Author Topic: Incomes Collapsing in the US  (Read 2315 times)

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Offline kimmy

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Re: Incomes Collapsing in the US
« Reply #15 on: February 13, 2017, 12:53:44 pm »
I think we can at least agree that not everybody's getting richer and not everybody should be happy to see the rich getting richer while half the country is making less (in real income) than they were 20 years ago.  I'd be interested to see equivalent statistics for Canada... my hunch is that it's not much different here.


Regarding the premise that income inequality itself isn't a problem: I conceptually have a hard time understanding how it couldn't be, in macroeconomic terms, a drag on growth.

Ultimately, our economy is driven by consumer spending. We have jobs because others are willing to pay for services we can provide.  But with so many people just not getting ahead financially, people aren't spending as much as they could. People are squeezing another year or 2 or 5 out of their car, they're delaying their home renovations, they're staying home and watching Netflix instead of going out to restaurants, and so on.  People would spend more money if they had more money.

And you can say "yes, but the money's still there, it's just in the hands of a smaller number of people"... but a handful of people can only eat so many meals, drive so many cars, and get their homes renovated so many times.

Take a billion dollars-- hypothetically the annual salaries and bonuses of 10 or 20 or 50 top CEOs and Wall Street bankers... imagine that billion dollars in the hands of 10,000 consumers instead.  From a macroeconomic standpoint, what creates more economic benefit: 20 already-wealthy people get $50 million each, or 10,000 average people get $10,000 each?  I strongly suspect that the latter would generate far more economic benefit, as people would start buying the things that are waiting on their "when I have more money..." list.

That's why I suspect that income inequality actually is, in itself, economically undesirable.  With all the growth in income going to a small portion of the population, consumer spending is being throttled back, and that can't be good for the economy. The engine that powers the economy is starved for fuel.

 -k
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