Income inequality is both a political problem and an economic problem for the United States.
Politically, it is clear that income inequality undermines American democracy. In order for our system of representative government to maintain its legitimacy, it is crucial that elected officials remain responsive to the majority of their constituents’ demands. Yet study after study indicates that in the U.S., regardless of partisan affiliation, elected officials are overwhelmingly more responsive to the interests of relatively wealthier voters. In fact, Martin Gilens of Princeton University has shown that when higher income and lower income Americans disagree on a particular issue, elected officials are overwhelmingly inclined to side with the wealthy by a factor of two to one.
Of course, one could argue that there are many ways to address this last problem – strong campaign finance laws that place a real cap on the amount that any individual or entity can contribute seem like an obvious start. But a self-defeating cycle emerges where the momentum required to pass these reforms can never get off the ground because of the outsized influence that wealthy Americans already have on the political system.
High levels of income inequality do more than undermine American democracy, however – they also inhibit economic growth. Researchers at the IMF published a report last October revealing that high levels of income inequality are associated with unstable economies prone to frequent crises and downturns. Redistributive policies that mitigate against income inequality can therefore actually help grow the overall size of the economic “pie” rather than simply re-slicing its constituent pieces.
Moreover, if you look specifically at the U.S., it’s clear that the policies promoting an upward redistribution of wealth come at a considerable price. According to the nonpartisan Tax Policy Center, the three most expensive exemptions in the tax budget – deductions for home mortgage interest, employer-provided health insurance, and employer-provided pensions – collectively cost over $330 billion every year and yet overwhelmingly benefit relatively wealthy Americans. Closing these exemptions would promote greater economic equality while also cutting off wasteful spending to help balance the budget.
So long as fair democratic representation and stable economic growth are predicated on widely shared prosperity, then public policy ought to be focused on reducing income inequality. But the story doesn’t end there. Income inequality is neither an accident nor an inevitable byproduct of a capitalist economy: To the contrary, the historical record shows that, in the United States, a substantial amount of economic stratification has arisen in response to deliberately designed government policies and programs.
Take, for example, residential segregation, which prominent social scientists cite as the central force responsible for articulating and sustaining racial and economic inequality: The emergence of the white middle class suburbs and the black poverty-stricken ghetto can be traced back to redlining policies employed by the Federal Housing Administration and discriminatory public housing regulations designed by the federal government that together make economic prosperity easier for some at the expense of others.
So long as public policy itself remains responsible for producing and sustaining inequality in America, policymakers today face an obligation to reverse this injustice and make the American Dream of equal opportunity a reality.
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