Opportunity for all: How to think about income inequality

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Contents

INTRODUCTION    1
Arthur Brooks

CONSUMPTION AND THE MYTHS OF INEQUALITY    3
Kevin A. Hassett and Aparna Mathur

IF YOU REALLY CARE ABOUT ENDING POVERTY, STOP TALKING ABOUT INEQUALITY    7
W. Bradford Wilcox

THE INEQUALITY ILLUSION    12
Aparna Mathur

DEFINE INCOME INEQUALITY    18
Jonah Goldberg

MORE THAN THE MINIMUM WAGE    21
Michael R. Strain

2014’S REAL ECONOMIC CHALLENGE    24
James Pethokoukis

INCOME INEQUALITY IN THE UNITED STATES    27
Aparna Mathur

A NEW MEASURE OF CONSUMPTION INEQUALITY    45
Kevin A. Hassett and Aparna Mathur

SHOULD THE TOP MARGINAL INCOME TAX RATE BE 73 PERCENT?    82
Aparna Mathur, Sita Slavov, and Michael R. Strain

 

Introduction

Washington is abuzz with talk of income inequality. President Barack Obama calls it “the defining challenge of our time.” Senator Harry Reid says there is “no greater challenge” facing America. The media declares the issue will dominate the debates and elections that lie ahead.

The conventional wisdom on inequality is built on three assumptions: (1) Income inequality is inherently unjust; (2) it is bad for the economy; and (3) government redistribution is the best way to remedy it. According to this narrative, narrowing the gap between what wealthy and working-class Americans earn should be our top political priority, and policies such as raising taxes or increasing the minimum wage are the answer.

This conventional wisdom is incorrect. A free enterprise society is not a zero-sum game in which citizens fight over resources. It should be a shared journey that empowers everyone to improve their station and earn their own success. Income differences are inevitable, and they are not inherently problematic as long as the opportunity to rise is available to everyone. Survey data show that the American people agree: narrowing the income gap is an afterthought for people who believe everyone has a shot at success, but it ranks as a top priority among those who feel the game is rigged.

While fixating on the distribution of income per se is misguided, the free enterprise movement must not neglect the reason for the debate. Mobility and opportunity are indeed falling in low-income America. And as the policy failures of the past half-decade have made painfully clear, outdated policies actually exacerbate the problematic trends they are intended to reverse.

Fighting to lift up vulnerable people is a mission with universal resonance. It is time for advocates of free enterprise to join the conversation, explain the truth about inequality and redistribution, and articulate the principles that will restore opportunity for all.

—Arthur C. Brooks, AEI President

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About the Author

 

Kevin A.
Hassett

 

Aparna
Mathur

 

Arthur C.
Brooks

 

Jonah
Goldberg

 

Michael R.
Strain

 

James
Pethokoukis

 

Sita Nataraj
Slavov

 

W. Bradford
Wilcox

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