Slicing the Income Pie Versus Growing the Wealth Pie


Image by er00mb0b via Flickr

In preparation for the upcoming Presidential election, we have heard stories about how the rich got richer, the middle-class was in stagnation, and the poverty-rate increased over the last 3 years. In response we have heard the President say he wants “millionaires and billionaires” to pay their fair share to help maintain a payroll tax cut and extend unemployment insurance. President Obama wants to increase taxes on top earners for 10 years to pay for a one-year tax cut and unemployment extension.

What is telling about Obama’s stance is that you can’t resolve the federal deficit by taxing the rich. A ten-year surtax on them will produce a short-lived bump for workers and the unemployed. The deficit will not be reduced one cent.

What Obama wants is to take a slice of the income-pie from the rich and give it to the middle-class. This is part of his class warfare strategy to win re-election. This is because the President is an economic pessimist. He does not believe that the middle-class can become wealthier without income redistribution. He doesn’t understand the basics of investment that leads to growth in wealth for all. President Reagan understood that the way for America to recover from the stagflation of the 70’s was to lower taxes and regulations. Our country’s wealth grew enormously from the mid-80’s until the last year of the George W. Bush administration. The rich did get richer, but so did the middle-class. Reagan believed that making the pie bigger through growth was more important than changing the size of the slices.

Taking more away from the rich reduces investment in business. Lower investment in business leads to stagnant growth and increased unemployment. Middle-income earners become wealthier from increases in productivity that are the result of investing by business and venture capitalists. President Obama blamed automated teller machines as one of the reasons for joblessness. He doesn’t understand that the increased productivity gained by using ATM’s has led to increased wealth for all of us. In this vein, you could say the invention of the automobile increased unemployment because horseshoe-making blacksmiths were thrown out of work.

Michael Barone has a reputation for his excellent analysis of polls and elections. His article in Tuesday’s Washington Examiner looks at what American’s desire more, growth or income redistribution. 82% of those polled feel that expansion and growth are most important for the economy versus 46% who feel redistribution is needed.

What the public understands is that economic growth helps everyone. Redistribution helps a few while hurting most. If only our President could understand this.

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One Response to Slicing the Income Pie Versus Growing the Wealth Pie

  1. Jody says:

    82% and 46% equals 128%. What’s wrong with this polling?

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