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We would have less income inequality, greater mobility, better schools and neighborhoods, and less crime if everyone, especially parents, instilled better values including the Protestant work ethic Amy Chu and her husband discuss the role of values in the following article and Niall Ferguson has also discussed the six killer apps that made America great
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Jack, everything is interconnected so cost shifting, subsidies, bailouts, redistribution, taxes, amnesty all affect income inequality. If we want more equality then we need to let the free market work. The free market should be free of cost shifting, subsidies, bailouts, redistribution, etc. It does not mean that the government can’t impose some rules, but ever since the Wall Street bailouts, cost shifting, subsidies, tax deductions, and the Community Reinvestment Act accelerated in the 1970’s, income inequality, the high school dropout rate, and unemployment have also accelerated. When you compare North and South Korea or East and West Germany, or the former USSR, then it is easy to see the harm caused by trying to make everyone equal through bailouts, cost shifting, subsidies, etc. You can try to level the playing field but human nature will never allow you or the government to create equal outcomes. It is up to each human being to decide how he/she will play the hand he/she is dealt.
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Cost shifting and subsidizes raise prices and are key issues with income inequality. Housing, health care, and education are the industries with the highest costs and they are also the industries with the most subsidizes and cost shifting. Cost shifting is Marxism, which states from each according to his/her ability to each according to his/her need. Cost shifting doesn’t work, it is discriminatory, and it drives up costs/prices. In addition, illegal immigrants and immigrants in general are driving up housing costs and driving down wages. With millions of US citizens homeless and jobless why is our government even considering amnesty? Hayek said, “The road to hell is paved with good intentions.” Well, we have created the highway to hell with all of the government interventions, bailouts, and cost shifting and now we cannot afford housing, health care, or education. The free market only works if people are allowed to both win and lose their own assets/resources, however big or small. Wall Street and banks would make more prudent investments if they had to eat their own losses and homeowners would be more circumspect in purchasing a home if they had to put 20% of their own money down, knowing the government would not come to the rescue. To further reduce the income inequality, no company should be able to deduct more than $100,000, per individual, annually. Companies would be less likely to pay huge salaries if they had to bear the full brunt of high salaries rather than shifting the cost to taxpayers through deductions. When the government gives bailouts, tax breaks/deductions, amnesty, etc., then individuals and groups take advantage of the situation and create moral hazards which lead to higher prices, unaffordability, and income inequality. A healthy society can no longer sustain this foolhardiness. The beauty of capitalism is it weeds out inefficiencies through accountability, and it protects the masses from poverty.
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Jan 2, 2014