Reprinted from Smirking Chimp
George Will really takes it to Bernie Sanders in his column this morning.
"The fundamental producer of income inequality is freedom. Individuals have different aptitudes and attitudes. Not even universal free public education, even were it well done, could equalize the ability of individuals to add value to the economy."
Got that? Bill Gates is incredibly rich because of his aptitude and attitude; the government's willingness to arrest anyone who infringes on the patent and copyright monopolies it gave him has nothing to do with his wealth. We're supposed to also ignore all the other millionaires and billionaires whose wealth depends on these government granted monopolies.
And we should ignore the Wall Street boys who depend on their banks' too big to fail insurance or on the fact that the financial sector largely escapes the sort of taxation applied to the rest of the economy. And we shouldn't be bothered by the fact that Jeff Bezos got very rich in large part from avoiding the requirement to collect sales taxes which was imposed on his brick and mortar competitors. And, we need not pay attention to the tax scams that allow for much of the wealth of the private equity crew.
Nor should we pay attention to Federal Reserve Board policies that deliberately slow the economy and reduce the rate of job creation any time workers are about to get substantial bargaining power. Nor should we pay attention to trade policies that put our manufacturing workers in direct competition with low-paid workers in Mexico and China, but protect our doctors, lawyers, and other professionals.
It's all about freedom. George Will has spoken.
Okay, but let's continue:
"First, the entitlement state exists primarily to transfer wealth regressively, from the working-age population to the retired elderly who, after a lifetime of accumulation, are the wealthiest age cohort. Second, big, regulatory government inherently exacerbates inequality because it inevitably serves the strong -- those sufficiently educated, affluent, articulate and confident to influence the administrative state's myriad redistributive actions.
"Third, seven years of ZIRP -- zero-interest-rate policy -- have not restored the economic dynamism essential for social mobility but have had the intended effect of driving liquidity into equities in search of high yields, thereby enriching the 10 percent of Americans who own approximately 80 percent of the directly owned stocks. Also, by making big government inexpensive, low interest rates exacerbate the political class's perennial disposition toward deficit spending. And little of the 2016 federal budget's $283 billion for debt service will flow to individuals earning less than the median income."
Interesting on how Social Security is regressive because people accumulate wealth over their working lifetime. Usually we look at income, but if we want to make up silly arguments, sure young people don't have any wealth and people tend to have their greatest accumulation of wealth near retirement. Hey, why should people get income in retirement, when they have so much wealth?
Okay, but in the real world we know that people pay for their Social Security over their working lifetimes, so it is no more a handout than the interest on government bonds that they hold is a handout. In both cases they paid for this income stream. Will does have a case for a regressive redistribution with Medicare, but there the redistribution is to the doctors, drug companies and medical equipment suppliers who charge us twice as much as their counterparts in other wealthy countries. If Will wants to bring these costs down, then he's got a good case.
As far as big regulatory government helping the strong, he certainly has a case as we just saw with the TPP. President Obama pressed our partners to give more protection to our pharmaceutical companies, software and entertainment industry. He made Trade Representative Michael Froman get by on just 8 hours of sleep in 5 days in order to get the job done for these companies. We can also point to the Wall Street bailouts, the Export-Import Bank and other areas in which government regulation shovels money to the wealthy. The case that government redistributes to the rich is probably a bit harder with the Consumer Financial Protection Bureau.
The moral is that the government is part of the economy whether George Will likes it or not. The battle is over who is likely to be better served by its actions.
As far as zero interest rate policy pushing up the stock market, relative to the size of the economy the stock market is no higher than its was in 2007 before the crash. The stock market was not being pushed up by ZIRP then, what is the case for it now? And of course tens of millions of middle and moderate income people have benefited from getting lower mortgage interest rates. And, the additional purchasing power has added one to two million jobs according to a number of different studies on the topic. So, the data don't quite fit Will's story here.
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