Is Income Inequality in the U.S. Always a Bad Thing?

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Politics of Inequality

President Obama  campaigned on 'Change' - but is his focus on income inequality misguided? Photo Credit: Blake Coughenour

President Obama campaigned on ‘Change’ – but is his focus on income inequality misguided? Image by Blake Coughenour.

Just about every time President Obama speaks extensively about the economy, he brings up the issue of the income equality in the United States. While his opponents have tossed the word “socialist” around as a result, the fact remains that the subject makes for good populist politics, particularly during campaigns.

In an interview with the New York Times in July, he said, “If we don’t do anything, then growth will be slower than it should be. Unemployment will not go down as fast as it should. Income inequality will continue to rise. That’s not a future that we should accept.”

High-Income-Earners

While nobody would directly trumpet inequality as a good thing, there are nevertheless opposing points of view that believe demonizing higher-income earners is divisive and obfuscates certain facts.

  • Every income class has enjoyed the benefits of economic growth, with the bottom 20% increasing 10.5% since 1970.
  • Lower tax rates have led to more income reporting, which has skewed the data with respect to the allegedly-widening income gap.
  • Wealth and income increases at the top have led to innovation, job creation and higher wages for everyone.
  • Volatile investment income has biased the information, and census information has led to uneven group bracketing.
  • Regardless of income distribution, disparities have not led to lower growth for the overall economy.
  • Natural income mobility causes lower-income individuals to cross into higher brackets over time.

Is Income Inequality Acceptable?

There has always been significant income inequality in the United States and, quite frankly, always will be. The president and media have decried it as a negative trend that threatens our country’s economic future; supply-side proponents and others believe not only is the disparity exaggerated, but the claimed negative impacts are either minimal or non-existent.

Generally, positions taken mirror one’s climb on the economic ladder, and even that can change due to the potential for income mobility over time.

No matter what, the rising tide does lift all boats. Some boats are just a lot bigger than others.

Resources

Facundo, Alverado, Atkinson, Anthony B., Piketty, Thomas and Saez, Emmanuel. The Top 1 Percent in International and Historical Perspective(2013). Journal of Economic Perspectives. Accessed September 13, 2013.

Paris School of Economics. The World Top Incomes Database(2013). Accessed September 13, 2013.

Weisman, Paul. US income gap reaches its widest point since the 1920s. (2013). ChicoER. Accessed September 13, 2013.

Ginn, Vance. 6 Myths About Income Inequality in America. (2013). PolicyMic. Accessed September 13, 2013.

McDonough, Katie. Obama warns growing inequality is weakening America slams obstructionist GOP(2013). Salon. Accessed September 13, 2013.

Lazere, Donald. A Rising Tide Lifts All Boats: Has the Right Been Misusing JFK’s Quote?(2013). History News Network. Accessed on September 13, 2013.

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