From the founding of this nation to the present there has been an
understandable tension between equality and individualism.
Clearly we, as Americans, want both, assuming they are reasonably
defined.
Equality presumes equal before the law, equal or roughly equal
opportunity and even equal in the eyes of God. But it does not
mean or should not mean equal in the race for success and equal
economic results.
Yet curiously the nation is moving from the safety net designed
to assist those in peril to redistribution or the attempt to
equalize economic results, i.e. "spread the wealth around."
This condition I would describe as a belief in compression at the
mean, a belief that has penetrated almost every aspect of
American life. It is the egalitarian project launched by John
Dewey in the 1920s and embraced by President-elect Barack Obama.
Take education as an example. Almost all recent funding in this
arena is designed to assist those in the bottom quartile of
performance. Schools that are not performing well receive more
funding than schools that meet state guidelines, based on the
assumption that additional funding can influence performance. And
in some cases, this has proven to be the case. The bottom moves
closer to the middle of the pack. Yet totally ignored in this
distribution scheme are those in the highest quartile, those who
might be described as excellent. The consequence, of course, is
decline at the top of the achievement pyramid, some upward
movement at the bottom and a bulge in the middle.
Assume a similar set of conditions in the tax structure where
those who earn over $250,000 (or is it $150,000?) are taxed at a
higher rate than those who earn less. Since rebates will be given
to those in the bottom quartile of the income structure paid for
by those in the top quartile, it would appear that progressivity
in the tax system is designed to promote compression at the mean.
No one too rich and no one too poor.
The problem with this arrangement is that if you eviscerate the
incentive for wealth, those who have the capacity to attain it
will be disincentivized. Why earn more if the government intends
to take it away and give it to others?
The same situation is emerging in the financial and industrial
areas. By offering to jump start a faltering economy, Secretary
of the Treasury Hank Paulson has advocated assisting some
financial houses, but not others. The government assisted J.P.
Morgan with the purchase of Bear Stearns, but let Lehman Brothers
fail. Consideration is being given to a loan for the Big Three
automakers, but not to computer manufacturers. Aside from the
fact that government officials can play God and determine who
stays in business and who doesn't, these bailouts are predicated
on the simple proposition that those companies capable of
generating profits and paying taxes will be obliged to assist
companies that are failing and need a handout.
The danger is that at some point every company will be asking for
assistance. In fact, the egalitarian project will inevitably fail
because it destroys the incentive to succeed. By homogenizing
economic rewards, government is instituting mediocrity. The
society is suggesting that meritorious results should not be
sought or valued.
Imagine a situation in which baseball players earning the highest
salaries based on performance have to subsidize those who are
".200 hitters." What would baseball become? Who would bother
attending games or even watching on TV?
Yet the movement for compression at the mean continues unabated.
Where it will lead is clear. Unfortunately, its devotees don't
seem to mind.
