I get upset when income/wealth inequality is viewed as something that needs to be studied to determine if it negatively affects society. First off, the top 2% that holds the vast majority of income/wealth does not have it because their intrinsic value to society is great. After all that teacher that molds your children, that doctor that cures an illness, that engineer who invents a product of societal value, that scientist that imparts the knowledge to that engineer all have more value than the titans of finance whose service is nothing but the manipulation of money to control all the professions. That that manipulation garners them inordinate wealth is a defect in our capitalist society that has hampered free enterprise.
Tax policy is another impediment for the middleclass to grow their wealth. When income is taxed at a progressively higher rate than capital gains, it discriminates and have a financial impact on the middleclass.
Given that the wealthy’ s marginal propensity to consume is much less than the average middleclass American tax cuts as shown via Bush can have detrimental effect. As an engineer who only believe in numbers, I have no problem understanding that if the growth rate of the wealthy is larger than the growth rate of the middleclass or the expanding pie mathematically only the more wealthy will eventually have.
WASHINGTON (Reuters, By Emily Kaiser) – In 2007, when the world was on the brink of financial crisis, U.S. income inequality hit its highest mark since 1928, just before the Great Depression. Coincidence? Maybe not.
Economists are only beginning to study the parallels between the 1920s and the most recent decade to try to understand why both periods ended in financial disaster. Their early findings suggest inequality may not directly cause crises, but it can be a contributing factor.
This raises a host of social, economic and political questions. Should public policy aim to reduce inequality, and if so by what means? Does concentrated wealth at the top of the income spectrum generate asset bubbles, or vice versa? Could raising taxes or interest rates ward off financial meltdowns?
Americans are generally not bothered by inequality because they believe with hard work, they, too, can strike it rich. Government policies aimed at spreading the wealth rarely get much support. (Remember 2008, when then-candidate Barack Obama’s campaign-trail comment about redistributing the wealth catapulted "Joe the Plumber" into media stardom?)
"It is usually only left-leaning rich people that care about inequality in the U.S.," said Carol Graham, a senior fellow at the Brookings Institution think tank who studies the economics of happiness.
Those attitudes may be subtly shifting, although it is unclear that this is anything more than just a temporary knee-jerk reaction to the latest bout of turmoil.
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Public opinion polls show voters mixed on whether to back higher taxes on the wealthiest households, as President Obama has proposed. The issue is so contentious that Congress put off its decision until after the November 2 midterm elections.
Resentment toward Wall Street is simmering as bankers’ paychecks swell to pre-crisis levels while unemployment remains more than twice as high as it was in 2007. Some politicians have been voted out of office simply because they supported the $700 billion bank bailout enacted in 2008.
Yet there is nowhere near majority backing for the sort of progressive New Deal policies passed during the Great Depression, which helped narrow the wealth gap and keep it contained until it resumed widening in the 1970s.
This time around, the wealth disparity narrowed in 2008 because rich households took a heavier hit from the financial crisis, but Census Bureau data shows it turned around immediately. In 2009, inequality was at the highest level since Census began tracking household income in 1967.
America has one of the largest wealth gaps among advanced economies. Based on an inequality measure known as the Gini coefficient, the United States ranks on a par with developing countries such as Ivory Coast, Jamaica and Malaysia, according to the CIA World Factbook.
How American Income Inequality Hit Levels Not Seen Since The Depression