Senate Income Inequality in the U.S.: Causes, Effects, Solutions

I've been meaning to start a topic on this too, after seeing this article a few weeks ago:

http://news.yahoo.com/s/yblog_thelookout/20110223/ts_yblog_thelookout/separate-but-unequal-charts-show-growing-rich-poor-gap

The Great Recession and the slump that followed have triggered a jobs crisis that's been making headlines since before President Obama was in office, and that will likely be with us for years. But the American economy is also plagued by a less-noted, but just as serious, problem: Simply put, over the last 30 years, the gap between rich and poor has widened into a chasm.

Gradual developments like this don't typically lend themselves to news coverage. But Mother Jones magazine has crunched the data on inequality, and put together a group of stunning new charts. Taken together, they offer a dramatic visual illustration of who's doing well and who's doing badly in modern America.

Here are three samples:

This chart shows that the poorest 90 percent of Americans make an average of $31,244 a year, while the top 1 percent make over $1.1 million:

And it continues to show some pretty cool charts.

 

There's also the unprecedented growth of the financial sector over the last few decades, culminating in our letting ourselves get talked into bailing it out and making sure that the bonuses kept flowing despite finance sector culpability for the mistakes. We've traded away an economy that once specialized in producing things for one that specializes in moving money from one pile to another in any way that makes the pile increase in size, with an entire class of professionals that does nothing but act as a private sector tax on the transfer of money between piles, dipping their hands into the money river as it flows by. The top hedge fund managers all make more than any of the Fortune 500 CEOs, so naturally no one with an ivy league MBA wants to run a real business that actually adds to the productivity of the world, that would be beneath them.

But the bigger the size of those money piles, the bigger the pretext for anti-christ sized incomes in the financial sector, meaning that more an more money has to be stripped away from the people who make things to free up money for the Wall Street bonus pool.

 

Merk, not without trying, but what if your entire opening post was changed to this:

The last three decades have seen a massive increase in financial mobility in the US. Case in point, over the last three years, the number of new millionaires in the US has risen 15.1%. The median income of $31K/year is a standard that is only duplicated in a very small number of other countries. Instead of flatlining, between 1961 and 2011, the median income in the US has increased 44%. But more than money, the average worker enjoys more non-financial benefits such as paid vacation, 401K accessibility, and health care than any other time in history.

In this thread, let's discuss how to continue this reality and how to improve on the overall trend.

Part of this theory is that we?re seeing the results of a 30 year war on personal responsibility in the form of policy, and more insidiously, of rhetoric. Obviously from the left, any suggestion of achievement or innovation (or of the lack of it being problematic) is met with the rallying cry of class warfare. Moreover, voters have been duped by rhetoric and propaganda to vote for unsustainable big labor union demands, which actually hamper individual access to jobs, while protecting the organizations themselves. The results of of which protect inflated gains while decreasing the number of available jobs. Instead, organized labor unions are increasing their bottom lines either through hoarding cash reserves, or the arbitrary collection of "union dues."

Another aspect of the left?s war on innovation and access to upward mobility is the sneering disdain for hard work and individual achievement, in the form of utter obedience to political correctness, and promoting the dominance of what is known as the Orwellian concept of "groupthink." (notwithstanding the education level of their own pundits and elected officials) Including the mismanagement of public schools, distortion of textbooks to fit political ideology, and, as the recent events in Wisconsin have shown, a general sense of entitlement and of a scorched earth results mentality.

Naturally, the right is not blameless. It could have stood up more forcefully to the sheer idiocy of the left, but other than that, everything is right on course. Thus, this is an even attempt to have a well balanced discussion based on the reality of the situation. Continued?

Now, I'm not saying that either "opening post variation" is any more or any less accurate and/or biased than the other, but I'd predict the actual results would be the same no matter which version was used....

 

I'll post on this further tomorrow, since today is St. Patricks day and I'm already a few deep, but I do think this interesting. A sort of cliff notes is I don't really care about inequality per se, but I'm concerned about the effect of inequality on long term growth and path dependency (poor families stay poor; rich families stay rich).
.

 

Well NYJ, I'm glad you agree with the hypothesis brought up by the revised opening post. So the solution that you're putting forth is to minimize the left's misguided barriers to growth and path dependency, because really such broad characterizations are the only ones that matter?

 

I think I read somewhere that income inequality actually has a bit to do with consumer society and how brands pick up a huge customer base and make huge profits out of it. In a world where people buy stuff from Apple, Coca Cola, Nike and whatnot, money just starts flowing to the top.

 

Pitchfork Level

I also believe we're heading inexorably toward a second dissolution of the Union. Broad sharing of the nation's immense wealth was the glue that held the American Dream together in the first half of the 20th century. It foundered against two jagged reefs: 1) the bad taste left in the mouths of white people when it came to including African Americans and 2) America's economic peak relative to the rest of the world. Once growing the pie itself became more problematic and we moved from high rate growth to much lower growth rates, the fight over dividing the pie intensified. Each successive economic shock since the 1970s has intensified the fight a little bit more until, eventually, the fight moves into the streets like it nearly did in Wisconsin. Don't think America has no chance of ever seeing pitched battles in the streets between disaffected unemployed youth and riot police. Rubber bullets, tear gas. And not just aimed at black people this time.

 

I think we are missing the real problem. The problem is not income disparity - or even wealth disparity. Those are just the excuses being used at this time.

The problem is that we have two sides with increasingly disparate views of what America should be.

One side is in strong favor of what amounts to a European-style social democracy, with a large welfare state and government involvement in the lives of people. The other side believes in a more free-market/capitalistic system with limited government because the people are capable of governing themselves.

There just is no middle ground to be had at this point, and the events in Wisconsin have closed off most of the room for compromise I can see. It's just as I posted near the start of the Wisconsin dispute:

Both sides of the Red America/Blue America divide are increasingly seeing the other as fundamentally illegitimate and/or a threat to the future. Blue America increasingly views Red America as heartless, racist/bigoted, unenlightened, and greedy folks who have no regard for the world. Red America is increasingly viewing Blue America as a bunch of race-baiting socialists who don't love America, and who are burdening their kids' generation with unsustainable levels of debt.

You can't negotiate with those whom you feel are illegitimate, not without betraying your own increasingly polarized political base.

I don't think we can avoid it at this point.

 

I agree with nearly everything in your post save this part. The ideology is a pretext. It really is just a battle over slicing the pie. Big corporations are just as eager to get Big Government handouts as the scruffiest welfare cheat. As the pie shrinks, or refuses to grow quickly enough, then the fight over the relative size of each slice heats up. The small numbers of people with power and influence have coopted the mechanism for slicing the pie. But the increasingly large numbers of the relatively disenfranchised still have numbers on their side. The more the fight over the pie heats up, the more it becomes a naked battle between privileged access to power and the power of the mob.

 

Snark aside 44, I have no problem with upward mobility. In fact, I say "moar plz, kthx." What concerns me is the ever-widening disparity of income.

Then you missed the entire point of my snarky-snark. I know you don't have a problem with upward mobility, it's that you packaged your "honest discussion" in the most blame game oriented, biased way possible. Go look at your opening post again. It can basically be distilled down to this:

blah...blah..the right sucks...the right still sucks...blah...oh yeah, the left did something that might not have been perfect, which they normally are....blah..did I say the right sucks?.. continued...

Obviously, both my follow on replies were sarcastic, but they used no less loaded language to direct the thread. In your post, you even said something along the lines of "lest this become a rant-fest..." and then proceed to set up the most rant directed paragraph possible..

duped by rhetoric? sneering disdain? hoarding cash? war on economic classes? really? Do you actually believe the words you used? You might as well have done nothing else but start a thread with an image of Scrooge McDuck rolling in a money vault along with a caption that was no more detailed than saying: "this is my issue, jerks...who is with me?" But the problem with that is for every bias in one direction, another can be thrown up in the opposite direction without actually discussing any of the actual issues. Aren't the topics here more complicated? What exactly do you mean by the right and left? political parties? politicians themselves? general movements?

Are there kernels of truth to both our versions of an opening post? Sure. But you can plainly see how they both guide the content in the most biased way possible. If you, yourself even said that you don't have a problem with upward mobility and financial gain, your entire point can certainly be examined without turning your post into nothing more than a misguided blame-fest.

 

I disagree - and here is why:
If your view were correct, it would be the poor and middle class going after ALL the rich, and that is NOT what is happening.

On the one side, you have the AFL/CIO, leaders like Sharpton and Jackson, etc, with some rich people (George Soros, for instance) and a portion of the establishment (President Obama, Governor O'Malley of MD, etc.).

On the other side, you have the Tea Party, various other grassroots groups (the old Christian coalition), some rich people (Koch brothers and Herman Cain, for instance), and a portion of the establishment (Jim DeMint, John Boehner, Governors Walker, Haley, and Scott, among others).

They cross all economic strata. This is more about two increasingly irreconcilable viewpoints about the way America ought to be than about how the pie is divided.

 

That's a good point, but some of that ideological difference is also coming from indoctrination that is purely economically motivated. Fox News is, after all, one very rich man's personal media vehicle for indoctrinating the lower middle class to support the interests of the rich.

And some of the "enlightened" rich on the left support progressive policies for purely selfish reasons - they see the bigger picture of providing a robust enough welfare state to placate the poor and middle class so that the rich can keep operating in an environment where profits are dependable and the social order is stable. Bread and Circuses. The Koch Brothers are short sighted and Rupert Murdoch may be deliberately evil. He may be trying to take down the United States. As a foreigner, he has no particular loyalty to the integrity of our nation. He is just beaming malicious propaganda at us to sow dissent. A modern day Tokyo Rose.

 

Alright, so we're on the same sheet of music. If that's the case, I'll just re-post my/your opening paragraph, because our hypothesis is unchanged:

The last three decades have seen a massive increase in financial mobility in the US for all classes. Case in point- over the last three years, from all backgrounds, the number of new millionaires in the US has risen 15.1%. The median income of $31K/year is a standard that is only duplicated in a very small number of other countries. Instead of flatlining, between 1961 and 2011, the median income in the US has increased 44%. But more than money, the average worker enjoys more non-financial benefits such as paid vacation, 401K accessibility, and health care than any other time in history. In this thread, let's discuss how to continue this reality and how to improve on the overall trend.

Part of this theory is that we?re seeing the results of a 30 year war on personal responsibility in the form of policy, and more insidiously, of rhetoric. Obviously from the left, any suggestion of achievement or innovation (or of the lack of it being problematic) is met with the self-centered rallying cry of "but it's class warfare." Moreover, voters have been duped by both outright falsehood and propaganda to vote for unsustainable big labor union demands, which actually hamper individual access to jobs, while protecting the organizations themselves. The results of of which foster inflated gains on the average citizen, while at the same time, decrease the number of available jobs. Instead, organized labor unions only increase their bottom lines either through hoarding cash reserves, or the arbitrary collection of "union dues."

Another aspect of the left?s war on innovation and access to upward mobility is the sneering disdain for hard work and individual achievement, in the form of utter obedience to political correctness, and promoting the dominance of what is known as the Orwellian concept of "groupthink." (notwithstanding the education level of their own pundits and elected officials, which only exists in their own imaginations) Including the mismanagement of public schools, distortion of textbooks to fit political ideology, and, as the recent events in Wisconsin have shown, a general sense of entitlement and of nothing less than a scorched-earth results mentality.

Naturally, the right is not blameless. It could have stood up more forcefully to the sheer idiocy of the left, but other than that, everything is right on course. Thus, this is an even attempt to have a well balanced discussion based on the reality of the situation. Continued?

That's my premise, so the ball is in your court. But you see things differently? That's easy to answer-you're wrong.

 

Ok, now to (briefly) respond with my own thoughts:

I don't think income equality in itself would be that bad if we had a better social safety net.

If every American was guaranteed access to the following, regardless of income, then income equality wouldn't matter:
*quality healthcare
*nutritious food
*clean water
*nice clothes
*sturdy shelter (with piping and temperature control)
*impressive public transportation/education/libraries/childcare

(I believe that's a comprehensive list, would anyone like to add/subtract from it?)

But we don't live in a country where every American is guaranteed access to the above if they have no money and can't take out a loan, so income inequality does matter. I'd rather have a better social safety net (which ensures that everyone does have a soft landing in case they do hit rock bottom) than directly attacking income inequality and redistributing wealth... it just seems the best way to eliminate poverty along with class tension. If even the poorest person in America was guaranteed the above, then he/she wouldn't have as much of a grievance to redress, and would be less likely to worry about inequality (with "the bottom" being firm ground instead of quicksand). It would also alleviate the fears and stress of millions of Americans who do worry that inability to find a job in today's tough economy would rob them of the above necessities of modern American life. I would even go as far as to say that if the above list was guaranteed, then we wouldn't need unemployment benefits anymore (maybe not even Social Security, Medicare, Medicaid, or minimum wage either), especially if the federal government would also offer a job in public works or community service to all unemployed people that are fit to work (maybe tied to the above, as part of the deal, excluding seniors and the disabled of course).

 

The first problem is, "Who pays for it?" - Someone is going to have to pay for those guarantees to the poor.

Following that, it is, "How do we ensure that the folks who do wind up paying for it feel they are getting their money's worth?" - Because if the people who pay for it see those guarantees essentially allowing others to live off them, they are not going to like it. And if you figuratively hold a gun to their head to get them to keep paying, they will grow to resent those payouts.

There's one other problem you missed: If the government is guaranteeing this, then if times are tough, will those who work for the government share in the hard times, or will they be above the fray? The average government worker has a higher average pay than the private sector, and in many cases, they get a much sweeter deal on pensions and health insurance than the private sector. Oh, and they also have better job security.

Meanwhile, a lot of people in the private sector find they are being asked to pay more and more in taxes. They are starting to wonder if they even factor into the equation - and when they start asking for some reasonable things - like making sure that when teachers are laid off, it's not the outstanding first-year teacher, which happened in Milwaukee. Or when teachers commit misconduct, they are promptly fired, if that is appropriate, rather than draw full pay in "rubber rooms" and eventually collect a $62,000 a year pension. Many don't even EARN $62,000 a year in salary, and they see their taxes paying for that sort of stuff.

That's just teachers. What about other government employees at the federal, state, and local level? How many more? And who created this situation? The unions and politicians. And yet even though these seem reasonable and common-sense, those who want to change things get three weeks of liberal "civility" that we saw in Wisco

 

The problem is.... government's made a mess once already. What proof do we have that they won't make that mess again in this Great Society 2.0 Ghost seems to want? We're tried government involvement. It hasn't worked since 1965.

Government cannot be the provider. And that goes back to the fundamental divide I referred to earlier. A large portion of America doesn't think government should be involved in providing that sort of thing, especially when we're dealing with where our debt is.