Growth vs Equitable Growth

 

There is a huge debate going on in political and policy circles between the advocates of increasing economic growth and the advocates of increasing income equality.  I generally argue that the best way to increase income equality is to increase economic growth overall.
CaptureI have just come across a series of articles from the Nov/Dec 2014 issue of the American Monthly, “American Life: an investor’s guide,” which are sponsored by the Washington Center for Equitable Growth, a progressive Think Tank.  The fact that this group is focused on equitable growth, rather than the narrower goal of income equality, is of great interest to me.
Capture1They advocate a number of things that I agree with such as:

  • The incredible importance of early childhood healthcare and education.
  • Improving K-12 education, especially in low-income areas.
  • Providing much more vocational education and apprenticeship programs.
  • Running a “high pressure” economy in order to tighten the labor market. They recognize that lower unemployment leads to higher wages (see above).
  • Expand the Earned Income Tax Credit especially for workers without children.

The authors want to “pressurize” the economy with a more stimulative fiscal policy which means increased deficit spending, a very bad idea in my opinion.  Much better ways to boost the economy are with policies such as tax reform, trade expansion, immigration reform and regulatory relaxation.
Yes, there is a high degree of income inequality and yes, it’s getting worse over time.  But, as Warren Buffett says, the poor are not poor because the rich are rich.  The best way to help the poor is to make them more productive.  That is exactly the purpose of the policies enumerated above.

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