Why The Land of Opportunity is in Danger and What We Can Do About It
By Ryan Hinds
With a less than stellar premiere of his signature healthcare legislation, President Obama wants to shift the election year agenda towards economic inequality. Though I disagree with our president on almost every issue, I can personally vouch for the sharp contrast between the lives of the rich and the poor.
A couple of months ago, I traveled on the Los Angeles Metro from Long Beach to downtown LA. I am distantly related to the Travolta family (as in John Travolta, who has starred in blockbusters such as Pulp Fiction and Grease) and was invited to a wedding for one of their daughters. Though places like Compton are well known for crime and poverty, never had I seen it personally. As I looked past boarded up homes and graffiti, I heard one passenger say to another, “You have a job, and that’s all that matters.” During economic booms, prosperity has bypassed millions of Americans; after the recent downturn, underemployment and unemployment have become even more commonplace. The wedding, on the other hand, was opulent, to say the least, likely costing more than I make in a year. A reception followed with gourmet appetizers, a candy station, and an open bar.
Hollywood celebrities (who tend to live in wealthy enclaves such as Malibu and Beverly Hills) overwhelmingly support Democrats, which is one of the few things they have in common with poorer minorities who live in the neighborhoods of eastern and southern Los Angeles County. Arguably, emotion plays a significant role in their political affiliations; I truly believe most modern liberals want to help the poor. However, that poses a major problem, as most of the solutions they advocate for are just feel-good measures that do nothing to empower people.
Politicians, on the other hand, are a different story. As far as I’m convinced, they have no desire to win the “War on Poverty”, as they risk losing the unilateral support of their constituencies. Democrats will likely develop a package of minimum wage increases, expanded social programs, and unemployment benefits to fight the effects of poverty and joblessness, ignoring its true causes. Republicans, on the other hand, continue to advocate for tax cuts, yet cannot explain why some low tax states such as Mississippi are quite poor, and have sluggish economies.
Equally troubling is the fact that some conservatives and even a few libertarians inadvertently downplay economic inequality, instead arguing that Americans have substantial opportunities to move up the economic ladder. It’s true that my parents lived modest childhoods (my mom’s parents barely escaped from Nazi Germany with little money) and now live comfortably, but millions of Americans still live paycheck to paycheck in fear of rising prices, and unable to achieve financial independence.
Life is not easy, and may never be, but shouldn’t we provide an environment that allows for as many people to be self-sufficient as possible? If we want to decrease the size of government (almost 75% of Americans view big government as the largest threat to our country), we must also reduce the demand for welfare, food stamps, and the like. Though it will be an uphill battle, we can find common ground with people of all political stripes to succeed. I hope you will all join me in TERM-inating poverty (and reducing economic inequality):
Taxes – For one of the most advanced societies on earth, our tax code is an abomination. Riddled with deductions and credits, Americans waste almost 6 billion hours a year just to do their taxes. Moreover, there is a fundamental problem with income and sales taxes (FYI, I used to be a FairTax fan, before it was cool). Income taxes discourage people from working, as government takes a large bite out of one’s paycheck (for young professionals, it is not uncommon for them to give $0.35 to $0.40 of each additional dollar they earn to the government, between federal, state, and FICA taxes). Sales taxes, on the other hand, hurt retail businesses, as they are essentially forced to sell their products/services for a higher price, losing customers. The only tax that does not have negative economic consequences is the land value tax, as land cannot disappear when taxed. This free lunch of sorts will also lower real estate prices, reducing the money required to start a business. In order to truly have equal opportunity, we must all have equal access to land and natural resources; land value taxes push us towards that goal.
Education – Parents in poorer neighborhoods are often unable to choose a better education for their children. Private schools (excluding some Catholic ones) are too expensive, and many cannot afford to stay home to homeschool their children (or lack an education themselves). Charter schools are a step in the right direction, but I would prefer a voucher system to give parents even more choices. The vouchers should be cumulative, which would allow parents to save funds for future use. A good education system helps provide the skills people need to improve their lives.
Regulation – The Small Business Administration (SBA) has estimated that small businesses face a regulatory burden 36% higher than larger firms. Though I support some regulation, I think we need to freeze the number of existing rules. Then we can review the costs and benefits of each, and get rid of those that are ineffective. State and local governments make it even worse. For example, it took a businessman in Ventura County, CA seven permits just to remove a wooden deck at his campsite, as requested by a county official! Needless to say, he closed up shop. A beachfront lot next to my apartment building has sat vacant for more than ten years because the city council and the California Coastal Commission cannot agree upon what should be built. In Florida, Louisiana, Nevada, and Washington DC, interior designers must be licensed and in the supposedly pro-business state of Texas, the government shut down a veterinarian for giving people animal care advice over the Internet. These bizarre rules just make it harder for people to start businesses, while protecting established ones from competition (along with other special interests).
Money – The Federal Reserve benefits well-connected individuals to the detriment of lower and middle class Americans, who have faced rising prices yet stagnant incomes; something that cost $10 in 1913 would be almost $250 today. Of course, the effects of inflation are hidden behind our “capitalist” economy, which is why politicians have been able to get away with this for so long. One solution may be having the US Treasury issue money directly, subject to constitutional restrictions, and at a level proportional to the size of our economy. Alternatively, banks could issue money themselves, with a fixed amount of federal currency in circulation for payment of taxes. Competition would reduce bank runs, as insolvent banks would go out of business in a free banking system. Each system has its drawbacks and kinks to work out, but a stable currency is a necessary part of the equation.
Economic inequality is one of the most pressing issues of our time. Though my libertarian views are pretty apparent in this article, I have spoken to self-described socialists who support many of the same reforms that I do. Go sit down and discuss poverty and economic inequality with someone from “across the aisle”. You might be surprised what you agree on! Opening the lines of communication is only the first step, but will go a long way towards bringing economic opportunity back to America.