The Growing Gap Between the Rich and the Poor

Welcome to 2022. The greatest existential threat facing the United States today is not global warming, not Russia, not China and most assuredly not COVID-19. The growing disparity between the rich and the poor – or even the rich and the Middle Class – is threatening to end this great experiment in democracy and the free enterprise system. It is at the heart of the political schism and the harshness of the rhetoric that now divides the nation. It is the petri dish in which both violence and the acceptance of socialism thrive.

It is a problem that in its modern form began after the end of World War II and has been allowed to fester for decades. And it is the proof positive that just throwing money at a problem never works.

Because this disparity has become such a political tool for both the Democrats and the Republicans, I feel compelled to remind the readers that I am a conservative – not a Republican. I register as a Republican because it allows me to vote in the primaries and to vote against the likes of Richard Nixon, Nelson Rockefeller, John McCain and Ted Cruz. I do not register as a Democrat because there are few, if any, conservatives in the leadership and elected officials of the Democrat Party – an odd situation given that there are significant numbers of conservatives in the two historical elements of the Democrat party: the members of the traditional private sector unions and the minority communities. That fact speaks poorly of the Democrat leadership in that they now take both elements for granted and even more poorly for the Republican leadership because they either will not or cannot embrace these two elements.

Having said that, let’s return to the point of the growing gap between the rich and the poor. But before we do we need to understand two points of reference. First, the politicians like to talk about the “one percent” – the top one percent of wealth accumulators. It’s a number that is convenient for political speech but is a wild distortion of the facts. The income for the “one-percent” has increased only marginally in constant 2015 dollars from about $350,000 annually in 1950 to about $1.36 million in 2015. On the other hand, the top one percent of the one-percent – the 0.01 percent – increased $3.3 Million to $31.6 Million – again in constant 2015 dollars. They reached a peak of $40.1 Million in 2007. Excluding the wealth of the 0.01 percent, the “one percent” grew hardly at all during that period. The point is that wealthiest – 0.01 percent – increased their wealth at a dramatically faster pace than did those in the remaining “one percenters.”

That should come as no surprise (unless you are Rep. Alexandria Ocasio Cortez (Socialist-NY) or were forced to endure a teachers union led education in the Portland public schools) because it is the availability of discretionary income – income in excess of taxes and basic living expenses – that allows for investment and the resulting passive income. Thus the greater the discretionary income, the greater the opportunity for investment and resulting passive income.

The point here is that, despite the Democrat leadership and the mainstream media, ninety-nine percent of the “one percenters: are more like the shop owners of the 40’s and 50’s than the idle rich of the F. Scott Fitzgerald era. The concept of enormous wealth has been painted with a much too broad of a brush.

On the other end of the spectrum are the poor. And while they may not be “poor” based on international standards they are indeed poor in the context of America. But determining the breadth of the problem is difficult since even the government uses three different standards: the official poverty measure, the supplemental poverty measure and the alternative poverty measure. Regardless of which standard you use the poverty level in America remains stubbornly unchanged. According to the Heritage Foundation, since the initiation of President Lyndon Johnson’s War on Poverty, America spent over $22 Trillion dollars through 2014 and that figure has continued to rise at approximately the same level through 2020. A better figure, according to a treatise entitled the Federal Safety Net spending on poverty programs has increased from about $900 per person in 1965 to approximately $22,700 per person in 2020. Much of that spending has been utilized by federal, state and local government offices to fund the massive bureaucracy responsible for dealing with poverty. Poverty has become big business for government bureaucrats. The result has been that while the percentage of people in real poverty has remained about constant, the number of people receiving welfare payments in one form or another has increased dramatically.

The remarkable thing about all of this spending, all of these programs, and all of the bureaucrats running these programs is nothing they do is directed toward moving those in poverty into productive lives. For decades, Democrats have been the champions of expanding benefits and eligibility for welfare. The level of benefits ensure that the differential between benefits and entry level wages is so slight that it encourages people to not work and for generations to become welfare dependent – dependent on the government, dependent on those who promise more welfare but continue to deliver just enough to keep those addicted on the plantation, dependent on the Democrat Party.

And finally, while there are many causes of poverty, for these purposes, those in poverty can be sorted into roughly two groups: those capable of working and those who are not. The latter category includes those who are unable to work either permanently or temporarily (illness, injury, family care givers, etc.) In order to close the gap between the rich and the poor it is necessary to move those capable of working into actually working – to put them on the path of financial stability and continuous, albeit uninterruptible, employment.

That is an abbreviated look at the current gap between the rich and the poor. To narrow that gap two things need to occur. First, the welfare system has to be geared to moving people into productive employment. And second, impediments must be implemented to discourage the accumulation of wealth through monopolization of markets. This column will spend more time on the latter since the answer to the former is known but remains unavailable solely because of politics – welfare induces dependency on a class of voters already subjugated by the liberal/progressives (Democrats) and written of by the noblesse oblige attitudes of the Republicans who seemingly do not have time to press for an alternative.

The solution to moving people out of poverty and into productive employment has been tried in various states in what are best described a pilot programs. They are lumped under what is referred to as “workfare” (as opposed to welfare). Most of these programs have demonstrable successes but they all suffer the frailty of being “temporary” based on the whim and caprice of changes in political power. It is difficult to get acceptance by private business if the program is likely to disappear when the next administration (usually liberal/progressive) takes office. Tax incentives should be applied to private businesses who participate in workfare programs. The incentives should be long enough to encourage businesses to hire but short enough to ensure that the taxpayers don’t subsidize the ongoing business enterprise. The consequences of refusing work should be the end of access to welfare benefits. The local, state and federal governments should be the “employers of last resort” much like the federal government filled that role during the Great Depression with such programs as the Work Progress Administration (WPA) and the Civilian Conservation Corps. The two concepts can actually be merged such that the government creates and funds projects dependent on the contractors participating in a “workfare” program. My suggestions of projects reflect that I was raised in the West and see regularly the results of past projects and the need for new projects. So here is a partial list: clean and maintain the areas adjacent to the roads and highways, clean and maintain the coastal beaches and the public access to inland waters, rebuild the infrastructure in the national parks system to match the terrain (log buildings not concrete bunkers), clean the city streets, remove debris from the nation’s waterways, thin and replant the nation’s forests (reduce fire danger and ensure renew-ability of the state and national forests), etc. The point here is that we already now how to move people from poverty to productive employment. The question is do we have the political will to do so. If we don’t we have condemned a segment of our population to servitude until . . . . . (see the end).

Back to the wealthy. The high tech industry has created enormous wealth in short periods of time for its founders and acolytes. What began has innovations in computer technology and software design and capability migrated to predatory acquistions of the next generation of innovations. Microsoft basically purchased any innovations that threatened its position as the leader in software driven operating systems for computers. Other tech companies followed suit. Historical names ceased to exist as they were absorbed into other competitors. Tech companies like Facebook grew as much from acquisitions as it did from innovation. Lax enforcement of the nation’s antitrust laws (caused in large part by the successful lobbying of succeeding administrations and largely clueless Congress) allowed this amalgamation to occur. The matters were made worse when it became clear that many of these businesses sought access to personal information as the trade of for free use of the platforms. Today, over ninety percent of all internet searches pass through Google. So dominant has Google become that even other search engines default request through Google. Much of the innovation is never given the opportunity to grow because it is absorbed by existing providers and subsumed to the primary goals of the acquiring company rather than the benefit of the consumers. Cut it anyway you want we now have an enormous concentration of wealth and power in a handful of multi-billionaires who, in addition to their enormous wealth have access to the most personal information of the unwitting public.

The solution is relatively easy to describe but I venture to say harder to implement and enforce. But let’s give it a try:

1. Anti-trust laws should be changed to require a demonstrable public benefit for any acquisition or merger that results in a market share above a certain point. I would suggest twenty percent. The minor efficiencies from merging administrative staffs of competing entities is insufficient given the damage it does to the concept of competition and free enterprise.

2. Corporation should be banned from using profits to reacquire corporate stock. Profits should be returned to shareholders in the form of dividends or used by the corporation for expansion and innovation subject to the acquisition and merger limitation stated above.

3. Existing corporations that use their technology primarily to acquire and resell personal information should be required to divest in a form that isolates the acquired personal information from the technology and requires that such personal information be shared with others on the same basis as the acquiring technology company. It would be a form of “equal access” imposed on the telecommunications industry after the break up of the Bell System. And a means of confirming the accuracy of the information by the person(s) effected should be available including a means by which such information is denied distribution.

The driving principle here should be to foster competition and retard the concentration of market share. An opportunity exists to trade off changes in the welfare system for changes in dealing with wealth acquisition by voracious companies. Legislation can be crafted to do both.

In conclusion, I am reminded of an admonition made to me over forty years ago by a Democrat friend and politician in Montana. In explaining why he was a Democrat he told me that in America there are far more poor than rich people and that unless the rich find a means for caring for the poor, they (the poor) will simply come and take it all away from the rich. (In large part that is what the violence of Antifa and Black Lives Matter previews for all of us.) We have conversed many times over the years about that subject and while my friend no longer believes that the Democrat Party looks after the poor, he still believes, as do I, that unless we find a way to move people out of poverty and into productivity, they will rise up and take it all away.

Taxing the ultra rich, the 0.01 percenters makes good copy but hardly addresses the problem. Taking money from the few to give to the many requires the excesses to continue until the ultra rich are no longer rich while we find the very poor still very poor and waiting for the next welfare benefit. The welfare state is bound to failure based on the old proverb:

Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.