How should Wisconsin address income inequality?

From the pages of In Business magazine.

Welcome to "Political Posturing," featuring opposing views on current issues important to Wisconsin's business community. In this column, Wisconsin Business Alliance Board President Brad Werntz and conservative columnist David Blaska offer their opinions from the left and the right, respectively.

Put trickle-down economics in the rear-view mirror.

A meme going around sums it up succinctly, showing a Monopoly board on which is written: “You’re playing Monopoly. One player is given all the property except Whitechapel Road. They are also given 95% of the bank. You are expected to succeed with what’s left.” Of course, you lose immediately. Why? It must be because you’re lazy, or stupid, or made bad choices, or are uneducated. The list goes on.

Unfortunately, none of these judgments are reality. Currently, income inequality is as large as it has ever been, and it’s getting larger. Why? The system is rigged to reward capital, and our politicians are complicit in this.

How bad is it? In a recent study in the Harvard Business Review, most Americans are comfortable with CEOs making 6.7 times more than workers, although they believe this ratio is currently closer to 30:1. The truth: CEOs make 354 times what U.S. workers make. In dollars, CEOs make over $12 million per year, while workers make just $34,000.

From a recent New York Times report: Incomes for the richest 1% rose from $871,100 in 2009 to $968,000 in 2013. For the remaining 99%, incomes fell from $44,000 to $43,900. Collectively, the 85 richest billionaires on Earth have as much wealth as the bottom 3.5 billion people. Oxfam estimates that between March 2013 and March 2014, these same 85 billionaires saw their wealth grow by $668 million every day.

Market forces did not create income inequality. It was created by a 30-year political experiment in trickle-down economics that rewards capital disproportionately. In support of capital, we have gutted unions, education, and infrastructure while tax policies have favored the wealthy and corporations over the average Joe.

It’s going to take political will to correct this, and it will take a long time. We can start by investing in education and infrastructure. We can raise minimum wages and cap CEO pay. We must make it easier for people to get to jobs using public transportation, and we need better child-care and family-leave policies for both mothers and fathers. Most importantly, we need to tax capital at the same rate that we tax ordinary individuals, so that everyone pays their fair share.

Brad Werntz is a small business owner and a board president of the nonpartisan Wisconsin Business Alliance.

(Continued)

 

Government can’t cure stupid.

With apologies to Jeff Foxworthy, the joke goes, you might be a redneck if your home is mobile and most of your motor vehicles are not. Also, you might be a liberal if income inequality raises your blood pressure

True, the Congressional Budget Office reports that income increased 15% for the top 1% of earners in 2010 but grew by less than 1% for the bottom nine-tenths. It’s just that there’s not a whole lot Big Gummint can do about it without invoking the law of unintended consequences.

That won’t stop Hillary Clinton — the wealthiest among the presidential aspirants of either party — from trying to fend off potential progressive challengers with ever-more elaborate policy prescriptions, such as raising the minimum wage to $15 an hour. That will wipe out a half million jobs, according to the CBO — and half of those earning minimum wage are under age 25. Even the University of Wisconsin–Madison, the birthplace of progressivism, says it can’t afford that. Taxing the bejeepers out of the rich is another favorite among the redistributors. But Sweden, famous for its high taxes on the rich, has as much income inequality as we do.

What’s widening the gap? In the Information Age, it’s education, or lack thereof. Standard & Poor’s Global Credit Portal reports: “With wages of a college graduate double that of a high school graduate, increasing educational attainment is an effective way to bring income inequality back to healthy levels.”

As New York Times columnist David Brooks has noted, there is a very strong correlation between single motherhood and low social mobility; between high school dropout rates and low mobility; and between the fraying of social fabric and low economic mobility. It is also true that many young men engage in behaviors that damage their long-term earning prospects. Take the 18-year-old “man” arrested in southwest Madison in late April for punching and kicking a 12-year-old girl during a melee outside the Meadowridge Library while a crowd watched. Your next IT hire?

Sorry, Hillary, but government can’t cure stupid.

David Blaska is a Madison columnist and In Business blogger. Find his blog at ibmadison.com/blogger/bring-it.

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