Why the Income Gap is a Red Herring

Just say the rich are getting richer and the poor are getting poorer and you will find yourself surrounded by liberal and leftists salivating to tell you how bad capitalism is as an economic system. They trace the increase in this gap back to the Reagan years. There is no doubt that the income gap exists but what does it mean, and what are the causes?

If we look at the greatest expansion of wealth in this country for the most Americans ever, you find that expansion during the Reagan years. More people than ever were able to participate in the growing economy because of the massive job growth. This opportunity added to people being able to fund 401K’s, buy homes, drive multiple cars, and in general build individual wealth. Family incomes increased and people were living the American Dream.

During this same period and beyond, many industrious Americans were building companies that created enormous wealth for many individuals. Many became the 1%’s; so often targeted for envy by the left. You see, when wealth creation happens some people do better than others. They are rewarded for their ideas through the market and can accumulate massive wealth which they can then use to create or invest in other economic opportunities. The people that also benefited from this wealth creation were the people that worked at all of these businesses that were created. As employees often do, they saw increases in their pay and may have bought a home and made some investments in their future. Many increased their possessions and chose to spend instead of save. That’s what freedom means, the ability to do what you want with your private property.

So the 1%’s saw huge expansion of their wealth as they chose to continue to invest in the economy. Some won and some lost. You see, the 1%’s are not the same set of people that were there in the 80’s or 90’s. The 1%’s change just like people in the 50% go up and down in income level based on their choices and circumstances.

The income gap is measured by “household income.” So if your household has two working members you are likely to have a higher income. If you are a single parent household, your income level is likely to be less.

The chart in this article shows a reduction in households in the income ranges of $35K - $99K. The lower and upper ranges have grown. So there are more rich and more poor which increases the “gap.” But what it doesn’t show is who is moving where and why.

The income gap can be the result of so many factors but moving to the lower income levels has nothing to do with people moving to the upper income levels. There are simply more people in this country that have not become rich (yet), and the people at the high income level are a very small group of people and not the same people at any given time.

The left wants you to infer that the rich are rich because they are keeping the rest of the people in the lower income category. They have gotten to where they are as a result of screwing other people. There are some of those but they are the people using political power to get and maintain wealth. They are the exception not the rule. This is the left’s attempt to use envy as their weapon to destroy even more wealth.

The income gap proves nothing but the fact that some people have been better at creating wealth in the marketplace. The people moving into the lower income levels have many stories but they also have the opportunity to get back out of that group if the government would stay the heck out of the economy.

What the left wants to do to “fix” the gap is to reduce everyone’s ability to succeed. They want to regulate wages, business opportunity, tax the rich, re-distribute according to the left’s definition of fair. A “fair” that punishes success and rewards poor choices and the invisible hand of the market place.

Taking from the rich, increasing taxes, stealing people’s hard earned retirement, and creating envy among people is evil and needs to be rejected by every American that still believes in the American Dream. There is the greatest gap in incomes where there is the most freedom. The people that are determined to succeed become wealthy. Some people are driven more than others and depending on choices some may be left behind by not creating any personal wealth. This is why freedom is so great and why so many on the left hate it! They hate it because it rewards based on merit. A free market does not care who you vote for, what color your skin is, what heritage you come from, it only cares if you have something everyone else wants. A true free market can’t be manipulated by politics and that’s what the left hates…