Income Inequality in the U.S.A.

Income Inequality in the United States

Income inequality has been in the news quite a bit lately.  I think that income inequality is a threat to our way of life.  The plutocracy is more and more taking charge of our society and our government.  According to Emmanuel Saez(2010), in 2007 the share of the nation’s total income that went to the top ten percent was 49.7%.  This is even higher than in 1928 which till then was the highest year on record.  The start of the recession did hit the rich also but they have bounced back easily.  Wall Street is recording record profits and giving out record bonuses.  For the rich the recession is over for the rest of us it is still going on.

The problem is the rich did not accomplish this on their own.  They had a lot of help from our government.  The government for much of the last thirty to forty years has knowingly redistributed the wealth of our country upwards to the rich at the cost of the rest of society.  It seems to be the Republican plan to spend our country into bankruptcy so they can have a reason to get rid of Social Security, public education, the EPA, medicare, and anything else that inconveniences some of the rich or which they have no need of.  They keep massively increasing our debt and at the same time giving tax cuts that reduce our nation’s income.  And the vast majority of that money has been funneled to the rich.    Anyone who has lived on a budget knows you don’t go out and buy extra stuff on credit and then have your boss cut your pay so it will be harder to pay for.  The rich have no need of a public education system and apparently many of them think it is a waste of money.  There is now talk of doing away with the whole system.  Just look at what some recent Republican candidates are saying.  They have always wanted to get rid of Social Security and are now coming out with new ideas on how to downsize it.  This is in spite of the fact that Social Security presently has a two and a half trillion dollar surplus and is solvent, as is, through 2037.  With so many other serious problems why are they insisting on working on one that is not a problem for twenty seven more years?  If they just lifted the income cap on Social Security payroll deductions the whole system would be solvent for good.  A simple fix, but the real idea is not to fix it but to totally do away with it.  Once again, why make such a big issue out of something that will not be a problem for twenty seven years.  If they would just let the tax cuts lapse and then only for those making over $250,000 a year it would go a long way to solving our budget problems.  Why do the bankers who caused the recession get bailouts and not prosecution?  They have been having record years.

Here is an example relating to the tax cuts.  If just the over $250,000 level does not get extended they will still get an extra $61,000 apiece.  That is because their income up to that level still would get a tax cut.  The difference is if that level is also extended they will get a cut of $370,000.  Now, those people are already rich so they probably won’t be spending that money on diapers for the new baby or to buy food or to keep a roof over their head.  It is highly doubtful they will take that money and give someone a job with it either.  Jobs are based on demand.  When there is no demand there are no jobs.  That is why we need a middle class.  The middle and lower classes spend their money.  They have to buy things.  Their income is not mostly discretionary spending money.  The middle class can manage to save some money but their

necessities are a big portion of their income.  That necessity portion of income just becomes a bigger portion as you get closer to the poverty level.  At the poverty level you do not even succeed at paying for your necessities so some get left out.  As a result of all of these policies our middle class has been shrinking and the number of people living in poverty has been growing.  As Nicolas Kristof (2010) said in an article, “From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest one percent.”  The end result is that if you really want the economy to grow, you make sure the lowest income people get some money because they will spend it and create more demand.  This in turn leads to more jobs.  The lower your income the less choice you have about spending as opposed to saving money.  The rich can save or invest most of the money they receive because their necessities take up a smaller percentage of their budget so extra money is not needed for them.  This is why the “trickle down” theory of economics never worked.  The rich just invested the money in a mutual fund or stuck it in the bank.

From 1970 through 2005 middle class income average increased from $41,318 to $50,811 this is according to Pew Research(2008) who used a Census Bureau chart.  This was a small increase in actual dollars but considering inflation and the way the wages for the upper classes jumped in the same time period it was relative backslide.  This is in spite of great productivity gains at the same time.  Almost all the gains from that productivity ended up going to the wealthy while the middle class actually fell from about 40% to about 35% of the population.  The last couple of years have only made things worse and we now have the number of people living in poverty growing again in this country.

I think that income inequality is a very real threat to our democracy.  The difference has gotten so great that there is a real danger that the plutocracy will completely take over our government and scrap anything that doesn’t benefit them directly.  This is in spite of the fact that a growing and vital middle class would actually be good for them in that it would stimulate demand and they would make more money.  If everyone at their level was taxed the same it wouldn’t even affect their buying power.  It just seems like human compassion should have a place in our politics.  We need to help the whole country and all of our citizens.  We are all supposed to be equal not some of us are more equal than others.  Here is an example of what it’s coming to.  In Colorado, a rich hedge fund manager ran over a doctor on his bicycle.  He didn’t stop.  He continued on and stopped down the road to call a tow truck for his damaged car not 911.  The doctor was left in pain with severe injuries including spinal cord injuries.  He will live in pain the rest of his life.  Now if you or I had done this we would be in jail.  The hedge fund manager was allowed to plead to two misdemeanors with no jail time because he is rich and a felony conviction might have an effect on how much he makes.  This is so wrong.  We are all supposed to be equal under our system of justice.  This is a blatant example that is not how it works.  This is well documented at several sites on the Internet.  David Edwards(2010) gives a fairly complete story.

It is all of these things in total that show our shocking situation.  Something must be done.  It will be hard to get anything done as the rich have the money and are very busy buying all our politicians.

Hopefully, this can be stopped and the middle class can once again start to grow.



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