Conservatives must talk about income inequality

The rich are getting richer. And the gap between the rich and poor are widening. This is a simple fact--the rich are going up, but the middle class seems to be stagnating. Currently, liberals (like Sanders and Clinton) are talking about this. The conservatives, however, try to dodge the issue. Here is the thing, though: We shouldn't doge the issue because there are conservative solutions. 

Liberals favor a top down solution. Soak the rich--you will shrink the wealth gap and fix the issue. You bring the rich down. But this is illogical: why punish someone because they simply have more money? Typically, wealthy people are wealthy because they are productive, not simply because they inherited it as many assume. To tax the rich to close the gap would simply punish, and not promote, productivity. This, in turn, would reduce economic growth, reduce investment, and reduce the wellbeing of the average citizen. What conservatives must do is talk about a bottom up approach. 

A bottom up approach preaches the opposite agenda: instead of bring the rich down, we bring the poor up. We need to increase upward mobility so that the poor can become rich; we need to shrink the gap without punishing productivity; we need to fix this issue without hurting the economy. There are a few things conservatives can, and should, propose to fix the issue. 

1. Earned income tax credits

Conservatives already do support expanding the earned income tax credit, or EITC. And it is one of the few issues where Paul Ryan and President Obama can actually agree. Both of them have forwarded plans to expand EITC in order to help the poor. EITC is the most successful government program ever created and has been successful in reducing poverty and increasing income mobility. When the liberal Center for Budget and Policy Priorities (here), the conservative Heritage Foundation (here), the liberal Brookings Institution (link above), and the conservative American Enterprise Institute (here) all urge for expansion of the EITC, we can conclude that it probably works. 

Academic research confirms this: EITC reduces poverty and inequality. A $1000 in the EITC reduces poverty 9.4%, increases employment 7.3%, and reduce inequality according to the National Bureau of Economic Research. The EITC increases employment by increasing incentives to work; the program supplements income. And, presumably, someone who is not working has no income to be supplemented. The incentives to work means we increase productivity, which is key to increasing economic growth; and if the EITC increases economic growth and supplements the income of the poor, inequality will surely decrease. 

Other research has found that the majority of those receiving Earned Income Tax Credit change income brackets, suggesting that the policy may increase upward mobility. An older study found that those who lose their EITC eligibility usually lose it because of changes in income. This means that it leads to higher long-term wages and, in effect, increases upward mobility for those affected by the policy. 

Liberals counter to this is that we must increase the minimum wage in conjunction with expanding the Earned Income Tax Credit. However, the issue with this is that it reduces employment. It would likely have the opposite affect (meaning increased inequality) at worst, and no effect at best. This liberal bottom up solution would not work. 

A conservative supporting EITC would be supporting a sensible policy that reduces poverty, increases employment, and decreases inequality. 

2. Cut the taxes for the middle class--including the payroll tax

In some ways, it may be justified to eliminate the payroll tax. No one has proposed this, but it should be an easy vote getter: the paycheck you receive will no longer be reduced because the government took it from you; and, by the way, you will pay lower income taxes. The argument against this--especially reducing the payroll tax--is that we need it to fund programs like social security. But this argument is weak; we fund Medicaid, Medicare, the military, and education without a special tax for each one--we just use revenues in general! There is no reason we cannot do this for social security. Abolishing the payroll tax would increase incentives to work, primarily help the poor who need as much money as they can get, and give the economy a jolt of caffeine as it would inevitably increase consumption. It should also be noted that this, in conjunction with income supplements like the EITC, would make the poor a lot wealthier and increase their income security by helping them pay off debts from schooling and other bills. 

There is really no reason anyone--on the right or left--should oppose the policy outlined above. The only plausible reason is what we always get when a Republican argues for lower taxes: revenue. We would have to pay for it somehow! 

First, reduce the corporate tax rate. Yep, that would increase revenue. This isn't voodo economics like income taxes; chances are, reducing income taxes would also reduce revenue. But this is not true for corporate taxes. In Canada, lower corporate taxes seem to increase revenue; higher corporate taxes reduce revenue in the US, according to the Tax Foundation. It should also be noted that if we eliminated the corporate tax, revenue would probably increase. A study by the AEI has found the revenue maximizing--or the rate at which corporate taxes give us the most revenue--sits somewhere around 26%. The current corporate tax rate is about 39%. This means that revenue would increase dramatically if we reduce the corporate tax rate. Not only would this make up for some of the lost revenue above, but it would cause economic growth (see here and here). 

Second, close the loopholes for the rich. Pretty sure everyone agrees on that...

Third, stop giving out corporate welfare. Again, everyone agrees on that...

Fourth, stop subsidizing the oil and gas industry. Oh, and stop subsidizing renewable energy, too. 

There are a plethora of ways a candidate could increase revenues (by closing loopholes), or decrease costs (by decreasing subsidization) in order to pay for this pro-growth, pro-mobility, anti-inequality policy which would benefit the poor without harming the rich.

3. Fix the education system

This is a long-term solution. Fix the education system, dammit! Increasing the access (probably by reducing the cost) of higher education is the best way to reduce long-term inequality and increase mobility. EITC and lower taxes do this as it makes it easier to pay for, or pay off, student-loan debt. We would also need to improve K-12 public education, which I may discuss in a different post. 

Increasing availability of higher education is essential to increase mobility without harming the rich. Of course, many like Obama and Sanders want to give two free years of community college to the poor. Although this is a novel goal, this may have negative repercussions: as with all free commodities, people will overuse something if they think that it has no costs. The issue with this, however, is that it will lower the quality of education. Further, this may not even fully help the poor: wealthy kids would benefit from this, too. The poor targeting would further reduce the efficacy of the program. This is not a solution. 

The next few policy prescriptions are adapted from here. 

Colleges promise higher incomes and results. So if they fail, they should pay for it. Make colleges pay for the loans on which their students are forced to default, meaning that they are paying for the damages they have caused. This would create an incentive for better quality education so that their promises come true, and that their students can pay back the debt, and to force them to think of ways to reduce college tuition. 

Another way to pay for college should become an option, too. Allow colleges to say "we will take X percent of your income for X number of years" in order to pay for education instead of traditional education. This, again, would make it easier for students to pay (and increase their mobility) while making colleges liable for what happens to their students later in life. 

It should be noted that college has no better alternative. This means that colleges don't really have to worry about other ways of education arising, so they don't need to lower costs. This means conservatives should aim for ways to make it easier for alternative methods of education (apprenticeships, trade schools) to be more mainstream while continuing to provide high-paying jobs for future students of said fields. 

There are more solutions to this problem, but a conservative could easily fix our higher education system. 

Conclusion: Conservatives should--no, must--speak out in favor of reducing income inequality. Not only would it win them votes, but it would end the left's monopoly on the issue, making it harder for them to keep the "empathy" advantage over Republicans. Conservatives must focus on a bottom up solution rather than the liberal top down one. And the evidence suggests that conservative policies can and do work when it comes to reducing income inequality; the liberal solutions do more harm than good. We can turn this issue around; income inequality, if played correctly, could lead to a GOP landslide victory in 2016. 

Donald Trump?!

He did it. He finally announced a presidential bid. Here is an excerpt from a FOX news article:

New York real estate mogul and reality TV star Donald Trump on Tuesday declared himself a candidate for the Republican nomination for president, launching his against-the-odds campaign after teasing one for years. ... And he could be an aggressive -- and interesting -- player on the primary debate stage, should he stay among the top-10 candidates in the polls. ... “This is going to be an election, in my opinion, based on competence,” Trump said. “The American Dream is dead. And if elected president, I will make it bigger and stronger than ever.”

My god. I hope he does not won. There is no way he can beat Hillary. Not only that, he is crazy. Even for people who don't like Rick Santorum (like I do), no one can deny that he is intelligent. Trump is smart, but not only does he hold beliefs similar to candidates like Rick... He acts crazy, too. I hope he does not win. I think the best candidates to beat Hillary are Walker, Kaisich, and Rubio. We will see who ends up taking a front-runner position in the next few months.  

Why I oppose border fences

I may eventually write a full post on this, but here is something I have already written. The other side conceded.
http://www.debate.org/debates/Border-Fence/17/

I argued three things.
(1) Fences harm the environment
(2) Fences cost a lot
(3) Many immigrants do not even cross the border

He argued this:
(1) Fences work
(2) Fences reduce crime
(3) Immigration is bad

I refuted all of his points and my points were not really debunked. 

Sorry, gun control advocates: gun control does not work

Whenever a pro gun control study comes out, the media is quick to pick up the story. Even FOX news, claimed to be a conservative beacon, picked up on the story. The Washington Post also published a much longer, in depth story on the study. 

The study, published by scholars from The Bloomberg School of Public Health at Johns Hopkins University, concluded that gun licensing laws reduced homicides by 40% in ten years. According to the study, permit to purchase (PTP) laws "may reduce firearm-specific homicides." Unfortunately for the left, the study is bogus. 

According to Economist John Lott: 

As the authors of the study note, from 1995 to 2005 the firearm homicide rate in Connecticut indeed fell from 3.13 to 1.88 per 100,000 people, representing a 40% drop over a ten-year period (“We estimate that the law was associated with a 40% reduction in Connecticut’s firearm homicide rates during the first 10 years that the law was in place“). However, unexplained is that the firearms homicide rate was falling even faster immediately prior to the licensing law. From 1993 to 1995, the Connecticut firearms homicide rate fell from 4.5 to 3.13 per 100,000 residents, which means more than a 30% drop in just two years. This represented a greater decline than the 17% national decline over those two years. Of course, Rudolph and his co-authors do not address this inconvenient fact (though if one looks at their Figure 1 on page 3 this preceding drop is clearly visible). ... Their results are also extremely sensitive to the last year that they pick. ... The longer samples show a relative increase in Connecticut’s firearm homicide rate whether Rudolph et al. had looked at one additional year or five additional years. ... The Webster study also cherry-picks what crime rates to look at. For over all violent crimes as well as robbery and aggravated assault, Connecticut’s crime rate was falling relative to the rest of the US in the years prior to the licensing law and rising afterwards. For murder, there is basically not change in trends before and after the licensing law.

More criticisms of the study are in the link above. 

Sorry, liberals, but the research you use is bogus again. Gun control does not work. And there is one point Lott made not in the quote above: the study looks at one state. But that makes no sense when 10 other states have similar laws. When Lott did his concealed carry research, he looked at *every single* county, state, and city. Increasing the sample makes a better study with more accurate results. Choosing one state is the definition of cherry picking; gun laws don't work. But law abiding citizens with firearms do work.  

Hilary Clinton's rich bashing is not convincing

At least Bernie Sanders believes in the crap he says. Hillary has sprinted to the left because she needs to appeal to her base. She must bash the rich or she cannot be elected. But it would be more convincing if she did not charge hundreds of thousands of dollars for each speech. She claims to hate the rich, even saying that when she and Bill left the White House at the turn of the century that they were bankrupt. Now she is charging $300,000 for speeches.

Yep. $300,000. 300k. 3 + 00000. Three with five zeros. Bankrupt?

Democrats need workers to win. The reason Romney lost was because he was seen as out of touch. Hillary Clinton makes Mitt look like he is a union factory worker in Detroit. It really pisses me off when politicians, like Hillary, claim that the game is rigged, that the rich are too rich, and that we need to tax our economy to hell in the name of equality. But the reality is that she is part of the problem she is complaining about! Ironically, she charged $225,000 on a speech about high tuition at a University!

I am sorry, but if the average household income is $69,000, and only 25.1% of the households make over $200,000 per year, but you make exactly that much for an hour speech and you make 4 times as much as the average American in one day, you should shut up. You have no right to talk about income inequality or what the average American experiences. Sorry.

Clinton is worth over $15 MILLION dollars. I am sorry, but she cannot be empathetic. She does not have the same rising story that Barrack had. Marco Rubio is actually worth the least at $443,000 dollars.

I see pundits all the time saying the Republican party is not empathetic enough. Having self-made men like Ben Carson, whose father left his mother, lived on welfare, and had an illiterate mother and Marco Rubio, who was raised by immigrants (and was made fun of by the NY Times because he has student loan debt!) actually know what poor Americans feel. Even if you disagree with them, there is no doubting that they have experienced what it is like to be poor in the United States. Hillary has not.

I honestly think that Hillary is not qualified to speak about income inequality and the plight of the American worker. But she will anyway. Hopefully, when she casts a republican nominee (who I hope is Rubio) as unempathetic, voters will see through that load of hooey.  

CBO: workers bear the costs of high corporate taxes

Workers "[bear{ slightly more than 70 percent of the burden of the corporate income tax. The domestic owners of capital bear slightly more than 30 percent of the burden," according to this CBO report.

According to this study by nber, "workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates." So, cutting these taxes actually benefits the worker, not the company.
So, I say, lower corporate tax rates--not for the rich, but for the worker!

Have wages stagnated?

The argument often forwarded by liberals in support of minimum wage increases are simple: wages have stagnated, minimum wages, increase wages, therefore we need a wage hike. And the argument has a grain of truth to it: wages rise for those who stay employed. But it fails to take into account the fact that many workers become unemployed by minimum wage hikes, so having people have the wage of zero easily outweighs the beneficial impacts. 
But the rest of it is incorrect. Wages have not actually fallen compared to productivity. This paper by the Heritage Foundation clearly details the problem with that argument. The argument uses wages and not total compensation, which includes benefits. Now, instead of having to pay for your own health insurance, your employer does it for you. Paid maternity leave has become more common, more vacation days, etc. All of this increases the purchasing power of the worker even though wages do not increase. In fact, had all of that gone into wages instead of paying for health benefits, there would have been wage increases. In fact, Walmart has actually lowered wages in order to pay for health benefits. So total compensation, not just wages, must be taken into account. 

The statistics used to prove the point also use different methods to control for inflation and wages, which further muddies the waters. The Heritage Foundation, of course, finds that total compensation has increase 77% over the last few decades. This is a different narrative than what Elizabeth Warren, Paul Krugman, or the Employment Policies Institute announces. But many may counter: isn't the Heritage Foundation a conservative organization? Correct. But economist Martin Feldstein, who works with the nonpartisan National Bureau of Economics, has published a study on the issue as well. He agrees with the Heritage report and says the apparent gap between productivity and pay exists only when improper data is used, and when you correct for that, both wages and productivity change together. Even the liberal, pro-minimum wage think tank the Center for Economic Policy Research found no gap between productivity and pay, as well as coming to the same conclusion as both Feldstein and the Heritage foundation. 

So yes, wages have increased. And even if they didn't, it could be that excessive government regulation, not the evil businessmen, were behind the pay gap. And it is crazy to think that merely raising the wage floor will raise wages when it makes wages zero for thousands of workers.