InCome Inequality

Alie Theodorou

Income at the Top

PHL 212 10:00 a.m.

Income inequality means there is a gap between the highest income earners and the lowest income earners. There are many inequalities in the US in many aspects of our lives, the biggest may be in our incomes. It has been about five years after the financial crisis began, and millions are still suffering. However, Wall Street is not. The divide between the 1 percent and the 99 percent is as great as ever. According to one recent study, the top 1 percent has captured about 95 percent of the income gains since the recession ended. In the interim, the top 10 percent of earners last year took more than half the country’s total income, which is the highest level recorded since the government began collecting relevant data a century ago.

On the one hand, you can argue inequality is necessary for providing incentives in a free market economy; without a degree of inequality there would be economic stagnation and lack of enterprise. On the other hand, you could argue that inequality has many disadvantages and is evidence of fundamental problems in society.

It’s an indisputable fact that the income gap between the rich and everyone else has grown over the past 30 years, and nearly two-thirds of Americans are aware of that. Even so, only 47% think it’s a serious problem that the top 20% earn 16.7 times as much as the bottom 20%. Most Americans don’t care whether the rich get richer; they do care whether the poor get poorer. 82% say the government should take at least some action if not a lot to reduce poverty—including 64% of Republicans.

Naturally, we disagree on what to do. Democrats and independents favor raising taxes on corporations and the wealthy to provide more support for the poor. Republicans want to reduce taxes to boost growth and create opportunities. These views seem to stem from the way the political groups view human nature. Republicans believe the rich are rich because they work harder and the poor are poor because they don’t. Democrats and independents say the rich had more advantages, while the poor got whacked by circumstances beyond their control. It’s hard to really know what is true and what is “right” all we know is that some people can buy 20 homes while other’s can’t even buy themselves dinner.

In Aftershock, author Robert Reich supports the position of a more efficient system of economics that would more evenly distribute money across the different economic classes. He lays out several measures that would have to be taken for his system to work. These include more protection for the middle class via legislation and stronger unions, stricter financial laws on corporations, higher income tax on the wealthy, and diverting money from other budgets such as defense. He states that the rich don’t spend money and stimulate the economy and that’s a big problem. Without demand of things people will not be willing to invest because they will fear not making money back. This is a big reason why most people at the top do not make domestic investments.