Table Of ContentEQUAL	IS	UNFAIR
AMERICA’S	MISGUIDED	FIGHT	AGAINST
INCOME	INEQUALITY
DON	WATKINS	 	YARON	BROOK
AND
St.	Martin’s	Press
New	York
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PART	ONE
MAKING	SENSE	OF	THE
INEQUALITY	DEBATE
CHAPTER	ONE
WHO	CARES	ABOUT	INEQUALITY?
THE	DEFINING	CHALLENGE	OF	OUR	TIME?
A	few	years	ago,	one	of	the	authors	of	this	book,	Yaron	Brook,	was	invited	to
give	 the	 keynote	 address	 at	 the	 Virginia	 Republican	 Party	 State	 Convention.
Here’s	how	he	started.
I	was	not	lucky	enough	to	be	born	an	American	citizen.	I	became	an	American	citizen	by	choice.	I
immigrated	to	this	country.	I	was	born	and	raised	in	Israel.	I	served	in	the	Israeli	military	where	I	met
my	wife	of	twenty-seven	years.	And	when	we	got	married,	after	we	had	fought	for	our	country,	we	sat
down	and	said,	you	know,	you	only	live	once	and	we	want	to	make	the	most	of	our	lives,	we	want	to
be	someplace	where	we	can	enjoy	freedom,	where	we	can	make	the	most	of	the	life	that	we	have,
where	we	can	pursue	our	happiness,	where	we	can	raise	our	children	to	the	best	of	our	ability.	And	we
looked	around	the	world.	We	weren’t	committed	to	any	particular	place,	so	we	looked	around	the
world	and	we	said,	“Where	are	we	going	to	go?”	We	chose	this	country	because	America	is	the
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greatest	nation	on	earth,	and	really	is	the	greatest	nation	in	human	history.
Of	all	the	questions	Yaron	considered	before	he	made	his	decision,	one	that
never	came	up	was	how	much	economic	inequality	there	was	in	America.	Like
millions	before	him,	Yaron	came	to	America	seeking	to	make	a	better	life	for
himself	and	his	family:	he	wanted	to	experience	the	American	Dream,	in	which
he	would	be	free	to	set	his	own	course	and	rise	as	far	as	his	ability	and	ambition
would	take	him.	Would	that	put	him	in	the	top	1	percent	or	the	bottom	10	percent
of	income	earners	in	America?	It	would	never	have	occurred	to	him	to	ask,	and
if	someone	had	asked	him,	his	answer	would	have	been:	“Who	cares?”
Yaron	is	not	unique	in	this	regard.	Polls	consistently	show	that	inequality	is
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very	 low	 on	 Americans’	 list	 of	 concerns. 	 Even	 people	 who	 live	 in	 rural
Michigan	and	struggle	to	make	their	mortgage	payments	apparently	don’t	care
that,	hundreds	of	miles	away	in	New	York,	a	handful	of	hedge	fund	managers	fly
on	 private	 jets	 and	 dine	 at	 Nobu.	 What	 we	 do	 care	 deeply	 about	 is	 the
opportunity	 to	 make	 a	 better	 life	 for	 ourselves—and	 we	 are	 more	 likely	 to
celebrate	the	fact	that	this	allows	some	people	to	succeed	beyond	their	wildest
dreams	than	lose	sleep	over	it.
But	hardly	a	day	goes	by	in	which	we	aren’t	told	that	our	attitude	toward
economic	inequality	is	wrong—that	even	if	we	don’t	care	about	inequality	in	and
of	itself,	we	should	care,	because	it	threatens	the	American	Dream.	In	one	of	his
most	celebrated	speeches,	President	Obama	declared	that	“the	defining	challenge
of	our	time”	is	“a	dangerous	and	growing	inequality	and	lack	of	upward	mobility
that	has	jeopardized	middle-class	America’s	bargain—that	if	you	work	hard,	you
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have	a	chance	to	get	ahead.”
Obama	is	hardly	a	lone	voice	on	this	issue.	Nobel	Prize–winning	economist
Joseph	 Stiglitz	 writes	 of	 “the	 large	 and	 growing	 inequality	 that	 has	 left	 the
American	social	fabric,	and	the	country’s	economic	sustainability,	fraying	at	the
edges:	the	rich	[are]	getting	richer,	while	the	rest	[are]	facing	hardships	that
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[seem]	inconsonant	with	the	American	Dream.” 	Journalist	Timothy	Noah	warns
that	 “income	 distribution	 in	 the	 United	 States	 is	 now	 more	 unequal	 than	 in
Uruguay,	 Nicaragua,	 Guyana,	 and	 Venezuela,	 and	 roughly	 on	 par	 with
Argentina.	.	.	.	Economically	speaking,	the	richest	nation	on	Earth	is	starting	to
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resemble	 a	 banana	 republic.” 	 French	 economist	 Thomas	 Piketty,	 in	 his
celebrated	work,	Capital	 in	 the	 Twenty-First	 Century,	 warns	 that	 “capitalism
automatically	 generates	 arbitrary	 and	 unsustainable	 inequalities	 that	 radically
undermine	the	meritocratic	values	on	which	democratic	societies	are	based,”	and
so	“the	risk	of	a	drift	toward	oligarchy	is	real	and	gives	little	reason	for	optimism
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about	 where	 the	 United	 States	 is	 headed.” 	 The	 bottom	 line,	 according	 to
Obama,	 is	 that	 the	 “combined	 trends	 of	 increased	 inequality	 and	 decreasing
mobility	pose	a	fundamental	threat	to	the	American	Dream,	our	way	of	life,	and
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what	we	stand	for	around	the	globe.”
In	his	1931	book	The	Epic	of	America,	James	Truslow	Adams	introduced	the
phrase	“the	American	Dream”	into	the	lexicon,	referring	to	“that	dream	of	a	land
in	 which	 life	 should	 be	 better	 and	 richer	 and	 fuller	 for	 everyone,	 with
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opportunity	 for	 each	 according	 to	 ability	 or	 achievement.” 	 The	 American
Dream	is	about	opportunity—the	opportunity	to	pursue	a	better	life,	where	one’s
success	depends	on	nothing	more	(and	nothing	less)	than	one’s	own	ability	and
effort,	and	where,	as	a	result,	innovators	can	come	from	nowhere	to	spearhead
limitless	human	progress.
On	the	face	of	it,	that	dream	would	seem	to	entail	enormous	inequality:	in	a
land	where	there	are	no	limits	on	what	you	can	achieve,	some	will	earn	huge
fortunes,	many	will	earn	a	decent	living,	and	others	will	fail	for	one	reason	or
another.	Yet	critics	insist	that	economic	inequality	is	at	odds	with	the	American
Dream.	Their	specific	arguments	vary,	but	they	all	boil	down	to	three	general
claims:	 in	 one	 way	 or	 another,	 inequality	 conflicts	 with	 economic	 mobility,
economic	progress,	and	fairness.
1.	Inequality	vs.	Mobility.	The	best	proxy	for	opportunity,	according	to	the
critics,	is	economic	mobility.	There	are	different	ways	of	assessing	mobility,	but
however	you	measure	it,	they	say,	the	fact	is	that	if	you’re	born	poor	in	America,
chances	are	you’ll	stay	poor,	and	if	you’re	born	rich,	you’ll	probably	stay	rich.
Some	critics	argue	that	rising	inequality	is	a	result	of	the	same	forces	that	are
limiting	mobility,	such	as	the	decline	of	unions	or	the	minimum	wage.	Others
paint	inequality	as	a	cause	of	declining	mobility—citing,	for	instance,	the	ability
of	affluent	Americans	to	send	their	children	to	exclusive	schools	that	poorer
parents	cannot	afford.	In	many	cases,	the	connection	between	rising	inequality
and	declining	mobility	is	never	fully	spelled	out:	we	are	simply	told	that,	for
instance,	the	highly	unequal	United	States	has	less	economic	mobility	than	our
counterparts	in	Europe,	and	that	we	can	increase	mobility	by	molding	ourselves
in	the	image	of	European	social	welfare	states.
2.	Inequality	vs.	Progress.	According	to	the	critics,	economic	inequality	is	at
odds	with	economic	progress.	The	dominant	view	is	that	the	last	forty	years	have
been	marked	by	a	startling	rise	in	income	and	wealth	inequality,	as	the	rich	got
richer	 and	 the	 poor	 and	 middle	 class	 stagnated.	 Some	 argue	 that	 this	 rising
inequality	is	a	telling	symptom	of	underlying	economic	problems,	such	as	tax
and	 regulatory	 policies	 that	 favor	 “the	 rich.”	 Others	 claim	 inequality	 causes
economic	progress	to	slow,	citing	statistical	correlations	between	high	inequality
and	lower	growth.	Explanations	for	how	inequality	slows	growth	are	all	over	the
map,	ranging	from	the	claim	that	it	reduces	consumer	spending,	supposedly	the
driving	force	of	economic	growth,	to	the	claim	that	inequality	makes	workers
less	happy	and	therefore	less	productive.
3.	Inequality	vs.	Fairness.	One	of	the	reasons	we	value	opportunity	is	that	it
reflects	our	commitment	to	fairness.	We	believe	that	a	person’s	level	of	success
should	be	tied	to	merit,	and	that	if	you	lie,	cheat,	or	steal—or	simply	make	dumb
decisions—your	“privileged	position”	shouldn’t	protect	you	from	failing.	But
rising	inequality,	the	critics	claim,	is	at	odds	with	fairness.
Sometimes	the	claim	is	that	inequality	undermines	fairness	by	giving	“the
rich”	the	power	to	rig	the	political	system	in	their	favor.	“Ordinary	folks	can’t
write	 massive	 campaign	 checks	 or	 hire	 high-priced	 lobbyists	 and	 lawyers	 to
secure	 policies	 that	 tilt	 the	 playing	 field	 in	 their	 favor	 at	 everyone	 else’s
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expense,”	President	Obama	tells	us. 	 In	 other	 cases,	 the	 claim	 is	 that	 rising
inequality	is	 the	 result	of	 injustice.	 According	to	 Stiglitz,	“Too	much	 of	 the
wealth	at	the	top	of	the	ladder	arises	from	exploitation.	.	.	.	Too	much	of	the
poverty	at	the	bottom	of	the	income	spectrum	is	due	to	economic	discrimination
and	the	failure	to	provide	adequate	education	and	health	care	to	the	nearly	one
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out	of	five	children	growing	up	poor.”
Often,	however,	the	underlying	message	is	that	economic	inequality,	at	least
beyond	a	certain	point,	is	inherently	unjust.	In	Obama’s	words,	“The	top	10
percent	no	longer	takes	in	one-third	of	our	income	[as	they	did	prior	to	the
1970s]—it	now	takes	half.	Whereas	in	the	past,	the	average	CEO	made	about	20
to	30	times	the	income	of	the	average	worker,	today’s	CEO	now	makes	273
times	more.	And	meanwhile,	a	family	in	the	top	1	percent	has	a	net	worth	288
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times	higher	than	the	typical	family,	which	is	a	record	for	this	country.” 	These
ratios,	the	president	assumes,	are	self-evidently	unjustifiable.
Whatever	 account	 any	 given	 critic	 endorses,	 the	 conclusion	 is	 always	 the
same:	if	we	care	about	the	American	Dream,	we	have	to	reduce	inequality	by
propping	up	those	at	the	bottom	and	by	bringing	down	those	at	the	top.	And	so
along	 with	 proposals	 to	 increase	 the	 minimum	 wage	 and	 bolster	 unions,	 the
inequality	critics	also	advocate	top	marginal	income	tax	rates	well	above	50
percent,	 huge	 taxes	 on	 inheritances,	 vast	 amounts	 of	 regulation	 designed	 to
restrain	big	business,	salary	caps	on	CEO	pay,	and	campaign	finance	laws	to
constrain	political	speech	by	the	wealthy,	to	name	only	a	few	of	their	schemes.
In	Piketty’s	runaway	bestseller,	Capital	in	the	Twenty-First	Century,	the	chief
proposals	for	fighting	inequality	are	an	annual	global	wealth	tax	of	up	to	10
percent	a	year,	and	a	self-described	“confiscatory”	top	marginal	income	tax	rate
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as	high	as	80	percent.
For	 some,	 even	 this	 doesn’t	 go	 far	 enough.	 There	 are	 critics	 of	 economic
inequality	who	are	largely	indifferent	to	its	impact	on	opportunity	and	want	to
level	down	society	even	if	it	means	crippling	economic	progress.	In	their	popular
critique	of	economic	inequality,	The	Spirit	Level,	Richard	Wilkinson	and	Kate
Pickett	 tell	 us	 that	 “we	 need	 to	 limit	 economic	 growth	 severely	 in	 rich
countries,”	because	“[o]nce	we	have	enough	of	the	necessities	of	life,	it	is	the
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relativities	which	matter.” 	Similarly,	bestselling	author	Naomi	Klein	argues
that	 to	 truly	 deal	 with	 the	 problem	 of	 inequality,	 we	 must	 reject	 capitalism
altogether,	 give	 up	 on	 the	 idea	 of	 economic	 progress,	 and	 embrace	 a
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decentralized	 agrarian	 form	 of	 socialism. 	 Left-wing	 radio	 host	 Thom
Hartmann	will	settle	merely	for	banning	billionaires:	“I	say	it’s	time	we	outlaw
billionaires	by	placing	a	100%	tax	on	any	wealth	over	$999,999,999.	Trust	me,
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we’ll	all	be	much	better	off	in	a	nation	free	of	billionaires.”
SHOULD	WE	BE	SUSPICIOUS	OF	INEQUALITY?
The	inequality	critics	paint	a	bleak	picture	of	modern	America—one	so	bleak
that	 many	 of	 us	 do	 not	 recognize	 it	 in	 our	 daily	 experience—and	 offer	 up
solutions	that	many	of	us	find	deeply	troubling.	But	at	the	same	time,	these
critics	are	addressing	issues	of	profound	concern,	and	their	claims	come	backed
by	 seemingly	 persuasive	 evidence:	 statistics,	 studies,	 and	 books	 by	 some	 of
today’s	leading	intellectuals	and	journalists.	We	want	America	to	be	a	land	of
Description:We’ve all heard that the American Dream is vanishing, and that the cause is rising income inequality. The rich are getting richer by rigging the system in their favor, leaving the rest of us to struggle just to keep our heads above water. To save the American Dream, we’re told that we need to fi