Mr. Obama continues to focus on wealth inequality as the causal force driving lack of opportunity, and is expected to push to some degree in his SOTU speech.  As we discussed last month, Mr. Obama asserts this is “the defining challenge of our time.”  Notice the reason this is so important: it is a difficult moral or political case to make that wealth inequality per se is something that we ought to fight.  I often challenge my students to identify any biblical case against wealth inequality as inequality itself, separate from legitimate concerns for the poor.  Of course there are many verses which rightly drive our concern for the poor, but the usual arguments are at root fallacious zero-sum game thinking–the wealthy are rich precisely because they have taken from the poor.  In this thinking, for me to have more means you must inevitably have less.  Indeed, I believe that is behind much of the left’s thinking on wealth inequality and income mobility–somehow as the rich are getting a larger share of the income, there are fewer resources left to help the poor (for such things as education and social programs).  We showed a few links last month showing that so-called government investments in education and infrastructure have not “withered” as claimed, but have grown dramatically as income inequality has risen.  But think about the issue of the rich “getting a larger share,” as if somehow its a collective splitting of a  fixed pie, independent of the amount each person produces (as judged by the social imputation process of free markets).  It is precisely this type of collectivist thinking that allows people to ignore the questionable morality of forcibly taking from one person to give to another.

But a key piece of this collectivist armor is that idea that rising wealth inequality leads to fewer opportunities for those on the lower rungs.  That idea suffered a devestating body blow last week when a report being published by the highly respected National Bureau of Economic Research (NBER) showed that income mobility (e.g., the ability of people born poor to rise to middle or upper class) has been essentially the same for the last several decades.   The authors hailed from Harvard, UC Berkeley and the U.S. Treasury; hardly bastions of right-wing thinking, so this is going to be difficult for intellectuals on the left to dismiss.  The question is will it force Mr. Obama to tone down his populist rhetoric?  I think it may well change the terminology, but it will be very difficult for him to abandon this line of attack.  He is on very untenable ground with respect to the economy; median income has dropped substantially even after the so-called recovery began (see below from D Short) and while the number of millionaires is rising rapidly.  He must have something to blame for this, or his own policies will necessarily be questioned.

Mr. Obama’s rhetoric may just be more “muddying the water” to avoid blame for the current economic realities.  But I don’t expect stubborn things like facts to get in the way of the narrative–but let’s watch tomorrow and find out!