Pelosi on Income Inequality

Using its monopoly of legal force, governments create privileges for some and handicaps for others. This coerced inequality stems from the irrefutable fact that government’s modus operandi of taxation and spending creates injustice. This injustice, which grows as government grows, is a powerful reason to limit government powers radically.

Income inequality arises from many sources, one of which is government powers being used, which is synonymous with those powers being abused. Other major sources are benign, however, and they are tremendously important. They cannot all be named or traced to their roots because they are so numerous and byzantine in their causes and effects, but they include all those free human choices and behaviors that result in one man being wealthier than another.

Nancy Pelosi’s view of income inequality is that it is in and of itself an injustice: “We may have democracy or we may have wealth concentrated in the hands of the few but we cannot have both. We must end that injustice…”

This thinking wrongly ignores the fact that income inequality arises from a multiplicity of freely-made decisions, not simply from government-installed privileges and handicaps. Wealth concentration doesn’t arise only from bad causes; it has good causes too, such as hard work, saving and creating wealth through businesses. Ending income inequality without distinguishing its good from its bad causes, as she wants to do, won’t eliminate injustice. It will create new injustice.

The obvious road to reduce injustice in a sound and proper way, and thereby have a positive impact on income inequality, is to reduce government’s power to tax, regulate and spend in ways that benefit its favorites and hurt those out of favor. This leaves alone free decisions being made by vast numbers of people.

Pelosi’s other idea expressed here is that democracy and wealth inequality are incompatible. This too is wrong. We are not faced with that tradeoff. A country can have majority rule and still maintain enough freedom that wealth inequality will result from privately made decisions. This depends on what matters the culture allows to be brought to a vote.

Pelosi says “We will call upon bold thinking to address the disparity of income in America…”

This can only mean that she wants legislation passed that shifts income from one set of persons to another. Since she wrongly views income disparity as having no good source, she wants to remedy what she sees as this unalloyed injustice (disparity of income). How? By the force of laws. But these surely will, by ignoring the other causes of income disparity, create new injustice. Pelosi’s remedies will thwart the outcomes that arise naturally from freedom and free markets.


9:59 am on January 23, 2019