The Widening Income Gap in America

The idea that economic inequality exists in America is not new. In Paul Krugman’s article “For Richer”, he discusses the growing chasm between America’s poorest citizens and its growing elite. But more importantly, he discusses the political policies that increasingly support this widening gap. It is with these policies that middle America needs to be most concerned.

Initially reminiscing about growing up in the ‘50’s and ‘60’s, Krugman notes how the ‘American dream’ was really within reach of all Americans if they worked hard. It was in his words, a “fairly equal society”. Times had changed from the ‘20’s and ‘30’s of what he calls “the Gilded Age”, when generations of families controlled most of the country’s wealth, living lavishly in mansions, with servants and status fit for a king.

But what should concern us all is the fact that these times of ‘American Royalty’, so to speak, are upon us again, and it is getting increasingly difficult for most working Americans to achieve the American dream. The idea that hard work will pay off is no longer necessarily true. And that, sadly, is in large part due to the policies that our government makes to lift up and support our wealthiest citizens, at the expense of the poor and quickly disappearing middle class.

What has changed, though, is who is holding this wealth today. As Klugman demonstrates, roughly 60 percent of the economic gains in our country went to just to the top .05% of taxpayers. When comparing gains overall throughout the taxpayer base, the so-called middle class had economic gains of just 10% from 1979 and 1997 while America’s wealthiest rose 157% (after taxes)! These disparities are alarming. When factoring in the cost of inflation, a 10% gain over almost 20 years actually translates into a loss! And that gain includes the addition of second wage-earners in middle class families. Overall, many families are finding that their debt ratios are on the rise while their standard of living is dropping.

Today’s wealth is no longer controlled by wealthy families through inherited assets, but rather by young CEO’s who are earning sometimes 300 times what the average worker earns! Krugman asks how these salaries can be justified. His theory is that over time, unlike the ‘50’s and ‘60’s when he was growing up, society has accepted the notion that these ‘all powerful leaders’ somehow deserve these enormous salaries. The understanding is that without these types of perks and benefits, corporations will be unable to retain skilled leaders and if they aren’t willing to pay, someone else will.

This type of thinking is obviously flawed, leading to outrage amongst the rest of the working public. This shift in acceptable norms in corporate America will at some point face correction. But it will probably take a huge uprising on the part of middle America before we see any real changes.

Another question, however that Krugman raises is the idea that there was ever a sustainable “middle-class” in the first place. Historically most of the wealth has been controlled by a minority, with huge gaps in income between them and the rest of the public. It wasn’t until after the Depression that economic equality really existed here in the U.S. Krugman questions whether or not this shift back to two general economic classes; the very wealthy, and the relatively poor (or struggling) population isn’t a more normal course of events.

The fact is, the more wealth one holds, the more relative power one holds. And the more power held, the more decisions and policies they can create. And it seems only natural, that in an effort to preserve their way of living, that those policies that are created tend to lean in favor of the policy-makers and the holders of power. It is this shift in wealth that creates the power, which in turn snowballs, creating more and more wealth and more and more power for a select few, leaving the rest of our population holding the bag. Unfortunately, the limited nature of all resources means that in order for some to hold most of the wealth and power, everyone else must lose theirs. It is this sad reality that makes it so critical that these issues not be ignored in our society before we become not one united nation, but a nation divided.

Do you feel that the "Middle Class" is sustainable? Are you finding it harder to make ends meet? If you could speak with your legislators about this issue, what would you want them to know? Do you feel our legislators have lost touch with"average" Americans?


Source:
“For Richer-How the permissive capitalism of the boom destroyed American equality”- by Paul Krugman, New York Times Magazine, October 20, 2002