The Right Ratio

In the debate over how wealthy some Americans should be, we should first consider our free-market traditions.

In the debate over the legitimacy of the “Occupy” movement and the frustration some Americans feel over the alleged 99 percent vs. 1 percent (poor vs. rich) ratio in the United States, it’s fair to pose the question: “What is the right ratio of rich to poor in the U.S. today?”

The answer may help us better define the American Dream and strive for an acceptable ratio of income inequality. It will also help us appreciate America’s time-tested market economy.

Since last summer, the “Occupy” movement has stirred debate over the arguments of Occupiers, Tea Party advocates, and others in the political sphere, over the proper role of government and the nature of modern American society.

Here at Harvard University’s Institute of Politics (IOP), where I’m a teaching fellow for the spring 2012 semester, debate and discussions abound on this topic. Former Ohio Governor Ted Strickland is leading a study group on the topic, “Class Warfare.” Of the dozens of seminars, speeches and intellectual events scheduled at Harvard each day, income inequality and poverty are frequent topics.

Former Wal-Mart Foundation director and Lesley College President Margaret McKenna is leading an interesting study group on the politics of education, citing that while the U.S ranks low on education scores internationally, if we subtract the 20 percent of low-income kids from the overall achievement scores, the U.S. ranks very high in educational achievement. The only problem with that is that we can’t ignore those children when calculating the quality of American education.

At the heart of most of society’s problems today, the lingering income inequality issue, followed by tax fairness, is front-and-center. On the other hand, America has always had income inequality.

The Founding Fathers were men of wealth, education and position. The Declaration of Independence had the 56 signers pledging to each other “our Lives, our Fortunes and our Sacred Honor.” Of the 44 U.S. Presidents, some 35 were millionaires. Many U.S. congressional representatives and senators are wealthy, and they represent both political parties. Senator John Kerry’s wealth approaches $1 billion.

The U.S. boasts of billionaires Bill Gates, Warren Buffett, the late Steve Jobs, Steve Forbes and Facebook’s Mark Zuckerberg. President Obama excoriates for political purposes the “millionaires and billionaires” he targets for more tax revenue, ignoring how the wealthy help society enormously by donating millions to charity and the arts. Few of those who’ve achieved financial success did so without hard work, ingenuity, drive and determination, all hallmarks of our market-driven, achievement-oriented society. Achievement of anything in America today takes work and energy, and that’s the way it should be. A nanny state is a slothful state.

So for those who lament the state of income inequality in American life, the questions are: “What’s the right ratio you seek?” Should the United States seek a “wealth level” of 20 percent? Fifty percent? Less than one percent?

The U.S. has fought a war on poverty for over 50 years. The National Poverty Center at the University of Michigan in 2010 cited a poverty rate of 15.1 percent, based on the 2010 census, and calculated by counting those below income levels of $10,000 for a single person to just over $26,000 for a family of five. The poverty level was about 11 percent in 1993, a decades-old low from twice that number in the 1950s. Today, the poverty level is probably higher than it was in 2010.

No matter how hard we try to eradicate poverty, we likely never will. While trying to do so is laudable, we shouldn’t stifle the creativity that is a hallmark of American life. Creativity often leads to great wealth for those with ingenuity, drive, energy and free will. Ambition levels, like talent levels, will always be unequal for individuals in a free society, and those disparities will result in disparate income outcomes.

As poverty politics touch the Republican presidential contest this year, some candidates are making an issue of Mitt Romney’s wealth, an unwise, self-serving approach that has Republicans talking class warfare like President Obama.

While helping America’s poor is legitimate, worthwhile and an American tradition, an income equality goal doesn’t fit a market-oriented society. Capitalism and free enterprise, having produced the strongest economy and most advanced society in world history, should largely be left to reach natural levels, allowing those who seek, and achieve, financial reward to enjoy their good fortune, distribute it as they wish and pay a reasonable income-tax rate.

Hopefully, they’ll then support an America that gives opportunity to each of us to achieve our own level of success based on talent, energy and brain-power.

Lake City Comicon @ Kootenai County Fairgrounds

Sat., Oct. 16, 9:30 a.m.
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About The Author

George Nethercutt

From 1995-2005, George Nethercutt was the Republican Congressman from Spokane. He contributes to the commentary section of the Inlander.