Obama Causes Income Inequality

By Dick Morris on December 7, 2013

To distract attention from the ObamaCare disaster, the President is seeking to focus on income inequality. But here, for him, the ground is even shakier.

The fact is that while income inequality has been getting worse, it is the policies of the Obama Administration that are causing the trend.

During the Clinton years, 45% of all personal income gains went to the top 1% of the population. Under Bush it was 65%. Under Obama it is upwards of 85%.

While the top 1% has seen an average 12% gain in personal income, the rest of the nation has gone up by only 1-2 percent, after inflation.

Instead of solving the problem, Obama is causing it.

How?

Quantitative Easing is the major culprit. Buying $85 billion of bonds and mortgage backed securities each month, the Federal Reserve pumps vast amounts of money into the coffers to the top banks in the nation. Supposed to lend it out to create jobs, most institutions don’t. Either they can’t find borrowers or they are afraid that federal regulators will take a dim view of risky loans.

Or they would just rather give the $85 billion back to the Fed and earn the 3% interest they are offered for keeping their money in Bernanke’s vault. After all, if you don’t have to pay anything for the cash, a 3% federally guaranteed return is a good deal. (And, why lend out the money at 6% when you can get 3% for just letting it sit there with a lot less risk).

Spurred by so massive an inflow of cash, banks are playing the derivative market, investing in stocks, augmenting their salary through stock buybacks which they then add to their own pay envelopes, or just passing out bonuses (expected to top $100 billion this year).

All these policies catalyze income growth at the top of the spectrum and add to the inequality of which Obama — whose policies cause it — complains.

Zero Interest Rates really sock it to the elderly who had hoped to live off their hard earned savings during their retirement years. After socking away fifty or a hundred thousand or more, the retirees had counted on a six to ten percent return on their savings to provide needed old age income. But now they get close to zero. Many are driven to plunge into risky investments in stocks and mutual funds, in many cases tempting fate with their investments. Sick or well, the odds are good that they will outlive the bull market.

ObamaCare is drying up full time jobs and forcing millions into part-time employment. Gallup says that 9.1% of Americans now work part-time but would like full time jobs.

Since the first of the year, there are 152,000 fewer and 400,000 more part-time jobs in our economy.

Why? Since this trend was not evident in ’10, ’11, or ’12, the likely cause is ObamaCare’s requirement that companies with 50 or more full time workers offer health insurance or face a $2,000 per worker per year fine. Firms all over America are cutting back on full time workers and replacing them with part-timers to get in under the fifty worker ceiling. The AFL-CIO has decried this trend as the “death” of the forty hour workweek.

Obama is not the solution. He is the cause of the problem of income inequality.

His proposals to raise corporate taxation and increase the minimum wage are likely to worsen the problem, spurring automation and cutting down on investment which is the only way to raise productivity and wage levels.

Obama’s new-found focus on income inequality is the height of hypocrisy.

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