The Progressive Trap

Screen Shot 2016-03-06 at 1.42.26 PMLawrence B. Lindsey, a former Federal Reserve governor, writes in the Wall Street Journal (also available here)

How Progressives Drive Income Inequality    (excerpts)

. . . the administrations of political progressives have made the distribution of income more unequal than their adversaries, who supposedly favor the wealthy.


Transfer payments under Mr. Obama increased by $560 billion. By contrast private-sector wages and salaries grew by $1.1 trillion. So for every $2 in extra wages, about $1 was paid out in extra transfer payments—lowering the relative reward to work. Forty-five million people received food stamps in mid-2015, an increase of 46% since the end of 2008. Similarly, 71.6 million individuals were enrolled in Medicaid and the Children’s Health Insurance Program, an increase of 13.3 million since October 2013.

In 2008, during the deepest recession in 75 years, 13.2% of Americans lived below the government’s official poverty line. The Great Recession officially ended in June 2009, but in 2014, after five years of economic expansion, 14.8% of Americans were still in poverty. The economy was better, and there were a lot more handouts, but still poverty rose.


Research by the Hamilton Project and the Urban Institute show that when families with children making between $20,000 and $50,000 attempt to have a second earner go back to work, the effective tax rate on the extra earnings—including lost government benefits such as food stamps, the earned-income tax credit, and medical support payments—is between 50% and 80%. This phaseout of the ever increasing array of benefits has created a “working-class trap” instead of a “poverty trap” that is increasing inequality and keeping the income of these households lower than they might otherwise be.


. . .  If the socialist ideal of “from each according to his ability, to each according to his need” worked in practice, the Berlin Wall might still be standing. Of course, one of the reasons it came down is that a new ruling class emerged to take from the productive and give to those in need, siphoning off a cut of the swag along the way. Ruling classes always have sticky fingers.

The article has revealing comparatives regarding the economic performance of Obamanomics and what to expect from other “progressives” and why.


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