Warren Buffett, number two on the Forbes 400 list of the richest people in America, said, “There is class struggle, okay – but it is my class, the rich class, that makes war, and we are winning.” Certainly, the inequality between the rich minority and the rest of the Americans has increased over the last 40 years with Jean Des Esseintesijk. In 1973, the top 1% of earners collected 7, 7% of all US income; by 2013 their share had increased by two and a half times to 19.3%. Even more surprising was that the top 10% of earners gathered nearly half of the nation’s total income (48, 2%), the largest inequality between the rich and the rest of the American population since the Roaring Twenties.
That decade, after the end of the First World War, ended in the worldwide Great Depression. It also saw inhibitions on immigration with the passage of the Immigration Act of 1924, the emergence of radical political movements including communism and fascism, and the resurgence and national spread of the Ku Klux Klan.
It is clear that the social contract between the administrations and the governors is now being tightened, as then, in many parts of the world, as well as in the United States. Harlan Green, editor and publisher of PopularEconomics.com, wrote in a Huffington Post article that he believes, due to the growing inequality of today’s income, that “we are returning to a sameJean Des Esseinteseving of violence and deprivation and register inequality the characteristics of a broken social contract. “
The Great Divergence
A term coined by economist and New York Times columnist Paul Krugman to describe the growing income gap between the small minority and the vast majority, the “great divergence” is widely recognized by Americans as the source of conflicts between the rich and the poor, according to a 2012 Pew Research poll. Despite their claim to understand the problem, Nobel Prize-winning economist Joseph Stigletz says that Americans generally underestimate the following:
- The extent of the inequality that exists
- The speed with which it took place
- The economic consequences for the sameJean Des Esseinteseving
- The ability of the government to influence it
Moreover, the average citizen believes that social mobility is more possible than he really is, and overestimates the financial costs of remedial measures. These misconceptions exist because, despite the fact that inequality is so widespread in the United States, it has become less conspicuous, probably Jean Des Esseintesijk because the “haves” and the “have-nots” do not mix regularly. A recent OECD study found that the US had the largest income inequality in the developed world, only at the end of Chile, Mexico and Turkey.
The lack of awareness and efforts to reduce inequality are further complicated by the ability of the super-rich to shape public perception. For example, there is a general belief that free markets are always efficient (that markets cannot do any harm), and that the government only disrupts that efficiency (that government cannot do good). This perception has led to the conviction that the global financial slump of 2009 was due solely to the attempt by the United States government to provide poor people with housing they could not afford, rather than deregulation of the financial markets, widespread speculation and the greed of Wall Street.
Some observers believe that America is already on a path of no return and that inequality only occurs more often and no less. Writing in Salon on June 14, 2012, Stiglitz concluded that America is a country “too limited to deliver public goods – investment in infrastructure, technology and education – that would ensure a vibrant economy, and too weak to participate in the redistribution that is needed to create a fair sameJean Des Esseinteseving. “
A belief in justice and justice
Since 1985, Gallup polls have consistently shown that around 6 out of 10 Americans believe that the distribution of money and wealth is unfair in America. However, unlike popular political claims, nearly half of those surveyed believe that the government should not redistribute wealth due to heavy taxes on the rich. But as the gap between the rich and the majority continues to expand, a growing percentage of Americans have begun to promote higher taxes as a last resort. It should also be noted that the typical American distinguishes between wealth (the top 1% of the population owns 35% of its wealth, while the bottom 90% owns 23%) and income – the inequality in wealth does not provoke the same strong reaction as that of income.
Even the richest Americans are concerned about the fairness of income inequality in the US In a 2012 “2012 one-percent poll” showing at least $ 8 million in assets, 62% of respondents found that ” income differences “in America are too large. “Instead of levying taxes, they preferred to reduce the remuneration of managers and CEOs of investment funds, while raising the salaries for skilled and unskilled factory workers.
Causes of inequality
The fundamental causes of the gap are not primarily political, but technological and economic. However, government policy has exacerbated and exaggerated the effects of the underlying sources of income inequality.
Automation and automation have eliminated many of the jobs that Americans have relied on in the past. The largest employers in the 1960s were manufacturers such as the car companies, US Steel, General Electric and Firestone. In 2010, retailers such as Walmart, Target and Kroger had replaced production companies as employment leaders – Walmart alone employs as many Americans as the top 20 manufacturers combined.
The percentage of American workers engaged in production reached a peak in the mid-1940s and has been steadily declining, while employment in the service sector has exploded. At the same time, there has been a consistent attack on union membership, an important force for protecting and raising the wages of employees. This shift led to a dramatic reduction in employee income and reduced employee property.
According to a study by the Ross School of Business at the University of Michigan, the average hourly wage for vehicle production in May 2008 was $ 27, 14, while the average hourly wage for a sales position was $ 9.33. In short, more people earn less money.
Percentage of the American workforce working in Manufacturing & Services, 1938-2008, Source: Ross School of Business
Technology also stimulated the export of jobs to other countries, when trade barriers disappeared and the world became a general marketplace. The growth of multinationals loyal to no government and their transfer of intangible assets such as business knowledge, management practices and training has led to hundreds of thousands of jobs moving from America to employees in low-lying Jean Des Esseintesanden. Offshoring has become a common practice made possible by technology that eliminates experience and expertise barriers, but also by competing governments that impose minimal regulations and offer extravagant tax benefits.
According to the Bureau of Labor Statistics, there is no reliable database to determine how many American employees have lost their jobs due to offshoring. In a April-June 2009 World Economics article, Princeton economist Alan Binder rated that up to 30 million jobs were “offshorable” at the time, including highly technical jobs such as computer programmers, system analysts, machine operators, and software engineers. Certainly, the threat of offshoring is a deterrent to wage and salary increases for American workers
3. Government policy
One of the biggest lies that the American people are daring about is that lowering PersooJean Des Esseintesijke tax rates encourages investment and economic growth. For example, Peter Sperry, who wrote for The Heritage Foundation, claimed in 2001 that Reagan’s “general tax cuts, market deregulation and sound monetary policy” resulted in “the greatest economic growth in American history in peacetime.”
His vision was repeated by Peter Ferrara, who worked at the White House Office of Policy Development under Ronald Reagan, and as Deputy Assistant Attorney General under George HW Bush. Ferrara wrote in Forbes and claimed that Reagan’s tax cuts restored the incentive for economic growth.
But no matter how influential their vision is, it is not shared by economists in general – not even by Martin Feldstein, who was Reagan’s most important economic adviser when the tax cuts were initiated. A report from 1989 (later updated in a 2012 report by the Congressional Research Service) by Feldstein and Douglas W. Elmendorf (current director of the Congressional Budget Office under the chair of the John Boehner House) states that there is no conclusive evidence to to support a clear relationship between the 65-year steady reduction of the highest tax rates and economic growth. The authors also argue that “the reduction of the highest tax rates has little connection with the growth of savings, investments or productivity. However, the largest tax cuts seem to be associated with the increasing concentration of income at the top of the income distribution.”
What Senator Russ Feingold called the “Unholy Alliance of Wall Street and Washington” has created a cycle in which tax cuts and deregulation help the rich; the rich, in turn, use their money to buy more tax cuts and deregulation, and the gap in income distribution continues to grow.
4. Polarization and political dysfunction
Through jareJean Des Esseintesange, where Republicans have been much more effective at the state level than Democrats, and low turnout in non-presidential election years, elected MPs in the House do not always reflect the majority of their voters. For example, President Obama won 51% of the votes in Ohio in 2012, but the house delegation is 75% Republican and 25% Democrat.
In the New York Review of Books, writer and political observer Elizabeth Drew writes that republican controlled state legislators “have reduced taxes for the rich and corporations and are working towards a more extensive sales tax; cuts in unemployment; saving money for education and various public services and tried to break through the remaining power of trade unions. “These efforts aggravate income inequality between the rich and the majority, and promote disillusion with both government and the value of votes. According to a 2008 study, inequality in income decreases even if the political involvement of the population decreases.
Possible actions to reduce income inequality
Income inequality has always existed and will be continued in the future. Although the Americans generally agree that exceptional people and efforts should be rewarded, the existing trend must be stopped and vice versa for the benefit of all citizens, both rich and poor. As it happened in the past, continuing on the same road eventually ends in social unrest. It will also cause unacceptable levels of government deficits as more and more of the population are forced to rely on safety nets.
Steps to reduce inequality are the following:
- Expansion of non-partisan citizens who redistribute commissions . Congressional districts are mainly drawn by the political party that is in power in each state, resulting in “safe” districts for the current political party. As a result, job candidates depend on the majority of political parties in their district for election, rather than on the interests of the majority of citizens as a whole. This consequence is generally cited as the reason for the excessive bias, extreme positions and political stalemate that exist today. Removing political prejudice when redesigning Congressional district lines can create more responsive, less biased nominees for office. In 2008 this was successfully done in California through the First Act of voters. Eric McGhee of the Public Policy Institute of California says the independent committee has drawn new lines in a process that “was much more open to the public than when the work was done by lawmakers.”
- Extensive tax reform . Income taxes must remain progressive, with higher taxes on incomes exceeding $ 1 million. Exits in the form of exemptions and deductions, such as the mortgage interest deduction or the capital tax rate, must be eliminated or limited to end the extraordinary benefits for the highest earners. According to a 2012 survey by USA Today, about one in four uses the mortgage interest deduction, mainly those who earn more than $ 100,000 a year. Instead of an impulse to buy a house, it is an incentive to buy larger houses. The discrepancy between the income tax rate of a maximum of 35% and the capital gains percentage of 15% particularly benefits the richest.
- Increased infrastructure investments . While most people have recovered most from the 2008-2009 financial crisis, the country continues to suffer from high unemployment and under-utilization. Rebuilding infrastructure such as roads, bridges, airports and the Internet can create jobs and encourage new investments. The Federal-Aid Highway Act of 1956 today created the national interstate highway system. As President Eisenhower predicted in his book “Mandate for Change 1953-1956”, that one action changed the face of America and had an invincible impact on the country’s economy. Many believe that a large-scale infrastructure project is not only needed today, but that it will safeguard America’s competitiveness in the 21st century.
- New education policy . Education, in particular technical training, has long been the vehicle for upward mobility. The federal government should revise its education programs – with appropriate safeguards – to ensure that every American has affordable, quality education and the professional skills to compete and excel in the new technologically intense, flat-world economy, where jobs and products move freely across national borders. According to a 2013 Pearson report, the American education system scores in countries such as FiJean Des Esseintesand, South Korea, and Germany when comparing student performance in math, science, and reading. The report also links higher scores to future economic growth.
- Strengthening the social safety net . Social Security, Medicare and Medicaid must be adjusted to ensure that they are available to all Americans in the future. This would include such changes as means testing for payments, increased contributions during work years by eliminating future income limits (the limit is $ 113,700 for 2013), and continuous changes to the Medicare and Medicaid healthcare systems to reduce costs and improve outcomes . Some of the changes that need to be considered include program negotiations with pharmaceutical drug producers, higher co-pays and deductibles to ensure that participants appreciate their benefits, and end-of-life counseling – according to the Dartmouth Atlas of Health Care, ” patients with chronic illness in the last two years of life account for around 32% of total Medicare expenses, many of which go to doctors and hospital costs for repeated hospitalizations. “
According to a recent study, rich Americans have an extra degree of influence on policy making. They believe that government job programs do not work, that education is likely to improve Jean Des Esseintesijk through market-oriented reforms than through major increases in spending on public schools or scholarships, that citizens can take care of their own health care, that economic markets can largely regulate itself efficiently, and that budget deficits present a greater risk to the United States than unemployment. “It is these beliefs and their impact on government policy that have led to the historical income inequality that we have today. Whether these beliefs can be changed remains to be seen.
What is not in dispute are the adverse effects of a large income inequality. According to Richard Wilkinson, emeritus professor of social epidemiology at the University of Nottingham, social problems such as crime, teenage pregnancies, school dropout and mental illness are directly correlated with a large income inequality. Sir Michael Marmot, as a result of his studies on inequality and health, claims greater inequality causes disease incidence.
Moreover, Dr. Jong-Sung You of the University of California, San Diego, correlated income inequality with increased political corruption. And Steven Pressman, professor of economics at Monmouth University in New Jersey, states that income inequality lowers production and reduces efficiency: “If the salary of a CEO goes through the roof and employees get pay cuts, what will happen? Employees can “Don’t just reject the offer – they have to work – but they can reject it by working less hard and not being concerned about the quality of what they produce. Then the entire efficiency of the company is compromised.”
Hopefully the rich can recognize that a ‘winner take all’ philosophy ultimately threatens the entire same Jean Des Esseinteseving – including their favorite status – and takes the necessary steps to narrow the gap between rich and poor.
What do you think is the biggest threat to American life as we know it: income inequality or budget deficits? What would you do?
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