It's indisputable fact that income inequality in the United States has grown substantially in the past few decades.
Median nominal incomes, adjusted for inflation, have not gone up in the USA since the 50's. (Median is the halfway point, so we are talking about the middle-earner). In contrast, the per capita GDP has risen quite dramatically, due to the increased purchasing power of the upper echelon.
I pose three questions to you:
1.) What has caused this phenomenon
2.) What are the long term implications if the trend is allowed to continue
3.) What, if anything, should be done to adjust our course
Thanks
For what has caused this phenomenon, I posted this on another thread earlier:
Much has been distorted about those tax rates of the 50's compared to tax rates now. But an honest evaluation of that shows that we now have only a small fraction of the deductions and tax shelters that were available to the rich back then. That is why when those deductions and tax shelters were reduced, as soon as the behaviors changed as a result, the rich were paying more than ever in taxes at the lower rates and were paying a slightly higher percentage of their income. The lowered profit margins, however, were more than offset by vastly increased volume and the rich did profit mightily. But so did everybody else too.
And in the 1950's we had a tiny fraction of the government regulation and interference into every aspect of society than we do now.
The problem is not how much the rich earns or how much the rich pay in taxes. The problem is in government meddling, manipulation, and spending that has generated runaway inflation and stifled American entreprenourship.
(The figures here only go through 2012 as no hard verifiable numbers are going to be available for 2013 until after the election.)
In 1950, the United States was #1 in GDP per capita.
In 2012, the United States is #13 in GDP per capita.
In 1950, redistribution of wealth was considered to be something that "the communists" did.
In 2012, the U.S. government redistributes more wealth than anyone else in the world.
In 1950, each retiree's Social Security benefit was paid for by 16 workers.
In 2012, each retiree's Social Security benefit is paid for by approximately 3.3 workers.
In 1950, the United States loaned more money to the rest of the world than anybody else.
In 2012, the United States owes more money to the rest of the world than anybody else.
In 1950, the U.S. national debt was about 257 billion dollars.
In 2012, the U.S. national debt is 59 times larger. It is currently sitting at a grand total of $15,435,694,556,033.29 (and is increasing at $1 trillion plus each year since). Surely our children and our grandchildren will thank us for that.
The latest I've read is that the wealth of the middle class is shrinking. But it is not because somebody else is wealthier. It is because they are having to spend so much more than they earn just to maintain the status quo. And each deficit they run cuts into their aggregate wealth.
That phenomenon has nothing to do with the rich. It has everything to do with increasing government meddling, regulation, and punishment of success that has pushed inflationary trends into the stratosphere.
Comparing the inflated cost of living today from 1950 to 2014: How declining purchasing power has hurt the middle class since 1950.
If the trend continues:
We increasingly become timid citizens who give up all our liberties for the government to assign back to us and dictate what kind of society we will be.
What should be done?
A low flat tax plus spending limits with teeth in them would go a long way to reversing an every more bloated monstrosity of a government that mows down everything in its past. It would free up those who drive an expanding economy so that they could calculate their risks and move ahead without fear. And it would take away government's ability to irresponsibly spend money we do not have and therefore would provide incentive for government to govern competently and effectively for all.