Income inequality is the wrong focus for government policy. After all, if we doubled the income of every American tomorrow, inequality would actually increase but we would also lift a lot of Americans out of poverty, says Michael D. Tanner, a senior fellow at the Cato Institute.
In the context of deficit reduction, that means we should keep this goal in mind: not punishing the rich, but reducing poverty. In the long run, the best way to reduce poverty is to create more jobs and opportunity.
Too many think of the economy as a fixed pie, and the role of government is to divide up the slices of that pie if one person gets a bigger portion of pie, others of necessity get smaller pieces. In reality the size of the pie is not fixed, says Tanner.
History also shows that government programs and redistribution do a surprisingly poor job of reducing poverty, especially when compared to economic growth.
As we look for ways to reduce the deficit, we should avoid policies like raising taxes that will discourage economic growth and job creation. Instead, we should recognise that an ever-growing and more expensive government is a burden that will ultimately reduce growth and make it harder for the poor to move up the income ladder, says Tanner.
Source: Michael D. Tanner, Not a Government Policy, November 30, 2010.
For more on Welfare Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=44
First published by the National Center for Policy Analysis, United States
FMF Policy Bulletin/ 14 December 2010
