The Liberal Obsession with Income Inequality

Staff writer David Leonhardt's Friday "Economic Scene" column on Friday's front page, "A Bold Plan Sweeps Away Reagan Ideas," showcased his liberal obsession with "the rapid increase in income inequality over the last 30 years."

The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters.

The Obama budget - a bold, even radical departure from recent history, wrapped in bureaucratic formality and statistical tables - would sharply raise taxes on the rich, beyond where Bill Clinton had raised them. It would reduce taxes for everyone else, to a lower point than they were under either Mr. Clinton or George W. Bush. And it would lay the groundwork for sweeping changes in health care and education, among other areas.

More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years. They do so first by rewriting the tax code and, over the longer term, by trying to solve some big causes of the middle-class income slowdown, like high medical costs and slowing educational gains.

Eschewing economic growth and personal freedom, Leonhardt sees all of U.S. history through the distorted liberal prism of income inequality:

The history of the United States economy over the last 70 years can be roughly divided into two periods: the decades immediately after World War II, when inequality plummeted, and the past three decades, when global economic forces and government policies caused it to soar. Mr. Obama is setting out to begin a third period that looks more like the first than the second.

That agenda starts with taxes. Over the last three decades, the pretax incomes of the wealthiest households have risen far more than they have for other households, while the tax rates for top earners have fallen more than they have for others, according to the Congressional Budget Office....And just as Franklin D. Roosevelt's tax increases on the wealthy followed a stock market crash, which had already depressed their incomes, Mr. Obama's proposals - if they become law - would too. The combination has the potential to reverse a significant portion of the inequality trends of the last few decades.

Most measures of income inequality don't include benefits the government (that is, tax payers, including a disproportionate share of "the wealthy") provides low-income earners, such as food stamps,public housing,and Medicare. Plus, in a free society with a fluid class structure, those who earn huge incomes generally get that way by producing things other people value. Why income inequality is by definition a bad thing Leonhardt left unexplained.