Narrowing the Gap vs Raising the Floor

I've noticed that there is a lot of political angst about the rising gap between the rich and the poor, but I've long wondered if that GAP is what is really important. Some political thinkers definitely believe it is. They want to narrow this gap essentially as a matter of principle in the belief that it is immoral for so much of the wealth of a nation to be controlled by so few. They view the social problems in a country, such as unemployment and lack of access to health care, as largely resulting from this gap. However, the way I see it there will always be a large income gap among people in any economic system where people can act more or less freely; the person who saves or invests wisely is going to have more income in the long run on average than the person who spends and consumes wildly. Not everyone even wants to be rich. Sure, most everyone would opt for great wealth if it was as simple to obtain as pressing a button, but many wouldn't sacrifice the time they spend with their families or their hobbies or social commitments just to make a lot more money. Rather than focusing on a gap that naturally arises among people with varying interests, I tend to think the major goal should be to improve the living conditions for the poorest among us so that no one does without necessities. In short, I think we should focus on raising the floor rather than narrowing the gap. Both naturally can happen at the same time, but it's also quite possible to narrow the gap -- any destruction of wealth will do that -- without raising the floor.

Thus, I fundamentally reject the idea that narrowing the gap between rich and poor is inherently a good thing in and of itself. Some progressives would like to see a return to 90% marginal tax rates just to make the rich pay their "fair share." Realistically, I think in practice this would create a huge incentive for tax evasion, a huge disincentive for trying to become rich (which typically involves taking on risk, like starting a business which creates jobs), and an opportunity for other countries to lure wealthy American citizens to greener pastures. It would also give the state a heck of a lot of money to do whatever it wants with; historically, at least, waging war and building ever larger bureaucracies have been two of the state's favorite things...much more so than benefiting the poor. Instead of approaching societal problems from the standpoint of trying to hurt the rich (and fill the state's coffers in the process), we should instead think first about helping those who need help the most in whatever way we can.

To me, that means focusing on necessities first. If basic food, clothing, shelter, education, and health care are ubiquitous and affordable, everyone will have a decent place to launch from. There's more than one way to increase access to necessities, and it can be done by the private sector as easily as the public sector...I don't think the source is as important as the actual solution of the underlying problems. However, we also don't want the cure to cause as many problems as the disease. I wonder, for instance, what allowing the government to force people to buy health insurance will lead to...is it just the start of many more mandated expenses in the future as corporations and the government tag team the citizenry? I think we are definitely trading our freedom for safety which is always a dangerous proposition. Meanwhile, the underlying health care and health insurance bubble hasn't burst, and it's definitely not the only bubble still growing in this economy. Why, for instance, should a person be in debt for the rest of their lives because they want to own a home built decades ago or attend a university their grandparents were able to attend by paying their own way? Some necessities have simply grown too expensive (necessities have by definition inelastic demand...people want them regardless of price), and both the public and private sectors have teamed up to keep prices high. The concept of housing as an investment has been destructive to the concept of housing as shelter, but Fannie Mae's guaranteeing mortgages in the name of increasing access to housing has also artificially kept housing prices high. Even now, the government is actively fighting house price deflation when that is just what should be happening! I'm always interested in hearing new and innovative government solutions to problems, but for now I still think our best hope comes from technology (imagine new, cheaper ways of building homes becoming mainstream...plus robots to build them), free and competitive markets, and vigorous nonprofits if we want to improve access and affordability at the same time. I have no confidence the government won't just end up narrowing a relatively unimportant gap without actually making individual lives better. What's the use of a better Gini index if it doesn't translate into truly better living conditions?