Friday, January 27, 2012

Economic Fairness and the State of the Union

In his State of the Union address, President Obama called for various laws, regulations, subsidies, and tax code changes all designed to promote economic fairness in society. The day after his speech, results of the Bloomberg Global Poll were released indicating that a majority of international investors agree that income inequality is a grave problem for capitalism. While Tom Kane praised the President, claiming he promoted entrepreneurship, I agree a lot more with Anthony Gregory's assessment that the speech was another brief for statism.

While there is much that could be said going point by point through President Obama's address, I want only to address the theme of economic fairness that permeated the speech. One certainly cannot fault anyone for desiring to live in a society that embraces justice in economic relationships. Unfortunately, what the President could do most to promote actual economic fairness was not mentioned--a return to the free society undergirded by the institution of private property.

In a free society, people earn incomes by supplying a productive service, meaning a service for which someone is willing to pay more than enough to cover its cost. Workers get paid to the extent that they contribute to their employers' operations. Capitalists reap interest income for supplying present money in exchange for future money. Entrepreneurs reap profit income to the extent that they more successfully satisfy future consumer demand. In such a society, incomes are the fair return for serving somebody else. As Scripture indicates "the laborer deserves his wages" (1 Tim. 5:18). Also note what the master of the house says to the unhappy worker at the end of the parable of the vineyard in Matthew 20:1-16.

In our present economic system, however, there are numerous ways people can live off of others. Bankers are allowed to create money out of thin air and reap interest income by loaning it out, all the while subsidized by the Federal Reserve. Wall street investors are free to make larger and more risky investments and get bailed out by the state.

Those who receive subsidies from the government reap income due to their privileged status vis-a-vis the government and they do so at the expense of other people. The only way for the state to fund subsidies is through taxes, borrowing, or inflation or some combination of the three. All of these sources of funding results in wealth being redistributed from some citizens to others at the rather arbitrary desires of bureaucrats.

A return toward economic fairness and justice requires a return to a free society. A return to a free society requires a return to private property.

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