Myth #5: The Rich Get Richer, The Poor Get Poorer

A series of 5-myths via Daniel Flynn’s excellent book — Machiavelli said, “One who deceives will always find those who allow themselves to be deceived.”

  • Daniel J. Flynn, Why the Left Hates America: Exposing the Lies That Have Obscured Our Nation’s Greatness (Roseville, CA: Prima Publishing, 2002), 138-143.

MYTH #5: THE RICH GET RICHER, THE POOR GET POORER

WRITER JAMES L0EWEN laments the fact that publishers re­frain from printing “a textbook that would enable readers to understand why children of working-class families do not be­come president or vice-president, the mythical Abraham Lin­coln to the contrary.” Without a hint of irony, the author penned these words when the occupant of the Oval Office was a man abandoned by his father and raised in poverty by his strug­gling mother in Hope, Arkansas. The writer’s ideological my­opia regarding class and success in America is a central tenet of leftist philosophy. The Left’s propaganda campaign has been so effective that a majority of Americans now believe that the American system benefits the rich at the expense of the poor. A December 2001 Harris poll, for instance, revealed just how the belief in class rigidity remains entrenched in the collective consciousness. Sixty-nine percent of Americans agreed with the assertion that, in their country, “the rich get richer and the poor get poorer.” The facts do not support this popular belief. Nor do they buttress the idea that the system is set up to bene­fit the rich.

The burden of taxation overwhelmingly falls on the rich. The federal government relieves the poor of paying even a nominal amount of income taxes. The Internal Revenue Ser­vice reports that in 1999, the richest 1% paid more than a third of all income taxes it received. The richest 5% paid well over half of all federal income taxes. Only $1 out of every $25 collected by the IRS came from taxpayers on the bottom half of the economic ladder. To state that such a system unfairly ben­efits the rich, as many politicians perennially do, requires an abandonment of the facts as well as common sense.

The poor’s share of the economic pie has undeniably shrunk, however slightly, in recent decades. But the size of the entire pie has grown larger. Every economic class now receives a larger piece because they feast on a larger pie. From 1967 through 2000, the household income of the poorest tenth of the population increased by more than 33% in inflation-adjusted dollars. Surely it is better to have a smaller piece of a massive pie than it is to have a larger piece of a small pie. Countries exist, of course, where income equality is more pronounced among the masses. Economic equality for the populace (but not the leadership) is far more evident in China, Cuba, and Libya than it is in the United States. But what good is equality if it results in making everyone equally poor? Only one consumed by envy prefers equality of condition to increased prosperity for all.

A $9 trillion economy hardly leaves much room for what the rest of humanity considers true poverty. In more than 100 countries, America’s poor would be considered the moneyed elite. To its critics, the obscenity of our free-enterprise system is that some still go poor in a nation that houses Bill Gates and Leona Helmsley. Strangely, the system where everyone shares financial degradation equally earns higher marks from such critics. Such utopians fail to realize that only the system that keeps in place the natural rewards for hard work and ingenuity realizes the desired widespread prosperity. Government schemes that remove incentives seal the degraded fate of their own citizenry.

The United States is a free country. Any country that values liberty necessarily shuns the socialist’s conception of equality. The two ideals are incongruous. Nobel laureate Friedrich Hayek astutely observed in The Constitution of Liberty,

From the fact that people are very different it follows that, if we treat them equally, the result must be inequality in their ac­tual position, and the only way to place them in an equal posi­tion would be to treat them differently. Equality before the law and material equality are therefore not only different but are in conflict with each other; and we can achieve either the one or the other, but not both at the same time.

A variety of income levels usually reflects the health of free­dom in a nation. What truly would frighten would be no differ­ences in income.

Ignoring the absolute gains of the lowest economic class while stressing their relative losses serves as one example of the mathematical legerdemain the Left plays in the service of class warfare. A second trick involves the portrayal of “the poor” as a static group of individuals rather than as an economic class whose membership constantly rotates. The people we refer to as “the poor” today are not at all likely to be the people we refer to as “the poor” a few years from now. This reality alone rebuts the notion that the rich get richer while the poor get poorer. Today’s rich are often yesterday’s poor.

Hard statistics demonstrate that economic mobility is widespread. A Treasury Department study tracking class move­ment from 1979 to 1988 discovered that 86% of 1979’s poor no longer remained in the lowest income quintile in 1988. More of 1979’s poorest quintile actually found themselves in the richest 20% of Americans in 1988 than were still mired in the poorest 20%. Considering that the bulk of the survey focused on the Reagan years, the very time the Left describes as an era of un­precedented misery for the poor, the numbers are quite devas­tating to any claim of a static class structure.

An Urban Institute study at around the same time yielded similar results. The group found that the greatest proportional income gainers from 1977 to 1986 were 1977’s poorest quintile. This bottom fifth of the economic ladder saw their incomes climb 77% during the time period. By way of comparison, the average income gain during the 10-year period was 18%. Con­spicuously, 1977’s richest quintile experienced an anemic 5% increase in their earnings. In many ways, the Urban Institute’s findings merely confirm common sense. Poor people, having nowhere to go but up, experience more rapid proportional gains in income than the rich. To advance an ideology that ig­nores this reality flies in the face of common sense.

Over the past two decades, the U.S. Census Bureau has tracked individual income fluctuation from one year to the next on seven occasions. Even over a period as short as two years, the studies reveal a startling fluidity in the economy. In each of the Census Bureau’s seven two-year studies, at least three-fourths of all individual incomes fluctuated up or down by 5% or more. The studies affirm that the average American sees his earnings change significantly from year to year. A similar Census Bureau study of poor people in the mid-1990s found that nearly one-quarter of impoverished citizens in the first year of the study es­caped poverty by the end of the next. Again, the poor are not a fixed group of people. Poverty is a condition that different people find themselves in at different times. Students, the young, and newly arrived immigrants may constitute “the poor” during one still frame but live quite comfortably once we fast-forward their lives.

Just as the extremely poor are not typically chronically im­poverished, the extremely rich usually were not born into afflu­ence. Historians generally regard John Jacob Astor as the first man to be worth $10 million, Cornelius Vanderbilt, $100 mil­lion, and John D. Rockefeller, $1 billion. Significantly, each of these men earned his own wealth and rose from a fairly modest background. When we look at the rich today, the tradition of self-made wealth still holds true.

The self-made rich constitute the majority of wealthy people. Someone born into wealth stands a far greater chance of dying wealthy, of course, than someone born into poverty. But this hardly supports the claim that “the rich get richer and the poor get poorer.” Nor does it indict the American system. The advantages of inherited wealth occur not just in the United States but everywhere else in the world as well. In viewing the Forbes 400, the annual ranking of America’s superrich, one finds quite a few spots on the list that, like the publisher’s chair of the magazine compiling the report, are occupied by the inheritors of great wealth. Sam Walton’s wife and children constitute half of the Forbes top 10. A brood of Rockefellers populate the list. Five generations after the launch of Johnson & Johnson, nu­merous members of Forbes’s exclusive club bear the genes of the company’s founders. Old money has its advantages.

Yet these people are the exception. A perusal of the most recent list of the 400 richest Americans yields a count of 252 men and women, 63% of the total, described by Forbes as “self-made.”74 Their stories are truly amazing.

Texan Red McCombs (ranked at 158), the son of an auto mechanic, made billions selling the cars his dad was paid a few dollars to fix. Equaling McCombs in wealth is Kenny Troutt (158), a man who grew up in a housing project, only to establish one of the most successful communications companies in the United States. Andrew McKelvey (172), founder of Monster .com, got his start selling eggs. He later graduated to peddling ad space in the Yellow Pages, which undoubtedly planted the seeds in his mind for his successful Internet classified-ad com­pany. Both Marcus Bernard (60) and Arthur Blank (136) grew up in dilapidated tenement housing in and around New York City. After Bernard and Blank were fired by the Handy Dan home improvement store, they decided to launch their own venture. Handy Dan is out of business. Home Depot is one of the most successful stores in history. West Coast financier Leslie Gonda (136) escaped the Holocaust. The odds do not get much worse than that. Yet he made it. The lives of Mississippi sharecropper’s daughter Oprah Winfrey (280), college dropout Steve Jobs (158), and paperboy, horse breaker, and greeting card salesman H. Ross Perot (47) all serve as testimony to the reality of the American Dream.

These aren’t Horatio Alger stories. The rags-to-riches tales found in the Forbes 400 really happened. If the American Dream can become real for a Jew fleeing from under the jack­boot of Nazism, whom can’t it become real for?

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