Be careful what you wish for

Three items fit into the category of the headline today.

First, Alan Reynolds of the Cato Institute, in the Wall Street Journal, on reports of how income inequality grew between 1979 and 2007:

A recent report from the Congressional Budget Office (CB0) says, “The share of income received by the top 1% grew from about 8% in 1979 to over 17% in 2007.”

This news caused quite a stir, feeding the left’s obsession with inequality. Washington Post columnist Eugene Robinson, for example, said this “jaw-dropping report” shows “why the Occupy Wall Street protests have struck such a nerve.” The New York Times opined that the study is “likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.”

But here’s a question: Why did the report stop at 2007? The CBO didn’t say, although its report briefly acknowledged—in a footnote—that “high income taxpayers had especially large declines in adjusted gross income between 2007 and 2009.”

No kidding. Once these two years are brought into the picture, the share of after-tax income of the top 1% by my estimate fell to 11.3% in 2009 from the 17.3% that the CBO reported for 2007.

The larger truth is that recessions always destroy wealth and small business incomes at the top. Perhaps those who obsess over income shares should welcome stock market crashes and deep recessions because such calamities invariably reduce “inequality.” Of course, the same recessions also increase poverty and unemployment.

The latest cyclical destruction of top incomes has been unusually deep and persistent, because fully 43.7% of top earners’ incomes in 2007 were from capital gains, dividends and interest, with another 17.1% from small business. Since 2007, capital gains on stocks and real estate have often turned to losses, dividends on financial stocks were slashed, interest income nearly disappeared, and many small businesses remain unprofitable.

But hey, the top 1 percent had a smaller share of AGI between 2007 and 2009, so that’s a good thing, right? We’ve been  better off because the evil rich had a smaller share, right?

The good news is that there is one Wisconsin Democrat who admits that Recallarama might not be the best thing, even if, as James Wigderson passes on, she’s concerned about what will happen to the Democratic Party:

… I am torn about whether this recall race is in the best interest of democracy, and about the precedent this recall could set.

I fear that crucial money and resources will go to this effort at the expense of the incredibly important Assembly and U.S. Senate races in the state. If Democrats re-take the Assembly, there will be a strong base of duly elected officials fighting for Democratic priorities, which will effectively take the Walker machine offline until the next election cycle. Tammy Baldwin is a strong Democrat, but she will need lots of money and soldiers to win; she is not a slam-dunk with statewide voters.

The recall will also draw out in force Republican voters who might not otherwise be motivated until November. In addition, Democratic party and interest money will have to spread across hundreds individual fronts nationwide in the coming year, not to mention the presidential election. Then there’s voter fatigue, and I assert that it is very real, especially since the state Senate recall elections.

Then there’s the question that no one seems to be asking: If we run record numbers of recall races against the currently elected legislature and governor, are we setting a precedent for permanent chaos? In state elections, Wisconsin is not truly Blue; the electorate is almost evenly split along party lines, with a particularly wild cadre of independents. No one side has a clear mandate from the people, at least not at the polls. Going forward, what’s to stop the Republicans from launching recall efforts of their own, countered by more counter-recalls? And if that happens, how long until the last vestiges of democratic process are swept away? …

Left to run its course, is there not a very good chance that the newly disenfranchised, including some Republicans, will rise up and naturally elect a new governing body that will serve the needs of the majority of the people? And if we don’t believe this, then maybe it’s time to ditch the whole idea that democracy is real.

Consider that Democratic supporters will be asked to donate money and time in the coming year for the Walker recall, plus any recalls of Republican state senators (those in odd-numbered Senate districts), plus the (legitimate) 2012 Assembly and Senate races, plus the Tammy Baldwin for U.S. Senate campaign, plus the campaigns against new U.S. Reps. Reid Ribble (R–Sherwood) and Sean Duffy (R–Ashland), plus the campaign for Baldwin’s House replacement … and, by the way, the Barack Obama reelection campaign. All that comes after a year in which more than $40 million was raised to drop the Republican state Senate margin from 19–14 to 17–16.

Those are the financial realities. Wigderson passes on a political reality:

It’s a real problem when one political party considers an election result to be illegitimate merely because it wasn’t the result that the party desired. Asking for a “do-over” over a policy difference undermines the idea of a elected representative government. Opening up the election process to continued “do-overs” will eventually make representative government untenable. When that happens, Willow asks the right question, “…how long until the last vestiges of democratic process are swept away?”

Finally, let’s say that Recallarama part deux is successful, Walker loses, and the public-sector unions get their precious collective bargaining and all their contribution-free bennies back. Should that happen, Big Government reports on Ohio cities’ laying off firefighters, school district support staff and security personnel, eliminating preschool and high school athletics, and closing fire stations. Ohio voters deserve all of this since they voted to overturn a state law similar to Wisconsin’s new public employee collective bargaining rules. Should Walker lose his recall election, Wisconsin will thoroughly deserve the same fate.

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