Equality in Economics

October 31, 2011

Political economy

Today I attended Congressman Eric Cantor’sspeech in the League and his arguments struck me in way that really solidified my view on the economic issues facing our nation today. Congressman Cantor gave a very realistic approach that some may find cruel but sometimes reality isn’t this flowery image we try to convince ourselves it is. This post is not meant to stir up an argument on whether the Republicans or Democrats in Congress are right, but rather just how some of the things that Cantor stated today were very true.

Eric Cantor from Wikipedia

One of his main points that really stuck in my head was his view on economic equality. He said that the people in America are not guaranteed equal outcome but rather everyone in this country should be guaranteed equal opportunity. The government is not a charity that is supposed to provide everything for its citizens but rather this country provides its citizens chances for social mobility through economic policy. Part of a democracy is that the people can determine their outcome and can act in self-interest to achieve this outcome. Not everyone comes from the same well off background that gives them a head start into a successful career and the government recognizes this, but realistically can a democratic government help everyone become successful? The answer is no. But the government should put in place the best environment to do so. This country was built opportunity according to Tocqueville. People who had little social mobility in Europe came to this country to have land and property that is their own to pursue their own self-interest. Some people are going to fail and some will succeed that’s the fact of life, we all can’t be winners but what this government should provides us is the best opportunity to take that risk to pursue our own self-interest.

Cantor also addressed the issue on whether or not it is right or fair to tax the rich. The government provides rich entrepreneurs and business leaders tax cuts so that they can help the economy grow. In my opinion the government should simplify its tax code so that these people in the upper class do pay more but at the same time this country cannot redistribute the wealth in order to make the classes meet in the middle. This is a socialist concept that reduces incentive to be successful. That’s basic economics that if the reward for success isn’t much different than what I am doing now my motivation won’t be there. People should be working hard  no matter where they came from in order achieve success succeed and social mobility will be set in. Isn’t this what sets America off as the economic powerhouse of the world? This country was built by innovators and ideas that made people very successful and if you take away this incentive to be the best away why should we go to college. If being successful is seen as a bad thing like in the case of the Occupy Wall Street protests then why go to college, why go to Michigan, why strive to be the best? It is because this country was built on social mobility relating back to Tocqueville; however, this opportunity is not given to us like a present but rather earned through motivation and determination. According to Cantor of the top 500 entrepreneurs in Forbes 93% came from the middle class. Isn’t this the social mobility people are arguing for? Additionally, minorities in recent years have been given more opportunities to attend college than ever before. Their graduation rate is lower than non-minorities as a percentage but like Cantor said success isn’t a guarantee it is an opportunity.

To say Eric Cantor’s ideas on economic equality are an unpopular viewpoint for most people today would correct. Obviously people in Congress don’t see eye-to-eye when it comes to this and that’s the life of politics and the nature of belonging to a certain party. In the case of the Congressman’s argument I think he made some very valuable points on the difference in economic equality, social mobility, and success. What are your thoughts on the Congressman’s arguments and my own input on these concepts? Do any of our other political theorists like Locke’s on the concept of property or maybe Menand’s on education apply to this post?

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About ndreynolds864

Student at University of Michigan

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12 Comments on “Equality in Economics”

  1. mjgeis Says:

    I understand what you are using Tocqueville to say about the country, and it does ring true in a sense, but you ignore a very large part of “equal opportunity”. Think of Appiah’s “contingent facts of birth”. You cannot simply charge ahead and say that “the government can’t help everyone succeed”, because there is no denying that a disparity between people’s background is an enormous factor in future success. By suggesting that a non-redistributing tax code is fair means that you are openly condemning those who are less fortunate to an even more certain failure. If you step back and look at your life, you will realize that nearly every event that occurs in it is 99.999% due to circumstances–some that may date back millions of years–and that a minute fraction of the causation of an event is due to the actions of yourself or those around you. When you really think about the gravity of that, it becomes plain why the government should intervene–perhaps they can bump the .001% of influence that people have up to .002%. Or, they can leave them without help and watch the immense tide of circumstances beyond their control wash them into the ocean.

    • lukeythekid Says:

      Mjgeis, I do not think that the author is all for condemning the less fortunate, but simply arguing that excessive taxation of the wealthy is counter-intuitive to our country’s entire psyche. The Occupy Wall Street-type protestors are calling for a leveling of the playing field because they see more successful men and women and they feel as though it is unfair for these business professionals to have so much more money, simply out of a childish notion that everyone has to share. While people are obviously always going to lobby for their own interest group, many protestors are unaware of exactly how much of an effect there is from the progressive tax rate. While it is easy to say “Oh, boo hoo for the rich people, they don’t get to buy another yacht,” remember that when you take 30% out of one of the “1%’s” paycheck it is already a huge amount; the increased rate, when coupled with the high income, provides a large amount of money for the government. It is not as though the wealthy are not paying their fair share already, and overtaxing them leads to negative responses such as tax evasion and fraud.
      Yes, it sucks that not everybody gets the same opportunities, but the government’s responsibility is not the same as Robin Hood’s. The wealthy contribute a huge amount to the economy, and taking away their spending power is a step backwards. Competition is what drives people to be successful and creative, and decreased incentives lead to mediocrity.

      • mjgeis Says:

        I understand your point as well, but there is no amount of economic contribution that the top 1% can make that will, for example, fix an impoverished school district. Yeah, they might create jobs, but the government can do that too. But let’s run with the school example. The wealthy are not going to fix impoverished school districts. There is not enough of a collective charity effort going on among them to do so. My justification for saying this? Detroit Public Schools is still in absolute hell right now, along with a load of other school districts. You can’t expect the wealthy class’s spending habits to fix that, because it is not an organized effort. The government has an organized effort, though. So, if the government takes a bit more from the wealthy to fix the schools, they are providing an irreplaceable service; only the government has the ability to fix such a large scale problem. You need to empower the organization that has the greatest ability to provide the greatest welfare for the people. In this case, that organization is the United States government, and the empowerment is derived from the income of the top 1%. This is a just solution, this a is humane solution, and above all, this the is smart solution.

  2. springsteen1 Says:

    Interesting post – interesting insight. I agree with a lot of the light he sheds into corners, and some of the light you shed, but I don’t agree with his argument itself, nor yours. For example, the notion that this isn’t Dem vs Republican is false – much of this is the essence of exactly what the partisan debate has been about for decades – how much government intervention in social issues, how much in government / banks regulatory reform / etc. We have debated ad nauseam what level of intervention is appropriate, and, it is safe to say in most arenas, to no avail.

    This is going to be a standing issue for a long time, which is why I stopped paying attention (as a news dork) to much of the analysis, insight, commentary, etc. on matters related to this. We are going to sit in political science classes and have students, GSIs, Professors who, whether they state outwardly or not, hold beliefs about equality, gov intervention, the taxation of the wealthy, and similar economic matters; pretending otherwise is a disservice to our community, our society, and to our country.

    This ties back to the original point – by and large, Democrats want more equality. They want taxes on the wealthy, but not just blanket / abstract, they want wealth more equally distributed, and a broader range of the middle class. By and large (so not everyone in the category), Republicans believe that the wealth has been earned and achieved by people through hard work, empowering the resources of America.

    Here and in many other arguments, Cantor delivered a partisan, ideological speech which really leaves us pondering, but at the end of the day, there isn’t much to ponder about – a Republican gave a Republican-centered speech.

  3. antuck Says:

    I’m very skeptical of the point that you and Cantor are making.

    One of the main reasons is because most of your post is based on a false dilemma: economic equality or equal opportunity? But why does it have to be one or the other? Why can’t we have equal opportunity, as well as a functional welfare system, a strong educational program, and decent healthcare?

    In short, what in “equal opportunity” seems incompatible with “economic equality” to you?

    Also, for people to start with dramatically different levels of income or wealth will inevitably affect their opportunities. Think college: how can a bright student who can’t afford even a cheap, poor quality public in-state university possibly hope to compete with a slightly stupider student who can afford an Ivy League education? Don’t say, “If they were really smart, they’d get a full ride.” Full rides are far rarer than most people seem to realize. Most students are lucky to get more than a couple thousand in scholarships.

    Therefore, if you support “equal opportunity,” then you support “economic equality.”

    Also, when you write things like, “Overtaxing the rich punishes people for working hard and succeeding,” I start to doubt your grasp of economics. You are not *punishing* them; you are merely reducing their incentive slightly. There are people in the USA who make 1000 times what others make. Let’s say you were to raise income taxes on this bracket of people. Would an individual from this group then say, “Now I’m only making 970 times what other people make; I shall no longer work hard or succeed”? No. He would barely notice. He would not spontaneously decide to stop working.

    On top of everything else, I think you’re drastically overestimating social mobility in the US. As you say, sometimes reality isn’t the “flowery image” we convince ourselves it is, and frankly, I think your view of social mobility is a flowery image.

    • ndreynolds864 Says:

      In response to antuck’s comment about social mobility, if you’re born in a poor family it is statistically harder for you to succeed and I get that but it is not impossible. My mom came from a poor family went to a small community college, a crappy public university, and a very small law school and through all these she had to work her way through it sometimes working 40+ hours a week. She couldn’t afford the most prestigious schools but she worked hard to graduate in the top of all her classes. Who says public universities and community set you back if you have the work ethic to be the best in your demographic. From her poor up bringing and hard work in sub-par institutions she worked her way to become vice president of a Fortune 500 company. So the social mobility concept is definitely realistic and probable but the less fortunate do have to work harder than people with money and power. And your comment that the social mobility I painted is flowery? I don’t understand where this came from because I would think that the image I painted was actually harsh. With how I talked about the fine line between success and failure. But social mobility is obviously there or else my poor mom would be scooping ice cream for 10 hours a day like she did in college.

      • mjgeis Says:

        Ok, yes, while you did present an example of someone demonstrating social mobility, you fail to put it in perspective. While your mom may have an extraordinary story, she is still only one person. You effectively demonstrate that social mobility still exists–a point that antuck would not argue. (I don’t think. I don’t mean to put words in your mouth.) I honestly don’t think your argument holds any water, because you implicitly assert that the same social mobility that your mom demonstrated could easily be demonstrated by the rest of people who need economic assistance.

        I’m not going to sugar coat this. That is not possible. It is not possible in the slightest for this kind of social mobility to come anywhere close to fixing the problems that this country has today. I’m not buying it for a second.

        Let’s say that your mom’s story has a certain frequency that means that her story can account for .05% of the United States’ working population today (that’s 76,700 people–an entirely unrealistic figure, I think). The number of unemployed people in the United States today is 14.0 million, and accounts for 9.1% of the working population. With a normal unemployment rate of about 4-6%, we still have about 8-10 million people unemployed that really shouldn’t be. Your social mobility cannot give 8-10 million people jobs. It can’t happen. It can give approximately 1% of them jobs. (That is, if you believe my gross overestimate from earlier.)

        There is no sense in trusting an “invisible hand” to do anything for you. The only way anyone can get anything done is by taking control and doing it themselves–think Machiavelli. The government needs to step in and help those in need, instead of trusting “market forces” or “social mobility” (whatever the fiscal conservatives’ most recent catchphrase happens to be) to do it for them. Otherwise, we are condemning those less fortunate than ourselves with our passivity.

      • antuck Says:

        mjgeis puts it very well. I never said that social mobility doesn’t exist at all; I simply said that, as most proponents of “hands-off” government view it, it is by and large an illusion.

        Rather than give me any statistics, you gave me one particular case (a fishy one at that—I don’t believe she worked 40+ hours a week while in law school, for example, and if she did, she would surely have graduated in the bottom 10% of her class). But 1 out of 300 million is not good enough. Even if enough jobs were available to allow Americans to put themselves through college (again, see mjgeis’ comment above), the sheer size of the student loans would make any sensible person reconsider. Not to mention, not even geniuses can work 40+ work weeks while studying something like law, medicine, or engineering (to list a few of the more profitable career paths, e.g. the ones most likely to help pay for student loans). It’s not even an option. Law schools students *have* no free time. Medical students *have* no free time. When are they supposed to work these jobs? While they sleep?

        Let’s say the case of your mother is exactly as you have described it. You don’t really think that every hardworking student is going to become the VP of a Fortune 500 company, do you? You are aware that your mother’s case is the exception, not the rule, right? Hard-working, motivated, absolutely brilliant students fail all the time, because they did not have the money they needed to get started on potentially dazzling careers.

  4. wjpetok24 Says:

    I also attended the Congressman’s speech but came away from it much more concerned and deflated than ndreynods. In fact, I found Cantor’s message and ideas to be some of the central issues currently facing our country and government. For example, Cantor argued that the country was in need of a “Steve Jobs Plan” to restore the economy. He argued that through innovative technology we could increase our entrepreneurial methods and reinvigorate our country. While this seems positive on paper, the congressman is surely short-cited in his analysis.

    Firstly, this argument for innovation and “Americans to take more risks” is an absurd demand of the majority of the American public. Given the current state of the economy, asking Americans who have by and large fallen on truly tough economic times to “take more risks” seemed disillusioned and hypocritical. It is due to the partisan political ploys that our country has been set back economically at such an astounding level, and Cantor did anything but ease that tension.

    • beaurh Says:

      Commenting on the notion that Americans need to take more risk, I believe this is true to an extent. Congressman Cantor was speaking to an audience of extremely intelligent and highly motivated University of Michigan students. We should be taking these risks, and be confident in our capabilities. It would be irresponsible and selfish of us to not use our opportunity.

      But in agreement with wjpetok24, it is absurd for everyone to be taking such risks. As Cantor said, equal outcome is not a reality and taking too much risk often results in failure, which is only detrimental. I also agree that after this speech, I too was a little taken aback. Although motivational for us students, it did not take into account the differing partisan ideologies that are stalling economic recovery.

      I believe that Congressman Cantor was simply trying to urge us use our resources and not back down from the necessary risks that could lead to unbelievable success. But in doing so, he failed to mention how he wishes to implement any of his aforementioned ideas causing as wjpetok24 stated a sense of “deflation.”

  5. habavol Says:

    I tremendously agree with the statements that Congressman Eric Cantor presented. I attended the event as well, and the points you brought up are very accurate, and I find that it is exceptionally frustrating that people could disagree with what he said. America is about giving fair and equal OPPORTUNITY not just handing out success. That would be illogical.

    As for the taxes, republicans are not “out to get” middle class and poor citizens, as many of the protestors were trying to advocate. I find it absolutely appalling that many people in the crowd there, and also people in general feel this way. In the United States we HAVE a progressive tax scale. It seems that many people do not recognize this fact, or possibly ignore it. People in the top tax bracket already pay close to 50% of their income to the federal government in income tax. Repletion of the bush tax cuts will push that over 50%. 50% of people in this country don’t even pay income taxes… I fail to see how that’s fair, let alone RAISING taxes on the rich.

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