The president seeks a fairer distribution of wealth; he claims not to admonish prosperity, but seeks to be sure it is shared. There is a proven method to this noble objective and it lies under his nose. Instead of promoting it he is effectively destroying it.
In The Wall Street Journal, 1/26/12 Henry Nau writes Lessons from the Great Expansion. (p A15 in the print version, the link may require a paid subscription, which I encourage.)
Yes, “the middle class has shrunk,” as Mr. Obama said while campaigning last month. But not because it’s getting poorer, rather because it’s getting richer.
According to Stephen Rose of the Georgetown University Center on Education and the Workforce, fewer people live today in middle-class households with incomes between $35,000 and $105,000, while the percentage of households making less than $35,000 has remained the same. Where did the missing households go? They became richer. In the past three decades, the percentage of households making more than $105,000 in inflation-adjusted dollars doubled to 24% from 11%.
Even more importantly, the global surge in growth spread wealth from the rich to the poor countries, creating greater equality in global markets than ever before. Throughout this period, developing countries grew two and even three times faster than developed countries. As a result, the share of world GDP held by emerging markets increased to 22% from 13%, while the U.S. share remained steady at approximately 26%. The “Great Expansion” created a global middle class of some 600 million-800 million people in China, India, Brazil and other developing countries.
What were the policy trends that produced this Great Expansion? Precisely the free-market policies of deregulation and lower marginal income-tax rates that Mr. Obama decries.
Capitalism replaced the feudal societies where capital was allocated based on rank and privilege with an allocation based on merit, innovation, and often, luck. We may decry the impact of luck, but it is more fair than rank, privilege, or social class. The re-emergence of a more state controlled economy is in a very real sense a return to allocating capital based on privilege and power as opposed to individual merit and freedom. By overreacting to a short period of correction and adjustment this administration risks damaging the very best system for achieving the objectives he claims to value so highly.