In his widely noted speech, President Obama said that "a dangerous and growing inequality and lack of upward mobility" is "the defining challenge of our time." This belief makes Mr. Obama unique: Unlike the other presidents since World War II, he places inequality above economic growth as the organizing principle of U.S. economic policy. The president's Dec. 4 speech, at an event hosted by the Center for American Progress, also stressed that increasing inequality is a "decades-long trend"—which carries with it the strong implication that the country needs to reverse the direction it has taken for the last three decades. But like so many of his other pronouncements, the assumptions behind his defining challenge are misleading.
Enlarge Image
President Obama at an event hosted by the Center for American Progress, Dec. 4. Reuters
Virtually all of the data cited by the left to decry the supposed explosion of income inequality, as Lee Ohanian and Kip Hagopian point out in their seminal paper, "The Mismeasure of Inequality" (Policy Review, 2011), use a Census Bureau definition of "money income" that excludes taxes, transfer payments like Medicaid, Medicare, nutrition assistance, the Earned Income Tax Credit, and even costly employee benefits such as health insurance.
Thus the data that is conventionally used to calculate the so-called Gini coefficient—the most commonly used measure of income inequality—ignore America's highly progressive income tax system and the panoply of benefits and transfer payments. According to Messrs. Ohanian and Hagopian, once the effect of taxes and transfer payments is taken into account, "inequality actually declined 1.8% during the 16-year period between 1993 and 2009, when the Gini coefficient dropped from .395 to .388."
In his speech, Mr. Obama cited a recent study from economists at Columbia University that found that already enacted benefits and tax programs have reduced America's effective poverty rate by 40% since 1967—to 16% from 26%. But he ignores all this when he claims that inequality is increasing.
The Columbia study shows that Messrs. Ohanian and Hagopian's research is hardly an outlier. The Congressional Budget Office released a study that came to a similar conclusion in October 2011. The CBO study picked an artificial starting point of 1979, amid a crushing period of stagflation. Yet it still showed that family income, including benefits, on average experienced a 62% gain above inflation from 1979 to 2007. It also showed that all five quintiles of the income distribution spectrum experienced real gains in family income.
The CBO study contradicts Mr. Obama's claims in the 2008 presidential campaign and early in his first term that the middle class was "falling behind." The real concern is that some people were getting too far ahead.
With respect to upward mobility, longitudinal studies conducted by the U.S. Treasury have found that there was "considerable income mobility" in the decades 1987-1996 and 1996-2005. For example, roughly half of those in the bottom income quintile in 1996 had moved to a higher quintile by 2005. The "median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups" in that decade, while the real incomes of two-thirds of all taxpayers experienced an increase.
Here is the bottom line: In periods of high economic growth, such as the 1980s and 1990s, the vast majority of Americans gain, and have the opportunity to gain. In periods of slow growth, such as the past four and a half years since the recession officially ended, poor people and the middle class are hurt the most, and opportunity is curbed.
Consider the Census Bureau data, which measure only money income. The data show that median family income adjusted for inflation has not been on a steady or stagnating path since the 1970s. It fell, in real terms, by 5.7% from 1974-1982, when slow growth and high inflation ravaged the average family. Tellingly, in this period, real income fell for the bottom four quintiles, but held steady for the top 20%.
From 1983 to 2007, however, median family income grew substantially—by 21.6% above inflation—and real income grew for all five quintiles. Then, beginning in 2008, real income plunged again, both for the median family and for all quintiles.
The point is this: If the goal is to deliver higher incomes and a better standard of living for the majority of Americans, then generating economic growth—not income inequality or the redistribution of wealth—is the defining challenge of our time.
Regarding growth, Mr. Obama claimed in his speech that we should use some money "to create good jobs rebuilding our roads and our bridges and our airports, and all the infrastructure our businesses need." Yet a recent analysis by BCA Research shows a sharp drop in real spending by the government on nondefense infrastructure since the president took office. When a Democratic Congress passed the president's massive $800 billion stimulus bill, seven-eighths of the total went to transfer payments like Medicaid, food stamps and sending a check to millions of Americans who do not pay income taxes.
The president claims to be concerned about spurring private investment. But investors at home and abroad can readily see that his steadfast refusal to reform the country's entitlement programs threatens spending on physical infrastructure, education, university research and other items that will contribute to the future productivity of the United States. That same unrestrained entitlement growth, and the debt that comes with it, will ultimately compromise the value of dollar-denominated assets. Public companies have trillions of dollars of cash to invest sitting on their balance sheets, but the Obama economy's growth record is weak, and insufficient to attract capital investment.
Straining credulity, Mr. Obama also pointed in his income inequality speech to theAffordable Care Act as one of his initiatives to improve the economy, despite clear evidence that the law's employer mandate is discouraging full-time employment. For most of this year, the overwhelming majority of jobs added to the U.S. economy have been part-time, not full-time. Gallup's payroll-to-population ratio, the proportion of the American population working full time, has dropped almost two full percentage points in the last year, to 43.8%.
Mr. Obama said in his speech that "making sure our economy works for every working American" is what "drives everything I do in this office." Accomplishing this worthy goal requires growth, not redistribution.
Mr. Grady, a managing director at the private-equity firm Cheyenne Capital Fund, is the chief economic adviser to New Jersey Gov. Chris Christie and chairman of the New Jersey State Investment Council.


3c)

Has A&E Awakened a Sleeping Giant?

By Robert Arvay

While the Japanese were celebrating the bombing of Pearl Harbor in December of 1941, the mastermind of that attack, Admiral Isoroku Yamamoto, had a sobering message for his countrymen. "We have awakened a sleeping giant," he said.

Even before the war began, the admiral had warned his emperor that Japan would enjoy early victories in any war with the United States, but that winning streak would last only six months to a year, after which American industrial might would inevitably overwhelm the small island nation.

He was right. For the first few months of World War II, the Japanese war machine steamrolled over the Pacific, humiliating and defeating the best that the United States and its allies (British Commonwealth and Dutch) could throw against it, winning battle after battle. To some, it seemed hopeless to resist.

Then came the Battle of Midway, where the Japanese Navy suffered its first catastrophe, and the long, bloody road to Allied victory began.

For years now, the gay lobby has steamrolled over the Christian conservative movement, humiliating us and defeating us in battle after battle. Then came the battle of "Duck Dynasty," and the gay lobby suffered a major backlash. Have they finally met their Midway?

For many years now, the drill has become familiar. Someone speaks out in favor of maintaining the traditions of marriage, and instantly the gay rights organizations are up in arms, making threats, filing lawsuits, and mobilizing protests. Then, instead of Christians putting up a serious resistance, there is apathy, apology, and defeat. The script was repeated over and again, time after time.

This time was different. This time, millions of Christians and other Americans, even some enlightened gays, said, enough is enough. We've had it with your bullying. We're mad as hell, and we're not going to take it anymore. The left was stunned, reeling backward in defeat. For the first time in a long time, they are not reloading, they are retreating.

I cannot say exactly how much of this came about because of "Duck Dynasty." While it obviously played a major role, I suspect there was more than one factor at work. The efforts of gays and others on the left to intimidate and silence Americans is not the only thing that Christians have become exasperated with. A whole host of other attacks upon First Amendment rights has gradually, perhaps invisibly, built up pressure in the hearts of freedom-loving Americans. A long list of violations of our rights by the most leftist president we have ever had surely played a role in the impatience Americans are feeling. If not the "Duck Dynasty" controversy, then some other event was sure to eventually blow the top off the volcano.

"Duck Dynasty" was not, we should note, entirely an accidental target of the social left. 
Its immense popularity had become perceived by Progressives as the very real threat it is -- a threat to those who wield the power of the entertainment media. It had long been known that small-budget, Christian-oriented movies are making strong inroads into the monopoly that the left has long claimed as its exclusive entitlement. Hollywood is the platform from which humanists and secularists broadcast their propaganda. In the bowels of this darkness, not even a few flickering candles of truth could be allowed to shine, because against the faintest candle, even the mightiest darkness is driven into defeat.

Against the small, intrepid flotilla of truth, the mighty battle-fleet of leftist dogma sailed forth, expecting yet one more victory on its way to total domination of society, a society in which (they hope) even the merest mention of Biblical teachings will be quickly crushed and smothered. They expected that smashing the ducksters would be done almost without breaking stride. A simple complaint, an implied threat, should do the job. Against the gay juggernaut, the Christian majority was predicted to cower in fear.
We now know that matters turned out very differently.

Very well. We won. The forces of would-be tyranny have suffered a major setback -- but we cannot afford to gloat. There is much more work to be done, and none of it will be easy. The great and bloody battles are yet to be fought. Winston Churchill warned the allies to expect victory, but only after much blood, toil, sweat and tears.

The victory is not ours, but God's, and He will win it for us, on His schedule, not ours.
It is not however, gloating, to visualize the disappointed aspiring dictators in their darkened caves, feeling the chill wind of forthcoming defeat, as they realize the grim truth -- they have awakened a sleeping giant.