 As you probably know, as everybody knows, I mean, over the last 10 years income inequality has become one of the main talking points of the left. Although I have to say that over the last three years, since Black Lives Matter and since the rise of the new wacky left, income inequality is taking a back seat to issues related to race and gender and trans and all that stuff. So because income inequality is more of a neomoxist thing, I mean, Piketty, who brought income inequality to the forefront in his book 10, 11 years ago, capital in the 21st century or Das Kapital in the 21st century, as I like to call it. Piketty is a neomoxist and, you know, Marxist without the intellectual aspect of Marx but just adopting the economic arguments of Marx and without the kind of philosophical arguments, which is interesting, which I think most modern Marxists are. They drop all the pretense of philosophy and just talk about the economics. But it's interesting that over the last few years, the left doesn't talk much about inequality. You don't hear it anywhere as much as you did five, six, seven years ago. But anyway, the big issue was in the United States was seeing ever-increasing, ever-increasing income inequality, inequality between the rich and the poor, the middle class and the poor, the rich and the middle class. The whole spectrum is massive divergence and increasing genicoefficience, which is a measure of inequality and increasing inequality across the entire spectrum, which they tell us is horrible and disastrous and destructive and needs to be dealt with. And I've talked about in the past about why income inequality is not a problem in and of itself, why the real question is the causes of it but not the fact that it exists is neither good nor bad. And indeed, you could argue that having inequality is a sign of at least having inequality can be a sign of freedom, although it can also be a sign of not freedom. So the way I like to think about it is freedom always results in inequality. And we'll see an example of this in China. Freedom always results in inequality and significant inequality. And the fact is that most systems of authoritarianism result in vast equality among people, although there's always a small group that are super unequal relative to everybody else. All right, so in the United States, we've been told over and over and over and over and over and over and over again that income inequality is a problem. It's growing, we're back to the late 19th century, I wish, in the sense of because of economic freedom, because of the Reagan Revolution and all the deregulation that appeared out of nowhere, I wish I could see it, but all that deregulation, all those lowering taxes, all of this has resulted in massive increases in inequality. Piketty has written a book and several articles about this and what's his name? Stiglitz, who's an overpriced winner in economics, has also written about this and many other American economists have got on their train and they are pushing the biggest problem in the American economy is income inequality, at least until Black Lives Matter showed up and then it became all these other things. But it turns out that even by their own standards, by their own measures, by their own data, this is just not true, not true. So one of the problems with most of these studies is that they look at income inequality, the differences in income, before taxes and transfer payments, and we talk about this in the book, equal is unfair, this is easily observable, so that you're just looking at wages or income. Now, they often don't take into account things like benefits, they don't take into account size of household, they don't take into account, most importantly probably, taxes and transfer payments, i.e. welfare payments. And if you take those into account in a variety of different ways, income inequality has not increased. Arguably, it's actually decreased by 3% over the last few decades. But now there's a new book coming out, new book coming out, let's see, what's it called? The new book is called The Myth of American Inequality, pretty straightforward title, Myth of American Inequality, it's coming out September 15th. It was written by Phil Graham, the former senator from the state of Texas, and Ely, something Ely, who is an assistant, used to be, he served twice as assistant commissioner at the Bureau of Labor Statistics, so a stat guy. And they have a new book coming out, looking at the statistics of inequality. And one of their findings is, which is really interesting, one of the findings is that once you take into account taxes and transfer payments, that the bottom 60% of income, the bottom 60% of income, so anywhere from zero to 60%, the people that fall into that level of income, there's very little difference between them, very little difference between them. That the welfare state, the war on poverty, has to a large extent equalized income of the bottom 60% of Americans. So if you look at government transfer payments, the bottom 20%, they have surged by 269%, 270%, between 1967 and 2017, while middle income households saw their real earnings after taxes rise by only 154% during the same period. So you can see welfare payments were rising at a far, far higher rate, far, far, far higher percentage than earnings of middle income. So what's happened is, the poor have caught up to the middle fast. And this is, we'll see in a minute, the kind of consequences this has. So here's some stats. This is from a editorial in the Wall Street Journal that the two authors wrote. And Phil Graham is one of the last good senators that I remember, particularly in economic issues. He was very good. He was good within the context of what is available, right? But I don't know that any senator today is as good as Phil Graham used to be. See you real. In 2017, right, among working age households, the bottom 20%, so the poorest 20%, earned only $6,940, $41 on average. That's low. But that's because only 36% of them were employed. But once you take into account transfer payments and taxes, those households had an average income of $48,806. So they earned from working, $6,941. Now you can see, if your household income is $6,941 and we measure income inequality off of that number, wow. Other people are making $60,000. That's a huge gap. But if it turns out that you get all this welfare in and you get $48,806, well, that is a lot more reasonable. That's how people live. You can't really live in $6,900. But of course they're only making $6,900, that's an average, because only 36% of them are employed. Now, if you take the second quartile, so this is 20 to 40%, quintile, not quartile, quintile. Quintiles are 20% gaps, right? If you take the second quintile, average age working households earned $31,811, 85% of them were employed. And you can see the income inequality is huge here. They made $31,000 off of $6,900 for the lower quintile. But once you take into account transfers and taxes, they had income of $50,500. So they went from 31 to 50. That 50,000 is only 2,000, less than 2,000 more than what the bottom 20% were. Only 3.5% more than the bottom quintile. And then if you took the middle quintile, the one that covers it's 40 to 60, so it covers true middle, right? Middle class. The middle quintile earned 66,453, and 92% of them were employed. Not surprising. But after taxes and transfers, they kept only 61. So notice, this is the first quintile where household income actually went down once you took into account taxes and transfers. The bottom 40%, their income goes up once you take into account taxes and transfers. 40 to 60 is the first one when it comes down, and it comes down to 61,000. So once you take into account taxes and transfers, right? Once you take into those account, into them account, 48,000, 50,000, 61,000, almost the same. Come on, people, quintiles are not that hard to follow. One, two, three quintiles. That shouldn't even challenge your crow. Epistemology. Three, three you can keep track of. 20% lowest, 20% second lowest, 20% middle. Now, once you take into account household size and you look at average income per capita, per capita, then actually the lowest quintile has a higher per capita income than the second quintile once you take into account transfers. So the people who are not working are making more money than the people who are working. 32,574 per capita versus 33 per capita. So you can see that the people who are not working at the very lowest quintile, only 9% of them are working. I'm making in America, sorry, only, what is it? Only 36% of them are working. Only 36% of them are working. That quintile is making as much money in terms of income as people who are working 92%, 85%. What you get here is a real inversion. What you get here is a situation where for many Americans, it's worth it not to work. It's worth it to be on the door. It's worth it to receive a variety of different benefits, transfer payments, because the cost of them in terms of income is zero and potentially working is less beneficial than receiving welfare as a consequence. You get high numbers of young people who are poor by definition almost, not working, not participating in the workforce. So the bottom quintile, the bottom quintile has 2.4 times as many working age members, I'm sorry, the second quintile has 2.4 times more working age people working than the bottom. People are working harder, longer, more people are working and yet they're making the same amount of money. Now, there's a massive injustice here. People are working hard, barely surviving, somehow scraping it together in that second quartile, quintile, and yet other people who are not working are just where they are. Now imagine if you're a working class American who's in that second or third quintile and you look at the people who are not working in America and you're seeing them basically the same place you are and all they do is complain because their welfare checks are not large enough because supposedly there's systemic racism because of all kinds of things. You're gonna be pissed off, you're gonna be unhappy. I think a lot of the angst that exists out there, you know, partially there's high suicide rates among working class Americans, the high opioid use among working class Americans and the attractiveness of somebody like Donald Trump to working class Americans has to do with this sense of something is deeply wrong in America. If I work hard all day and other people are not working at all and we're making the same amount, I'm being taxed, my taxes going to pay for them but they're not working and they can work. I mean it's frustrating, demoralizing. It explains the low workforce participation rate that we're seeing as welfare increases as government programs and this is government programs at the federal, state, local level increase, why work? And notice that in 1967 before the war on poverty was announced, in 1967, 68% of working age people in the bottom quintile worked. In 2017 it was 36%, I don't know what it is today. So the lesson many people learnt from welfare from the war on poverty is I don't need to work. I can get money without working. Now you could have predicted this. This is not rocket science. This is not a surprising result in Centerv's mind. This is not a surprising result in Centerv's matter but there you go. It is what it is. It is a result. This is what happens. The welfare state, as I've said, over and over and over again in debates and is destructive. It's destructive to the character of people. It's destructive to the self-esteem of people. It's destructive to their incentives. Now, if you're ambitious and you're self-motivated and so on, you can get out of poverty and you will find a job and you will work hard and you will do everything that you need to do to get out of there. But the handing of people checks, the giving them of checks, the demoralizing impact of that, not only is demoralizing to people receiving the checks, they're not ambitious. They don't, particularly the weaker ones but it's primarily demoralizing to the people whose money is being taken away from them to provide those checks who themselves are having a hard time earning a living. People just above some kind of poverty line and it's demoralizing to that middle class. So what we're seeing in America today is not an increase in inequality but an increase in equality at the bottom and that increase of equality at the bottom is actually eroding self-reliance. It erodes worker pride. It erodes labor force participation. It is a government generated income inequality and government generated income equality always and everywhere results in disaster and always and everywhere is a sign of a lack of freedom in this case through the welfare state. Now, one way within the context of a welfare state you could solve this, not that I'm for this because I'm against a welfare state on principle is to make it a requirement to work if you're gonna get wealthy, if you're gonna get any supplement first work, if you're capable of, if you're, but the tragedy is you've got working-age people who are just not working and there's no cost to that. There's no penalty to bear and that has vast social consequences and it has vast political consequences and I think to shift to populism both on the left and the right are big consequence of the fact that we have such an expansive welfare state. Thank you for listening or watching the Iran Book Show. If you'd like to support the show, we make it as easy as possible for you to trade with me. You get value from listening, you get value from watching, show your appreciation. 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