Academic journal article AEI Paper & Studies

Introduction

Academic journal article AEI Paper & Studies

Introduction

Article excerpt

Washington is abuzz with talk of income inequality. President Barack Obama calls it "the defining challenge of our time." Senator Harry Reid says there is "no greater challenge" facing America. The media declares the issue will dominate the debates and elections that lie ahead.

The conventional wisdom on inequality is built on three assumptions: (1) Income inequality is inherently unjust; (2) it is bad for the economy; and (3) government redistribution is the best way to remedy it. According to this narrative, narrowing the gap between what wealthy and working-class Americans earn should be our top political priority, and policies such as raising taxes or increasing the minimum wage are the answer.

This conventional wisdom is incorrect. A free enterprise society is not a zero-sum game in which citizens fight over resources. It should be a shared journey that empowers everyone to improve their station and earn their own success. Income differences are inevitable, and they are not inherently problematic as long as the opportunity to rise is available to everyone. …

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