The Real One Percent Problem

Barack Obama speech hand 2 SC The Real One Percent Problem

Occupy Wall Street won. In fact, the movement won even before taking to the parks in 2011. By the time the demonstrations started, America had already elected a president whose top priority was to reduce high-end income inequality — i.e., the inequality between the wealthy and everyone else. If Obamacare — at its heart a “spread the wealth” redistribution scheme — and a call for ever-more tax hikes on the rich and on businesses aren’t proof enough, there’s also Barack Obama’s recent speech at Knox College. The enormous disparity between the 1 percent and the 99 percent, the president argued last month, “is not just morally wrong, it’s bad economics.”

But that financial divide is hardly America’s biggest challenge, economic or moral. Obama’s Knox College claim that the income of the top 1 percent surged over the past 30 years, while the income of the typical family “barely budged,” has been thoroughly debunked. While the rich did get a lot richer, real median household income grew by roughly 20 percent before taxes and government transfers, and by about 40 percent after. And, says a Washington Post fact check, “it’s inaccurate of Obama to suggest otherwise.”

Then there’s a blockbuster new study from economists Steven Kaplan of the University of Chicago and Joshua Rauh of Stanford University on why high-end inequality has increased so much the past three decades. Is it compliant corporate boards’ giving huge payouts to CEOs, or perhaps crony capitalism between Washington and Wall Street? Was it the Reagan and Bush tax cuts? Not so much, according to Kaplan and Rauh: “We believe that the US evidence on income and wealth shares for the top 1 percent is most consistent with a ‘superstar’-style explanation rooted in the importance of scale and skill-biased technological change.” Market forces — technology and globalization — allow a broad swath of folks — CEOs, bankers, lawyers, athletes — whose skills are in high demand “to expand the scale of their performance.” The NBA has a global TV audience today, so its superstars can earn more in salaries and endorsements. Growing international markets have greatly increased the size and value of U.S. companies and, not surprisingly, executive pay has risen, too. Technology allows top executives and financiers to manage larger organizations and asset pools.

Read More at National Review . By James Pethokoukis.

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