by Richard A. Epstein
May 06, 2014
The upside of economic inequality is that, as a byproduct of economic growth and prosperity, it makes life better for everyone, especially the poor. Yet, future growth is unsustainable in an age dominated by progressive politics. There are two reasons for this: an extensive system of regulation of all key sectors of economy—including labor, real estate, health care, and financial markets—and a combination of progressive income taxes, specialized levies, and a heavy estate tax, whose proceeds are used to fund a system of transfer payments. Today’s unending cycle of regulation, taxation, and transfer payments induces non-stop political competition, which lets strong voting coalitions take from their adversaries in order to enrich their friends. This crony capitalism reduces the return to both capital and labor. The solution requires systematic deregulation coupled with flat taxes to increase competition, in turn producing greater economic growth and prosperity for all.