Here's the truth if you can handle it.
During the 1980s, there was an unceasing flood of articles and books condemning Ronald Reagan's economic policies for making the rich richer. We were constantly reminded that the top 5 percent of households increased their share of total income from 16.5 percent in 1980 to 18.3 percent in 1988. This was unconscionable, we were told over and over again by liberal pundits.
These pundits, such as Robert Reich and Lester Thurow, have been strangely quiet during the 1990s, as the rich have become richer even faster on Bill Clinton's watch. According to the latest Census Bureau data, the top 5 percent of households have raised their income share from 18.6 percent in 1992 to 21.7 percent in 1997. Thus, in five years of the Clinton administration, the richest of the rich have increased their share of income by 3.1 percent, compared with an increase of just 1.8 percent during Reagan's eight years. Given the sharp rise in the stock market last year, the 1998 data will no doubt show a substantial further increase in income for the wealthy.
The left has give Clinton a pass on this issue because he is one of them. After all, he raised taxes on the rich, didn't he? The fact that the money was largely used to reduce the deficit, which greatly enriched the wealthy by increasing the value of their government bonds, did not arouse much comment among the liberals. Nor did they have much to say when he supported a cut in the capital gains tax to 20 percent. When George Bush tried to cut the capital gains tax in 1989, liberals went to the mat to defeat it. In 1997, they voted for it.
Despite their monumental hypocrisy toward Clinton's coddling of the wealthy, the left still believes in income redistribution. Only instead of attacking the policies of the administration that have led the rich to become richer than at any time in our history, the left instead grouses about conspicuous consumption and proposes nutty plans to give pots of money to teenagers.
The conspicuous-consumption school is represented by economist Robert Frank, whose new book, "Luxury Fever" (Free Press), is an extended tirade against big houses, expensive cars and imported wines. He doesn't think the rich need 30,000-square foot mansions or $10,000 wristwatches and could get by just fine without them.
Frank is right, but unless people have the opportunity to spend their wealth on such things, they would lose the incentive to create wealth in the first place. And he forgets that nouveau riche Internet millionaires are also creating a lot of wealth and employment for other people. Do we really want people like Steve Case and Bill Gates to retire and clip coupons rather than continue working so they can pay for their extravagant lifestyles? How would society benefit from this?
Frank is a crank but a good enough economist to know that the government cannot outlaw luxury. His solution is simply to institute a consumption tax, as many conservatives have long supported. Other redistributionists, however, are not as sensible. In "The Stakeholder Society" (Yale University Press), law professors Bruce Ackerman and Anne Alstott go off the deep end. They would spend $250 billion per year to give every high school graduate $80,000 to spend as he or she sees fit, financed by a tax on wealth.
Of course, in a nanosecond, all the money would be spent on stereos and cars or transferred in the form of higher tuition to the universities where Ackerman and Alstott teach. Yet despite their plan's absurdity, it is getting a respectful hearing in liberal publications. If this is the best the left has to offer these days, it is truly dead intellectually.
COPYRIGHT 1999 CREATORS SYNDICATE, INC.
Bruce Bartlett was deputy assistant secretary for economic policy at the U.S. Treasury Department, and a senior policy analyst in the Office of Policy Development at the White House. |
