less they believe their best path forward is individual initiative and industriousness. It's not that they wouldn't do it if they knew how, or if they believed it could really help them, but they've been sold by politicians constantly telling them it can't work because "the system is rigged" against them, so they might as well put all their hopes in the idea that some public official will "fight for them."

---

The result of that? Well, the politicians who keep telling you that they're the ones to address "income inequality" are the ones who keep widening that very gap, as Lawrence Lindsey explained a couple of days ago in the Wall Street Journal:

Money matters, but so do other policies, such as the long, historic sweep of the expanding welfare state. In 1968, government transfer payments totaled $53 billion or roughly 7% of personal income. By 2014, these had climbed to $2.5 trillion—about 17% of personal income. Despite the redistribution of a sixth of all income, inequality measured by all three of the Census Bureau’s indexes is far higher today than in 1968. Transfer payments under Mr. Obama increased by $560 billion. By contrast private-sector wages and salaries grew by $1.1 trillion. So for every $2 in extra wages, about $1 was paid out in extra transfer payments—lowering the relative reward to work. Forty-five million people received food stamps in mid-2015, an increase of 46% since the end of 2008. Similarly, 71.6 million individuals were enrolled in Medicaid and the Children’s Health Insurance Program, an increase of 13.3 million since October 2013. In 2008, during the deepest recession in 75 years, 13.2% of Americans lived below the government’s official poverty line. The Great Recession officially ended in June 2009, but in 2014, after five years of economic expansion, 14.8% of Americans were still in poverty. The economy was better, and there were a lot more handouts, but still poverty rose. The structure of American households shows how this happened. From 2008 through 2014, the most recent year for which we have data, the number of two-earner households declined. These two-earner households have become the backbone of the American middle class. Research by the Hamilton Project and the Urban Institute show that when families with children making between $20,000 and $50,000 attempt to have a second earner go back to work, the effective tax rate on the extra earnings—including lost government benefits such as food stamps, the earned-income tax credit, and medical support payments—is between 50% and 80%. This phaseout of the ever increasing array of benefits has created a “working-class trap” instead of a “poverty trap” that is increasing inequality and keeping the income of these households lower than they might otherwise be. While the number of two-earner households declined during the first six years of the Obama presidency, the number of single-earner households rose by 2.6 million and the number of households with no earners rose by almost five million. In other words, two thirds of the increase in the number of families under Mr. Obama was accounted for by households with no one working. This is the reason the middle class has shrunk, and the reason inequality has increased. And unless we increase the number of people wanting to work and the number of jobs through economic growth, inequality will only increase.

---

---

Bottom line: If you're poor, the worst thing you can do for yourself is to vote for a Democrat. They're the ones whose policies will keep you poor your entire life

It may not be Democrats' fault that the family is breaking down - that more people are having children out of wedock and doing other things that put them at an economic disadvantage - but it is their fault they keep subsidizing these behaviors with counterproductive public policy. When you subsidize something, you get more of it, and all the transfer payments Democrats insist on making from producers to non-producers have two very destructive effects: 1. The lessen the urgency to either get a job or get a better one; 2. They reinforce the cultural message that you're not entirely responsible for taking care of your own needs. I don't care how much liberals insist that doesn't disincentivize work. It does. They're no way it can possibly not. Human nature allows for no other possibility. And what Lindsey demonstrates in his piece proves that it has that effect. Think about it like this: Let's say you've spent many years in the workforce and you've always been gainfully employed. One day, a liberal comes along and takes all your money away from you and gives it to someone who has never worked - and gets you fired from your job. But nothing else changes. You still know how to work. You still have the same experience. You still have the same skills and good habits. And the person who was given your money still lacks all that. Fast forward five years: What do you think are the chances you're back on your feet and he's back where he was before the wealth transfer? Pretty strong, right? Because even though you were dealt a blow and he got a momentary windfall, you still know the right things to do and he still doesn't. That's what wealth transfers on a massive scale do. The same people end up doing well in the end, and the same people end up doing poorly, but the ones who do poorly are given a false sense of security that they don't have so much to worry about because someone else is going to take care of them. In the end, they put less effort than they otherwise would have into improving their situations - and it's the fault of the people who claim they want to help them. Lindsey's piece bears that out. Politicians who say they will reduce "income inequality" actually increase it because they totally misunderstand what causes it in the first place. Bottom line: If you're poor, the worst thing you can do for yourself is to vote for a Democrat. They're the ones whose policies will keep you poor your entire life.

---