Inequality in America, the Saga Continues
A recent piece on Business Insider displayed a slew of interesting charts detailing different aspects of the rise in inequality in the US in the recent decades. The state of American inequality is either a shocking revelation or a banal cliche, depending on your point of view. All of the stats displayed were interesting, but I want to share three in particular that caught my eye.
Half of America has 0.5% of the stocks and bonds:
Anyone who pays attention to right-of-center thinking knows that one of the biggest economic myths, particularly in the investor community of economic conservatives, is that “everyone is in the stock market.” And since everyone is in the markets (through their pension funds and other retirement funds or investments), policies that help the stock market grow, help large corporations be more profitable, and make financial investing easier and more lucrative do not benefit the rich at the expense of everyone else. Since everyone benefits when the markets and corporate America benefit, such policies are beneficial to a large segment of the society. Well, there goes that idea. Clearly such policies will disproportionately benefit one tiny segment of society over and above the rest.
Poor Americans have a SLIM CHANCE of rising to the upper middle class:
This chart puts in stark visual form the evolution of inter-class mobility in the US in the second half of the 20th century and beyond. The dramatic nature of the change is indeed striking. The US certainly was a very different kind of country in the aftermath of World War II than it is today, judging by the enormous differential between the probability of moving up, and of moving down at that earlier time. The much greater chance of moving in either direction–up or down–in the 1940s and 1950s is also fascinating. It indicates that the US was a much more fluid and dynamic society a half-century ago. Today, by contrast, whatever your lot in life, chances are that you’ll be there for a while. And this is precisely the stuff of which social cleavages and class warfare is made. A permanent elite and a permanent underclass are typically seen as the domain of third world countries.
America spreads the wealth FAR LESS than other developed countries
The interesting part of this graph is the significant difference between inequality reduction through taxes and inequality reduction through transfers. Taxes in America reduce inequality about as much as they do in other countries, but the transfers accomplish much less. I see two major conclusions to draw from this: (1) the US government spends a lot of money on things other than transfers, the biggest of which is defense spending, on which the other countries spend almost nothing in comparison, and (2) the money that is spent on transfers–and there is a lot of it, to be sure–does not accomplish very much, or nearly as much as it could.
The latter point is why many like myself believe that one of the keys to reducing inequality in the US is not necessarily more money, as liberals tend to believe, but simply better managing the money that is already being spent, as well as improving the incentives involved. Also, higher taxes in and of themselves are not needed, as the chart indicates. Better to rework the tax system by, for example, shifting the total burden away from the lower and middle classes, and toward the mega-rich. This can be helped by closing loopholes and exemptions that are disproportionately exploited by the rich, and which result in a largely regressive tax structure. Some more interesting thoughts on how American inequality compares with developing countries can be found on the Map Scroll blog. (Hint: it’s not good for the US.)
MORE ARTICLES:
