Mike Kueber's Blog

September 21, 2011

Income inequality in America

Filed under: Economics,Issues,Politics — Mike Kueber @ 4:16 pm
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My two big concerns about America are its burgeoning debt and its mushrooming income inequality.  One threatens to destroy our economy and the other threatens to erode our national cohesiveness.  The solution to our debt problem seems relatively straight-forward – quit spending more than we take in – although that solution is complicated by our inability to pull out of the 2008-2009 recession.  Solving the problem of income inequality is more problematic.

Some conservatives have suggested that income inequality can be ameliorated by improving economic and social mobility.  If people have the opportunity to improve themselves, they will.  Liberals are more inclined to reduce inequality by governmental redistribution of wealth.  President Obama’s comment to Joe the Plumber (“spread the wealth around”) reflects this sentiment.

The New York Times recently did a Room-for-Debate article on whether taxes can be used effectively to narrow income inequality.    Although that is an excellent question, the seven commentators failed miserably to provide any insights.  It was almost as if the commentators were in a political debate and felt free to ignore the question and put forth any information or opinion they had without regard to answering the question.

Only Commentator #6 provided something that I considered useful.  Chrystia Freeland, an editor-at-large for Thomson Reuters suggested two causes for the growing income inequality:

  1. The left blames the pro-rich tax policy and the decline of unions.
  2. The right blames globalization (hurts those on the low end) and the technological revolution (helps those on the top end).  The result is an hourglass economy with a squeezed middle class.

Freeland concludes by saying the following:

  • Justice is a central issue in American politics and in American society. That’s why it seems so important to figure out whether the rich are paying their fair share. It is a crucial question — and the truth is that the rich are getting a better deal than they used to. But the even more central issue — and it is one that both left and right are reluctant to acknowledge — is that the fundamental forces shaping U.S. capitalism today are hostile to the middle-class majority, which defines U.S. democracy.  The rancor and the paralysis that characterize American politics at the moment are the result of this conflict.  Someone needs to admit that modern capitalism isn’t working for the middle class, and find a way to make it work better, before it is too late.”

Talk about begging the question.  I will have to keep looking for a reform to modern capitalism that works for the middle class.