Inequality Starts at the Top

Rich Tucker / March 26, 2014

President Obama has vowed to spend his remaining years battling against income inequality. He’s proposing, among other solutions, a national minimum wage. But Washington, D.C., an island of success in a country that’s a sea of struggle, is the wrong place to try to combat inequality.

“During the past decade, the region added 21,000 households in the nation’s top 1 percent. No other metro area came close,” The Washington Post reported last year. And while federal bureaucrats do quite well for themselves—in a family where both parents are GS-14-level bureaucrats, the annual income would top $200,000—they’re not the area’s biggest earners.

The real winners, the Post explains, are “former bureaucrats, accountants and staff officers for whom unimagined riches are suddenly possible. They are the entrepreneurs attracted to the capital by its aura of prosperity and its super-educated workforce. They are the lawyers, lobbyists and executives who work for companies that barely had a presence in Washington before the boom” in federal spending since 2001.

D.C. is booming because companies have discovered that a little money spent on lobbying can pay big dividends. Boston Scientific, to name one, now spends $2.6 million on lobbying. But by influencing federal policy on just one bill, it saved itself between $50 million and $75 million. That’s an impressive return on investment, so little wonder others are also pouring money into lobbying. “Companies spent about $3.5 billion annually on lobbying at the end of the last decade, a nearly 90 percent increase from 1999 after adjusting for inflation,” the Post reports.

Lobbyists help determine what drugs are approved or disapproved. They help get new automotive regulations written and determine whether patents are extended or lifted. And, of course, they help direct old-fashioned pork-barrel spending back to particular projects.

And the lobbyists are paid whether they win or lose. The problem is that these people are getting wealthy without creating real wealth for others: Government merely redistributes money; it doesn’t create wealth.

In generations past, lawyers were usually middle class. “It’s a sturdy profession, and a useful one,” Abraham Lincoln tells his son in the movie Lincoln. Now it can be a quick way to make big money. Abe wouldn’t have predicted that.

In the big picture, inequality isn’t the problem. Some people will always make more and have more than others. What’s important is how the money was made, not how much money was made. The 1 percent in Washington generally practice cronyism, not capitalism. That’s the problem to focus on.