In a recent New York Times column, Nick Kristof discusses the increasing income inequality in the United States. It’s quite sobering. He asks, what is in my opinion, the absolute right question:
So we face a choice. Is our economic priority the jobless, or is it zillionaires?
We live in such strange times – we keep discussing tax cuts for the rich like it is absolutely true if they’re not extended we’ll plunge into a recession. I would argue that the tax cuts are a big part of the reason we’re in this mess to begin with.
In my reporting, I regularly travel to banana republics notorious for their inequality. In some of these plutocracies, the richest 1 percent of the population gobbles up 20 percent of the national pie.
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The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
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Robert H. Frank of Cornell University, Adam Seth Levine of Vanderbilt University, and Oege Dijk of the European University Institute recently wrote a fascinating paper suggesting that inequality leads to more financial distress. They looked at census data for the 50 states and the 100 most populous counties in America, and found that places where inequality increased the most also endured the greatest surges in bankruptcies.
Here’s their explanation: When inequality rises, the richest rake in their winnings and buy even bigger mansions and fancier cars. Those a notch below then try to catch up, and end up depleting their savings or taking on more debt, making a financial crisis more likely.
The U.S. became the strongest country in the world because of the rise of the middle class. We began educating people and good high-paying jobs for many people led to economic prosperity. I don’t know why we’re trying to go back to the time when America was a developing country. It feels like we’re going backwards doesn’t it – we’re letting our infrastructure crumble but there seems to be plenty of money to make war on other countries. Now we’re in the strange spiral where we’re trying to roll back our social insurance programs – for what? For more tax cuts for the rich, which we hope (cross our fingers) means they’ll decide to give someone a job.