The Real Inequality Problem

It isn’t that some people are wealthy but that others are struggling.

Commentary by Pete du Pont

Source: The Wall Street Journal

Among the too numerous frustrations of the political process is that a lot of smart and talented people spend their time and energy fulminating about things that don't really matter. That diverts attention from our nation's real problems. There are few better examples than today's debate about economic inequality.

America may well have an economic inequality problem, but it's not a problem that will be solved by denouncing "the 1%" or blaming bankers, Republicans or tax rates that are too low. It's not a problem that will be solved by senseless rhetoric about the false wage gap between the sexes or calling for large minimum wage increases that would reduce the number of entry-level jobs.

To the extent we have an economic inequality problem, it's not because a small percenatge of our population—comprised of professional entertainers and athletes, corporate CEOs, internet pioneers, and others—are wealthier than the average American. Young graduates bearing large student loans while facing a weak job market, families facing unemployment or low wages, and single parents struggling to raise children do not find their situations any more difficult because some in our nation are wealthy.

Yet, liberals seem to think otherwise, and here we find a stark illustration of the converse mindsets of liberals and conservatives. Liberals seem to want to reduce economic inequality by bringing the people at the top down, while conservatives want to reduce inequality by bringing the people at the bottom up. The left wants to focus on class warfare while the right wants to focus on economic growth, the proverbial rising tide that raises all boats.

If we want to reduce economic inequality, the only logical solution is to raise the living standards of the middle class and those at the lower end of the economic spectrum. History, economics and sociology show that the optimal way to do this is not through political grandstanding or government diktats but through the pursuit of policies that have grown our economy in the past.

We must reform our almost Rube Goldberg-like tax code to remove its economic inefficiencies. We need a simpler, fairer and flatter tax structure, one that lowers rates across the board and eliminates most of the provisions that, while perhaps well-intentioned, serve as disincentives to economic growth. President Reagan enacted tax rate reductions and simplified the tax code in the 1980s, ushering in a quarter-century of economic growth. Certainly there were the usual economic cycles over that period, but this growth led to millions of new jobs and overcame the tax increases of the next two presidents. The tax cuts of President George W. Bush led to even more growth. Simply put, cutting tax rates while reducing tax inefficiencies works.

Our nation's businesses need regulatory relief, especially if we expect them to compete in today's global economy. As much as the left hates to admit it, jobs are created by businesses; the person who said we cannot have employees without employers was correct. But instead of relief, we see business-constraining and job-killing regulations—ObamaCare, Dodd-Frank and a raft of others.

The Heritage Foundation notes that the first five years of the Obama administration wrought 157 new major regulations, while regulatory costs on Americans increased more than $70 billion per year. Some regulation is necessary to protect workers, consumers, investors and the environment, but there needs to be a middle ground. Too many regulations are senseless and job-killing.

Today's world runs on energy, and we must make energy more available and affordable for businesses and households. Instead, we suffer the consequences of an administration intent on hamstringing coal-fired electricity generation, discouraging the extraction of newly discovered natural-gas deposits, and arbitrarily putting much of our energy resources off-limits, all of which drives up costs. We must stop taxpayer subsidies for technologies that have found favor with this president and his backers on the left. Such subsidies discourage real innovation and set back progress on generating economical clean energy.

There is more we need to do, including getting our deficits under control (which will require a growing economy) and expanding free trade. Job-training programs must be focused and effective so that workers can handle today's jobs. And all children need access to a good education.

America is a great nation. We should not be surprised or troubled that some of its citizens are wealthy; that's not a problem. Our real problem is the way government gets in the way of economic growth, job generation and higher incomes for all.