Why the Income Inequality Argument Flopped
When will Democrats stop believing the paramount issue in the USA is income inequality? Not only are they mistaken, but it has become a political third rail. Hilary Clinton campaigned with income inequality as her “kitchen table” economic message, suggesting America’s bottom income quintile needed more economic assistance (and billionaire Trump would hold them down). In fact, the election was determined by a massive shift of working-class and middle-income voters into the Republican column.
Sorry, Van Jones of CNN: it was not whitelash. Rather, it was backlash by the bottom 60% of American income recipients against rising income equality. Trump recognized this and ran a situational-politics campaign with two macro-messages: (1) wage and economic stagflation was the result of Democrats over-taxing and over-regulating businesses, and (2) government entitlements were threatening the value of work. This message is how Trump won Michigan, North Carolina, Ohio, Pennsylvania, and Wisconsin.
Bill Clinton is arguably the savviest politician of our lifetime and he blasted his wife for ignoring the aforementioned swing states and union workers. Furthermore, his wife cut her own throat by creating a make-believe enemy when she referred to Trump’s “forgotten Americans” as a “basket of deplorables.” In a recent report published by the Cato Institute and a former assistant commissioner of the Bureau of Labor Statistics, the bottom two income quintiles in the USA have fared much better than the third and fourth quintiles (middle class Americans). And while the coastal elites were oblivious to this fact, it was obvious and irritating to working-class and middle-income voters.
The Cato analysis included $1 trillion in entitlements omitted by the US Census Bureau table of income distributions (e.g. Medicaid and food stamps) and subtracted federal, state and local taxes; thereby producing a real-world measurement of spendable income during the Obama years. In short, middle-income and lower-income families with W2 income realized welfare recipients were not much worse off. This political injustice was perceptible to blue-collar workers in the check-out lines at Wal-Mart and Dollar General Stores – and this explains why the forgotten Americans supported the pro-growth Trump candidacy. Check out the Cato findings and decide for yourself.
In 2013, the bottom quintile earned only 2.2% of all earned income; however, after adjusting for transfer payments and taxes, their share of spendable income was 12.9%. The second quintile’s share of all earned income was 7%, but they had 13.9% of spendable income. In other words, America’s poorest 20% enjoyed spendable incomes six-times higher than their earned incomes, and the next poorest 20% enjoyed spendable incomes twice their earned incomes.
The middle class (or third) quintile’s share of all earned income was 12.6%, but their share of spendable incomes was only 15.4%. So much for Democrats looking out for the middle class, right? And it gets worse. The fourth quintiles share of all earnings was 20.5%, while their share of spendable income was only 18.6%. The upper quintile’s share of all earnings was 57.7%, but their share of spendable income was only 39.3%. Read these two paragraphs again: this is the central argument against tax-and-spend progressive Democrats.
This is a tipping point in America's history. Do we value work in America more than income equality? Low-income Americans (bottom 20%) have practically the same spendable income as lower-middle-income Americans despite earning one-third the income and working 60% fewer hours. Furthermore, compared to the bottom 20%, lower-middle-income families had four times as many households whose adults worked two or more jobs. These facts beg the question: why work when welfare pays as much?
Compared to the bottom 20%, middle-income families (AKA the 3rd quintile) earned six times the share of income, worked four times the hours, had seven times the households with adults working two or more jobs, and enjoyed only 20% more spendable income. This is the real America that felt so alienated by Barack Obama and so disrespected by Hillary Clinton, they voted for a boorish billionaire celebrity. And Democrats did not see it coming - not even close!
The father of the modern welfare state, German Chancellor Otto von Bismarck, had a stated goal to provide the poor “a helping hand…not as alms, but as a right.” This Europe-style style socialism found its way into the thinking and policies of Barack Obama, who happily traded entitlements for votes. To many working and tax-paying Americans, Obama seemed patently un-American because he did not value their hard work and taxes. Historically, middle-class Americans value hard work and self-responsibility. Democrats don't talk about these values enough.
Even while Obama mismanaged the economy into systemic stagnation and no-growth incomes, it was his belittling of middle-class values that closed the door on Hillary's campaign. Remember his “You did not build that” speech in Roanoke, Virginia? I do: he belittled hard work and intelligence in one speech. Yikes! Van Jones can blame race for Trump’s presidency, but he’s 100% wrong. Trump won because Obama-Clinton Democrats did not help or speak to working-class and middle-income Americans.
Democrats must wake up and start speaking to the value of work and the need for some welfare reform. Even if they win the House in 2018 and Trump loses in 2020, the income-inequality message is just asking for a butt thumping by a Reagan-style Republican. If there is no John Kennedy or Bill Clinton out there, then Democrats are the Whigs of tomorrow - - gone!