Income Inequality: Obama Owes You $19,000
Photo Credit: REUTERS/Larry Downing
Now Democratic leaders are hard at work flogging the income inequality issue while refusing to come up with $6.4 billion to extend unemployment benefits. Clearly, they do not want the benefits extended. They would rather have a provocative issue to use against Republicans in the fall.
It’s possible, however, that income inequality could turn out to be a big mistake for them. Maybe Americans aren’t dumb enough to fall for wealth envy ruse again. Maybe they’re ready to grow up and realize that Bill Gates and Warren Buffett will always make more than most people. The real problem is the difference between what they should be earning, based on wage growth during previous recoveries, and they’re earning under Obama. Who’s responsible for that? Not Bill Gates or Warren Buffett.
In the past, as in the 2008 campaign, Obama liked to compare himself to Ronald Reagan. That was always laughable, but since the President brought it up, how does he compare with Reagan in terms of wage growth?
The Social Security Administration’s national average wage index shows that earnings of US workers rose by a cumulative 7.2% during Obama’s first term (from $41,334 to $44,321 between 2008 and the end of 2012). During Reagan’s first term, wages rose 29% (from $12,513 to $16,135), and they went on to rise to $19,334 by the end of his second term (a total of 54.5%). That difference is the source of much of today’s discontent over income inequality.
The real “inequality,” in other words, is between what workers are now getting (an average of $44,321) and what they would have been getting ($53,321) if the economy had been growing as it did under Reagan.
The contrast is magnified over time. By the end of Obama’s second term, average wages are likely to be close to $47,500. Applying the growth trajectory of Reagan’s second term, average wages would be $66,634. Personally, I would rather have the $66,634, and most Americans would as well.
By 2016 Obama’s experiment in socialism will have cost US workers over $19,000 per year in lost wages. And Obama’s party is just getting started. If succeeded by another left-wing president, presumably Hillary Clinton, the lost wages will continue to compound.
It doesn’t really matter how much less than Warren Buffett you are making if you don’t have enough to get your kids through school and save for retirement. It does matter if you’re making less than you should be as a result of government policies that restrict growth.
Not many of us will make it into the 1% so it doesn’t matter how much they make. What matters is how much we make. And Obama has seen to it that average Americans will be making $19,000 less than they should be. Income inequality is only a hot-button issue because, under Obama, incomes have become more unequal.
Stagnant wage growth is bad enough, but, remarkably, Obama is the first president in American history to have frozen job growth during his first term in office. According to the World Bank, the US labor force has grown by a statistically insignificant .005% between January 2009 and the end of 2012. Even the less prosperous nation of Chile managed job growth of 11.5% during the same period. Why was job growth in the US so far behind that of Chile? It was because Chile embraced the free market under a conservative president while America chose socialism.
Conservatives want something better for all Americans. They want the poor to dream big, along with everyone else. They celebrate stories like that of Larry Ellison, founder of Oracle Corporation, whose $41 billion puts him third on the list of America’s wealthiest citizens. Ellison began life as the adopted son of a family of modest means. He worked hard and earned every penny he made, but America gave him the chance.
That kind of opportunity, the chance to found a small company and see it grow into a major enterprise, has been wrecked by the Obama administration and Democrats in Congress. It is Republicans who want to make it possible once again.
Conservatives have a time-tested plan for attacking income inequality. They want Americans to have the chance to work and prosper, to start small businesses, and to see their wages grow by 54% and more. That message will resonate in 2014. But only if conservatives start to talk about the real “income inequality” in America—the inequality between what Americans are making today and what they would be making without Democrats in power.
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Jeffrey Folks is the author of many books on American politics and culture, including Heartland of the Imagination (2011). He can be contacted at [email protected].