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December 24, 2013

THEIR VIEW: Income gap not the real problem

The growing gap between the richest Americans and everyone else is hurting the U.S. economy. So says a majority of more than three dozen economists surveyed by The Associated Press.

Even if you let experts in various fields shape your opinions, you might want to do a little independent thinking on this one. Frankly, those economists are just full of it.

Oh, they correctly identify a big problem for the economy. Higher-income families, whose wealth is growing, spend less of their money than do low- and middle-income families, who make up most of the population but whose pay is barely rising. For a robust economy, a bigger spending base – simply more people spending money – is needed.

But what difference does it make how big the gap between that the richest and everybody else is? What does that have to do with anything?

Framing is everything – it governs not just what we think about a problem, but how we try to solve it. Framing the stagnant economy in terms of an income gap immediately makes us think of ways to narrow the gap, and the easiest way to do that is to take from the affluent and pass it around to everyone else. Dwelling on the gap is the politics of envy and a justification for tax hikes. It is old-fashioned redistributionism, plain and simple. If you really want those rich people to slow down their spending, keep threatening their wealth.

The heart of the problem is not that the most well-off have too much money or that their wealth is growing too quickly. The real problem is that there are not enough of them. A robust economy fosters upward mobility, and a stagnant one impedes it.

Framing the issue that way will suggest solutions that try to create more wealth in the middle and lift more people up from the bottom, not plunder from the top. Small-business owners, for example, would be treated to lower taxes and a saner regulatory environment. They would not be pushed to the sidelines of job creation in fear of what the federal government is going to do next and what it will cost them.

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