Stifling growth with smothering regs

Income distribution would be better with less government

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Rising income inequality poses “a fundamental threat to the American dream, our way of life and what we stand for around the globe,” President Barack Obama said Dec. 4. He pledged to make reducing it the focus of the rest of his presidency.

During his first term, the incomes of the top 1 percent grew by 31.4 percent, the incomes of everyone else by just 0.4 percent. On Mr. Obama’s watch, 95 percent of income gains have gone to the top 1 percent. When George W. Bush was president, only 61.8 percent did.

It was just “the latest in the one-off speeches” Mr. Obama gives periodically, said Dean Baker, co-founder of the leftish Center for Economic and Policy Research.

But if Mr. Obama is serious about reducing income inequality, he should focus on Washington D.C. Median household income there has jumped nearly 20 percent during his presidency, to more than $65,000 — 23 percent more than the national average.

In 2011, the three wealthiest counties — six of the top 10 — were D.C. suburbs. In the top two, median household income was more than twice the national average.

The average wage of federal civilian workers in 2012 was $81,704, according to the Bureau of Economic Analysis. For workers in the private sector, it was $54,995. With benefits, compensation for federal workers averaged $114,976 — 74 percent more than for private sector workers.

Beyond Washington D.C., income inequality is greatest in big cities.

In Chicago, where per-capita income in 2011 was $27,940, more than 2,400 city employees had six-figure incomes. This doesn’t include 1,500 employees of Chicago Public Schools who took home $100,000 or more. Chicago teachers are the highest paid in America, the school board says.

Per-capita income in Detroit was $15,261. City employees averaged $47,097. When benefits are included, teachers in Detroit Public Schools earned about $93,000, the Mackinac Center estimated.

Almost everything broken in America is run by the government, or heavily regulated by it. Healthcare.gov is an example. It cost hundreds of millions to build and barely works.

Only some 20 percent of elementary students in Chicago are “on track” to graduate from high school, scores on the Illinois Standard Achievement test indicated.

In Detroit in 2011, just 7 percent of eigth graders were “proficient” in reading, 4 percent in math. Detroit is formally bankrupt. Chicago — $33 billion in debt — likely will be soon.

Federal domestic spending has more than doubled since FY 2000. Since 1950, spending by state and local governments has grown 2.6 times faster than the private economy. The combined spending of federal, state and local governments is the highest since World War II.

When government grows, economic growth tends to slow. Government consumes and redistributes wealth, but doesn’t create it. The more government takes, the less there is for everyone else.

Innovation is the key to rising living standards. For most, the path to prosperity is a good job. Excessive regulation stifles innovation and clobbers employment.

The number of pages of regulations in the Federal Register increased 694 percent between 1949 and 2005. GDP would be more than three times higher if regulations had remained at the 1949 level, estimated economists John Dawson and John Seater. More than 40,000 pages have been added since 2005.

If the labor force participation rate were what it had been when Mr. Obama became president, 7.19 million more Americans would have jobs.

When markets are free, businessmen compete by making better products. But when government chooses winners and losers, businessmen seek profit from subsidies, not innovation. When crony capitalism predominates, the economy slows and income inequality grows, Sutirtha Bagchi of the University of Michigan and Jan Svejnar of Columbia University found in a study this year.

Government chooses poorly. Many of the companies in which President Obama “invested” tax dollars are in financial trouble, or bankrupt.

Before “public servant” became an oxymoron, Americans were the wealthiest people on Earth, the gap between the 1 percent and the rest of us narrower.

Rising income inequality is a symptom. The “fundamental threat to the American dream, our way of life and what we stand for around the globe” is government grown obese.


Jack Kelly is a columnist for the Post-Gazette (jkelly@post-gazette.com, 412-263-1476).

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