{"id":7968,"date":"2014-10-31T08:02:39","date_gmt":"2014-10-31T15:02:39","guid":{"rendered":"http:\/\/victorhanson.com\/wordpress\/?p=7968"},"modified":"2014-10-31T08:02:39","modified_gmt":"2014-10-31T15:02:39","slug":"janet-yellen-shills-for-the-democrats","status":"publish","type":"post","link":"https:\/\/victorhanson.com\/wordpress\/janet-yellen-shills-for-the-democrats\/","title":{"rendered":"Janet Yellen Shills for the Democrats"},"content":{"rendered":"

by Bruce Thornton \/\/ FrontPage Magazine<\/a><\/p>\n

\"Photo
Photo via FrontPage Magazine<\/figcaption><\/figure>\n

At a conference last week, Federal Reserve Chairman Janet Yellen recycled a shopworn Democrat talking point about the supposed crisis of income inequality and stalled economic mobility. \u201cThe extent and continuing increase in inequality in the United States greatly concerns me,\u201d Yellen said, going on to wonder \u201cwhether this trend is compatible with values rooted in our nation\u2019s history,\u201d especially \u201cequality of opportunity.\u201d<\/p>\n

Like the mythic \u201cwar on women,\u201d this progressive sound bite is misleading and duplicitous, based on statistical sleight of hand. Worse yet, it is a pretext for more and more government expansion and intrusion into the economy, and for more and more redistribution of income through entitlement programs. It makes one wonder what one of the most powerful government officials impacting the economy, supposedly a politically neutral technocrat, is doing recycling Democratic campaign slogans.<\/p>\n

<\/p>\n

The \u201cincome inequality\u201d claim depends on ignoring numerous data that contradict it. For one thing, it glosses over the mobility among the 5 income cohorts over time, assuming that the same people are rich or poor year after year. But as Stephen Moore and James Pierson point out<\/a>, \u201cIn America they [the rich] don\u2019t generally stay rich for long. A few years ago the Department of Treasury examined what happens to the wealth of families across several generations. Guess what: the poor got richer and the rich got poorer. The incomes of poor households rose 80 percent from 1987 to 1996 and then more than doubled from 1996 to 2005. The richer people were at the start of this period, the more income losses they suffered in subsequent years.\u201d<\/p>\n

The Treasury study indeed confirms this mobility, finding that between 1996 and 2005 over half of taxpayers moved to a different income quintile. Half of taxpayers in the bottom quintile in 1996\u00a0moved to a higher income group in 2005. Meanwhile, only 25% of the richest 1\/100 of 1% in 1996 were still that rich in 2005. This mobility has indeed stalled, but not for \u201cseveral decades,\u201d as Yellen claimed, and not because of the sinister machinations of the wealthy. Its cause rather is the sluggish economic growth after the recession ended 5 years ago, and the blame for that in large part falls on Obama and the Democrats\u2019 regulatory overreach, trillion-dollar deficits, \u201cyou didn\u2019t build that\u201d anti-business rhetoric, and redistributionist economic policies. Get the feds out of the way of the economy so it can grow, and we will see income growth and mobility again.<\/p>\n

The \u201cincome inequality\u201d meme ignores other facts as well. It focuses only on \u201cmoney income,\u201d neglecting the value of government transfers like Medicaid, Electronic Benefit Transfer cards (formerly known as food stamps and welfare checks), emergency-room health care, Section 8 housing subsidies, and the Earned Income Tax Credit, all of which boost the buying power of the statistical poor and lower middle class. For the middle class, \u201cmoney income\u201d ignores the value of employer-provided fringe benefits such as health care. As for the rich, \u201cmoney income\u201d ignores the highly progressive taxes they pay to fund those government programs. As Gary Burtless of the Brookings Institution writes<\/a>, \u201cTo disregard the impact of transfers and progressive taxation on the distribution of income and family well-being is to ignore America\u2019s most expensive efforts to lessen the gap between the nation\u2019s rich, middle class, and poor.\u201d<\/p>\n

Finally, consumption\u2013\u2013how much people spend\u2013\u2013 is more revealing than \u201cmoney income\u201d as a measurement of economic wellbeing. In fact, consumption rates of the lowest income quintile have increased over the years, reaching nearly twice of income in 2005. As a result, Kip Hagopian and Lee Ohanian write<\/a>, \u201cA family claiming $22,300 in income in 2005 would have reported about $44,000\u00a0in expenditures in that year. As noted earlier, the gap between reported income and consumption is filled by various categories of government transfer payments (including Medicaid, food stamps, subsidized housing, the Earned Income Tax Credit, Temporary Assistance for Needy Families, etc.), family savings, imputed income from owner-occupied housing, barter, support from family and friends, and income from the underground economy.\u201d Indeed, if one takes into account consumption, the statistical poor enjoy living standards higher<\/a> than the average European. The obsession on \u201cmoney income\u201d ignores how well all Americans live.<\/p>\n

Yellen\u2019s second claim, that income inequality contradicts \u201cvalues rooted in our nation\u2019s history\u201d like \u201cequality of opportunity,\u201d is equally muddled. If we look at the political order of the Constitution\u2013\u2013our most important \u201cnational values\u201d\u2013\u2013 income inequality was taken for granted, a reflection of an unchanging and flawed human nature. In his famous comments on \u201cfactions\u201d in Federalist<\/em> 10, James Madison wrote, \u201cAs long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As long as the connection subsists between his reason and his self-love, his opinions and his passions will have a reciprocal influence on each other; and the former will be objects to which the latter will attach themselves. The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests.<\/em> The protection of these faculties is the first object of government<\/em> [emphasis added]. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties.\u201d Hence \u201cthe most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society.\u201d Income inequality is a fact of life, not a failure of government or the economy.<\/p>\n

Indeed, the clashing interests of those with property and those without, and the political discord they create, were continually on the minds of the delegates to the Constitutional convention. New Yorker Gouverneur Morris, arguing for an appointed rather than a popularly elected Senate, frankly said, \u201cThe Rich will strive to establish their dominion and enslave the rest. They always did. They always will. The proper security against them is to form them into a separate interest. The two forces will then control each other . . . By thus combining and setting apart, the aristocratic interest, the popular interest will be combined against it. There will be a mutual check and mutual security.\u201d<\/p>\n

Thus the \u201cmixed government\u201d of the Constitution was designed not<\/em> to eliminate property inequality, which is rooted in the differences of talent, hard work, virtue, and luck among people. Rather, it was created to prevent any <\/em>faction, whether the rich or the poor, from taking control of the government in order to aggrandize its own power and serve its own interests at the expense of others\u2019. Only that way can the freedom, property, and opportunity of all be kept safe.<\/p>\n

Our \u201cnational values,\u201d then, are for equality of opportunity, not equality of result. Yellen pays lip service to the former, yet that sentiment contradicts the whole complaint about income inequality, which is about result, not opportunity. Like most progressives, Yellen is really concerned with equality of result, something the Founders abhorred, for a tyrannical government always promises the masses equality of result, in the form of a redistribution of property, in order to secure the support of the people for centralizing and increasing government power and limiting personal freedom. But equality of result, as the sorry and bloody history of communism shows, is contrary to the reality of human nature and the unequal distribution of talent and character. As Plato wrote, it is \u201cnumerical\u201d equality rather than \u201cproportionate equality,\u201d which takes into account the differences of character and virtue that exist among people, and \u201cassigns in proportion what is fitting to each. Indeed, it is precisely this which constitutes for us political justice.\u201d<\/p>\n

America\u2019s \u201cnational values\u201d have traditionally included equality of opportunity, not equality of result. People should be free to rise to whatever levels their differing talents and virtues can take them. Differences of wealth over time and over large populations reflect those differences more than any unjust manipulation of the economy by the rich. Moreover, in a dynamic, free-market economy, the success of the well off improves the well being of the rest, whether by creating jobs or paying the trillions of dollars in taxes that fund the redistributive programs that have allowed millions of American to enjoy a material existence only dreamed of by most of the human race.<\/p>\n

We still have equality of opportunity, whether measured by the millions of ordinary people who create and run businesses big and small, or the 11 million illegal aliens who didn\u2019t risk their lives coming to America because it lacks economic opportunity. The Chairman of the Federal Reserve has no business indulging a progressive canard that exploits envy and resentment for electoral gain.<\/p>\n

Copyright \u00a9 2009 FrontPage Magazine. All rights reserved.<\/p>\n","protected":false},"excerpt":{"rendered":"

by Bruce Thornton \/\/ FrontPage Magazine At a conference last week, Federal Reserve Chairman Janet Yellen recycled a shopworn Democrat talking point about the supposed crisis of income inequality and stalled economic mobility. \u201cThe extent and continuing increase in inequality in the United States greatly concerns me,\u201d Yellen said, going on to wonder \u201cwhether this […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[842,22],"tags":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p466Sb-24w","jetpack_likes_enabled":true,"jetpack-related-posts":[{"id":1960,"url":"https:\/\/victorhanson.com\/wordpress\/wall-streets-disgruntles-utopians\/","url_meta":{"origin":7968,"position":0},"title":"Wall Street’s Disgruntles Utopians","author":"victorhanson","date":"October 11, 2011","format":false,"excerpt":"by Bruce S. 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Thornton \/\/ FrontPage Magazine The election and reelection of Barack Obama have seemingly realized the progressive dream of transforming America from its traditional Constitutional order to one more similar to Europe\u2019s\u2013\u2013an activist rather than a limited federal government, one whose power and reach extend into the market\u2026","rel":"","context":"In "Our Contributors"","block_context":{"text":"Our Contributors","link":"https:\/\/victorhanson.com\/wordpress\/ahref=\/index.php\/categories\/angry-reader\/categorylink\/a\/our-contributors\/"},"img":{"alt_text":"Photo via FrontPage Magazine","src":"https:\/\/i0.wp.com\/victorhanson.com\/wordpress\/wp-content\/uploads\/2014\/11\/votejpeg-42b1d7963e761260-500x320.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1661,"url":"https:\/\/victorhanson.com\/wordpress\/blame-our-failing-schools-for-occupy-wall-street\/","url_meta":{"origin":7968,"position":2},"title":"Blame Our Failing Schools for Occupy Wall Street","author":"victorhanson","date":"November 2, 2011","format":false,"excerpt":"by Bruce S. Thornton FrontPage Magazine Having taught in a state university for thirty years, I\u2019m not surprised by the ignorance on display among the Occupy Wall Street protestors. From kindergarten to university, for decades our schools have abandoned the teaching of basic facts and foundational thinking skills, and replaced\u2026","rel":"","context":"In "Education"","block_context":{"text":"Education","link":"https:\/\/victorhanson.com\/wordpress\/ahref=\/index.php\/categories\/angry-reader\/categorylink\/a\/education\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6886,"url":"https:\/\/victorhanson.com\/wordpress\/the-inequality-smokescreen\/","url_meta":{"origin":7968,"position":3},"title":"The Inequality Smokescreen","author":"victorhanson","date":"January 7, 2014","format":false,"excerpt":"by Bruce S. 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Abetted by his Luca Brasi, Harry Reid, he has run roughshod over the separation of powers and\u2026","rel":"","context":"In "Our Contributors"","block_context":{"text":"Our Contributors","link":"https:\/\/victorhanson.com\/wordpress\/ahref=\/index.php\/categories\/angry-reader\/categorylink\/a\/our-contributors\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2534,"url":"https:\/\/victorhanson.com\/wordpress\/its-the-philosophy-stupid\/","url_meta":{"origin":7968,"position":5},"title":"It’s the Philosophy, Stupid","author":"victorhanson","date":"July 15, 2011","format":false,"excerpt":"by Bruce S. Thornton Advancing a Free Society The Democrats\u2019 position in the negotiations to raise the debt limit and deal with runaway government debt can be summarized in one mantric phrase: the rich must \u201cpay their fair share\u201d in taxes. White House communications director Dan Pfeiffer, for example, said\u2026","rel":"","context":"In "Bruce S. 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