Income Inequality

David:
The path to the White House this year will undoubtedly pass through a discussion of income inequality. Let's break this into a discussion of what it is, why it is, and what to do about it.

Doug:
That sounds like a good idea. Let's get this party started.

David:
During the Obama years, the income and buying power of working-class Americans has stagnated, largely because of the actions of the Obama administration. Money flowing to the wealthy has increased substantially, for the same reasons. That's why I find it puzzling that the president and Democrats are making this an issue during this election cycle. It's like the old saying, give a man enough rope, and he'll hang himself.

Doug:
It is true that during the last few years the income differences between the top wage earners and the rest of us has continued to grow wider. But this has been a trend that has been going on for many decades. What actions of the administration do you think have contributed to the inequality? In your analogy, what is the rope, and who is the man?

David:

Democrats are the man, and the economy and plight of the middle-class is the rope. It's actually interesting to watch Sanders on the stump. President Obama says the unemployment rate is less than 5%, and Bernie says no, it's actually 10%. It refreshing to see honesty in politics.

Doug:

I think you (and Bernie) have a point. But, you have to compare apples to apples. What the government tracks hasn't changed over the years. Sander's point is that there are many people not being counted as "unemployed", because they gave up. But there are always people in the camp that just can't find a job. That was true 5 years ago, 10 years ago, and 50 years ago. So, to be fair, you'd need to compare Bernie's measurement over time. If you did track that, I think you'd be seeing that number go down too. If it is 10% now, it was probably 25% when Obama took office. 

David:

Well, at least you and me, along with Bernie and the Republicans, agree that the government numbers are not accurate, and are misleading.

Doug:

Any manner of boiling a real situation down to a single number is going to be an approximation and leave out some important aspects. But it is even more misleading to compare apples to chickens.

David:

Ah. So you're saying Bernie Sanders is comparing apples to chickens in his speeches. Perhaps Hillary isn't the only one with trust and honesty issues?

The Fed has kept rates at near 0% for 7 years now. For the little guy, who tries to save money by putting it in the bank, his rate of return has been zero. If you have enough money to put into the stock market, you've done well in the past few years. The stimulus money and bailouts were supposed to allow banks to loan more money to the middle-class, but because the money had no strings attached, the big banks and corporations used the money to buy all of their smaller competitors. Things are now worse than they were before in regards to Wall Street firms that are too big to fail.  They are bigger, and there are now fewer of them.

Doug:

You sound like you are stumping for Bernie. I think you have some latent Progressive tendencies.

David:

If Bernie is campaigning on the ideas that big-government fixes completely miss the mark, and make things worse, then yes, we're on the same team. Unfortunately, his message is that big-government is still too small, and their foibles need to be enlarged. Go figure.

Obamacare, and all of the new taxes, regulations, and penalties that go with it, have caused most of the new jobs that have come about during the "Obama recovery" to be part-time, or entry-level jobs. 

Doug:

Oops, that doesn't sound Progressive. That sounds crazy. There is no evidence to support that. In fact, just the opposite. Obamacare has helped keep healthcare costs in check.

David:

Obamacare actually did nothing for healthcare costs. It was a bill that addressed insurance availability and coverage. The two are not exclusive, but they are not necessarily related. And, since the passage of the ACA, insurance costs are up. Deductibles are up. Networks are narrower, and Americans did not get to keep their plans or their family doctors. None of it was true.

Companies will save money where they can, and if it's cheaper to hire part-time employees rather than full-time, they'll do it. If the government punishes a company for hiring full-time employees, they won't.  Smaller companies are also now drawing the line at employing 50 employees. To cross that line means they must provide insurance that costs much more than it did before Obamacare. And insurance premiums and deductibles are eating away at the money that the middle-class does have.

Doug:

I think that was "Papa John's" talking point last election. But he seems richer and happier than ever.

David:

But his pizza delivery costs may get more expensive: Obama has gone to great lengths to raise the cost of gasoline. Remember his first Energy Secretary claiming that the goal was to get gas prices above $4.00 per gallon, to cut fuel use? Despite his efforts, gas prices have come down, providing much needed relief for the middle-class. But what's he proposing now? A $10 per gallon tax to push prices back up again. This action also hurts the middle-class more than the wealthy.

Doug:

I think you get mixed up when we are talking about reality, not some fictional world. The reality is that gas prices are low. If I can quote Rubio, "Obama knows what he is doing."

David:

Gas prices are low, despite the president's efforts. Remember, he stopped oil drilling on federal land. If not for fracking and new ways to get oil on private land, we wouldn't be where we are right now. I find it amusing that he now tries to take credit for low prices ( and the benefits for the middle-class) , but immediately turns around to propose his new tax, with the explanation that he intends to raise prices to discourage gasoline use. Personally, I prefer to have money in my pocket instead of putting it in my gas tank.

Doug:

Yes, yes, yes. The economy is great, despite the president's efforts. The stock market is great, despite the president's efforts. Gas prices are low, despite the president's efforts. Healthcare is saving costs, despite the president's efforts. Oil production in the US is at an all time high, despite the president's efforts. Perhaps income inequality, too, is the largest it has ever been, despite the president's efforts.

David:

Almost. The stock market has seen great jumps because of low interest rates, which the president supported, but that hasn't helped the little guy at all. Income inequality is expanding because of the president's policies.

Now, what to do about income inequality? A good start would be to put a moratorium on new business regulations. Right now, there are more small businesses failing than there are new ones starting up. As the largest driver of new jobs, small businesses need relief.

Doug:

I don't think that is going to help the majority of middle class US citizens. We need to seriously alter that way that money flows in this country. We need to pay people enough to live on, and we need to stop giving bailouts and welfare to huge businesses. 

David:

I agree on your last point, in that we need to cut out tax breaks and government money for huge corporations. You might want to mention that to Hillary. But, regulatory burdens on small business, and the uncertainty of the regulatory environment moving forward is a drain on new start-ups. Small businesses still account for 64% of all new jobs, according to government statistics.

Doug:

Despite the president's efforts!

David:

Absolutely! See, I knew you'd start to catch on sooner or later.

Obamacare needs a major overhaul. I mean, a complete and utter revision. In other words, it's a failure, and needs to be repealed and replaced with something that works. Allowing insurance to be bought and sold across state lines using the internet would allow more companies to compete for buyers, and decrease costs. Freeing up insurers to offer tailor-made packages would also decrease costs for most buyers. Some of the rules set up by Obamacare may be retained, but overall, government involvement has made things more complicated and more expensive. 

Doug:

You keep talking like that, and we'll have another Democrat in the White House for 8 years.

David:

More likely, a federal courthouse. But you can always dream...

Doug:

You always are :)