GAP BETWEEN RICH AND POOR IN AMERICA

The following blog post is a response from my friend Don to a mutual acquaintance, concerning the gap between the rich and poor in America, originally dated Tuesday, March 20, 2012. -- Craig



GAP BETWEEN RICH AND POOR IN AMERICA

by Don Kirkland


I agree that the increasing gap between the rich and the poor is an undesirable characteristic of the current economy. The question is how to best mitigate the problem. Your answer is increased government involvement. My observation is that government creates the gaps by rewarding some and punishing others based on political power rather than normal market forces. Remember: Free medical is welfare for health professionals, free legal is welfare for lawyers, free financial backing for investment houses is welfare for Wall Street bankers, food stamps and Agricultural subsidies are welfare for Agribusinesses, excessive defense spending is welfare for the military industrial complex and rent subsidies are welfare for landlords. Anything that is free is wasted. Government-provided services may be free to the recipient but they are not free to the overall economy, in fact they are 2 to 3 times more expensive than the same services provided by the free market.

My guess is that 2 to 5 percent of the people are truly needy and deserve help. The proper way to provide that help is charity. When you create a government-funded entitlement you simultaneously create a distortion to the market that drives prices up, and rewards the politically connected at the expense of everyone else.

The well regarded findings of Reagan's Grace Commission was that LBJ's Great Society / War on Poverty programs spent over 1 million dollars for every person below the poverty line between 1964 and 1984. However, in 1984 the poverty rate was exactly the same as it was in 1964. This result is typical of wasteful government programs that suck wealth out of the system for the benefit of the politically connected and punish the rest of us including the poor. They actually institutionalize poverty and turn it into a viable life style. In America now you can actually be poor for a living.

The only thing that Governments do better than the free market is make war. That is the reason that powerful governments go to war so often.

Average American liberals have good hearts and want to do the right things for the right reasons. They just have no idea of how an economy actually works. Their policies are the classic example of why: "The road to hell is paved with good intentions." The one historical fact that is undisputable in my lifetime is that the more government tries to solve our problems the more difficult they become.

I am NOT advocating for the Crony Capitalism of most of the Republicans, which is almost as destructive as the Socialism of the Democrats. The current political debate in this country is a false dichotomy between two wrong answers. The only free market advocate in the race is Ron Paul and he has inadequate financial backing because the political elite in both parties (that are robbing us blind) would lose money and influence if he was elected. The average Republican Washington insider is much more afraid of Ron Paul than Obama. They know they can deal with Obama and both walk away with a political win at the expense of the average tax/debt payer.


Cheers,
Don