American Elephants


American Economic Mobility Disproves Obama’s Class Warfare by The Elephant's Child

When campaign season comes along, with it always comes “class warfare”.  Many people don’t understand what is meant by “class warfare”.  America is very much a classless society, although our politicians prefer class divisions so they can claim to do away with them.  The divisions — there are five of them — come from the Treasury Department, where you have “rich” at the upper end, “poor” at the lower end, and then lower middle, middle, and upper middle.  The government finds it helpful to keep track of how people are doing in this way.  The rest of us should not.

The problem is that Americans, stubbornly, will not stay put.

There is enormous mobility in the American population.  Young people start out poor, find jobs, get promoted or find a better job, and with hard work, get promoted again and again. Some even become the rich.  From apartment to house, kids, schooling, then folks begin to reach their peak earning years, eventually retire, and slip back down the income scale and live on a fixed income.  Yes, of course, the path is not always smooth.  Two steps forward, one step back.  Lost jobs, accidents, divorce, foolish mistakes, but the point is that neither “the poor” nor “the rich” remain the same people over time.

If you follow Obama’s speeches over time, you will find that his economic plan assumptions are based on long-discredited Marxist theories. “The top hedge-fund managers made $29 billion last year” he claimed.  He assumes that capitalism unfairly favors the rich.  And he believes that it is government’s job to step in and close the gap between the average worker and the wealthiest 1%.

But he needs to get his nose out of the Marxist playbook and look at the real data.  The “poor”, those at the very bottom, do not get poorer, the income pie continually gets bigger.

Obama vilifies the mega-rich, the top 1%; but according to IRS data only one quarter of those who belonged to the group in 1996 remained in the group by 2005.  Three-fourths of them no longer qualified.

More than half of those in the bottom income group in 1996 had moved to  a higher income group by 2005.  Over 5% had jumped to the richest quintile. Some had moved up through their own hard effort, but many rode an expanding economy. Economic growth for those in the lowest fifth was 90.5%. Hardly a permanent underclass. The top 1%, on the other hand, dropped 25% in median income in the same time period.

According to the Treasury Department, the top 10 percent received about 46 percent of the income in 2000.  In 2006, they received about 47.3 percent.  But in 2006, they paid 70.8 percent of all taxes, and 33 percent at the bottom pay no taxes at all.  Obama claims that he will cut taxes for 95% of the people, but only 67 percent of Americans pay taxes.

Obama fails to understand that many of “the rich” are actually small businesses who choose to report the income from their business as an individual, rather than incorporate.  He fails to understand that raising the capital gains tax will cost the government revenue, as taxpayers won’t sell an investment if it costs them too much.

He also plans to call for a “living wage” which will stick retailers with a $10 minimum wage indexed to inflation, and with a mandate for seven days of sick leave applied to employees. But many retailers operate on very thin margins.  He assumes that business owners will simply eat the cost. With Nancy Pelosi’s much heralded increase in the minimum wage, there was 20% unemployment among young people this summer.  Perhaps you have noticed that most retail stores have smaller staffs, and there is increasingly more self-service.

Obama has claimed that the current financial crisis was caused by a lack of enough regulation.  But it was actually caused by too much regulation of the wrong kind. A Democrat congress essentially told banks that they must lend to people with questionable ability to repay the loan, under penalty of law.  This is regulation, not oversight.  And very poor regulation at that.

Few congressmen have been entrepreneurs prior to being elected to Congress.  Lacking any knowledge of how to run a business nor of what the problems involved are, congress wants to tell businessmen how to run their operation.  The proper work of congress is oversight.  They don’t seem to learn the difference.

Americans are opposed to income redistribution to fix the economy.  Only 13% of adults, nationally, believe that the government should take steps to distribute wealth more evenly among Americans.  84% of adults believe that the government should take steps to improve overall economic conditions and the job market, according to a USA Today/Gallup poll from mid-June of this year.

Taking from the rich through much higher tax rates in order to help the poor and middle class makes no sense intellectually and has seldom worked in practice.  Reducing rates increases the share of taxes paid by the highest income earning group.  Obama’s pollsters have told him that the economy is his strongest suit.  And some Americans seem to believe that Obama actually knows something about economics.  But such doesn’t seem to be the case.

When you put “tax fairness” before economic progress, you usually end up with neither.

If someone gets obscenely rich, it does not take anything away from you.  The pie just gets bigger.  Do not let anyone sell you on class warfare.  It doesn’t work.

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4 Comments so far
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As libertarians often say, “We don’t want certain people to have a bigger piece of the pie. We want everyone to have his own pie and to make it as big as he is able to.”

You are so right about economic mobility. That’s why most middle class people don’t engage in class envy. Most of them are on the way up and hope to be “the rich” someday.

Comment by renaissanceguy

[...] can get a preview of the great commentary on this post about class warfare, and the economic mobility of Americans. Great [...]

Pingback by Introducing American Elephant « Scatterin’ O’ the Thoughts

[...] doesn’t seem to understand the mobility of people within our American economy, which is alive with movement between the income classes.  And we are [...]

Pingback by Joe Biden says taxes are a matter of “patriotism”. « American Elephants

[...] has always been enormous mobility in the American population. Young people start out poor, find jobs, get promoted or find a better [...]

Pingback by Obama Has Brought Economic Mobility to a Screeching Halt. « American Elephants




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