America and income inequality

From President Obama’s SOTU address: That’s what middle-class economics is — the idea that this country does best when everyone gets their fair shot, everyone does their fair share, everyone plays by the same set of rules.

Questions:

1. With many discussions about the economic inequality how much in your opinion is the US far away from the economy when everyone gets fair share?

2. Frankly, is it even possible having the economy in which everyone gets the fair share? Some gaps will still remain, won’t they?

Answers:

Gary BurtlessSenior Fellow, Economic Studies, The Brookings Institution

1. This depends on your definition of “fair.”  I believe the difference in income between the richest 5% of Americans and the poorest 25% of Americans is larger than is “fair” under my definition of “fair.”  I also believe it is larger than is healthy for the well-being of Americans in between the poorest 25% and richest 5%, but that statement would be hard to prove conclusively.

2. Their fair share of what? People who are under 18 and past age 70 are not expected to do much in the way of work; disabled people are not expected to work; new mothers are not expected to work, except to care for their new-born infants.  Many people believe that, in 2-parent families, one of the parents should be excused from the obligation to work for pay; taking care of the couple’s children is a heavy enough burden.  Does it follow that every able-bodied person between 18 and 69 who is not responsible to raising children should be expected to work?  I don’t think so, and neither do most other Americans (or British or French or Japanese or Germans).  It is certainly possible and desirable to increase the percentage of people between 18 and 69 (and who are not enrolled in school) who work for pay.  I believe the US should try harder to boost the adult labor force participation rate and to reduce the unemployment rate.  I believe it should be possible to boost the adult labor force participation rate by 2 or 3 percentage points and to reduce the unemployment rate to 4-1/2 percent.

Lawrence Jacobs, Professor, Director, Center for the Study of Politics and Governance, University of Minnesota

1. I see no prospects for US lawmakers in Washington passing meaningful tax reform, jobs generating programs (such as infrastructure), or investing in human capital through President Obama’s recommendation to make community college free to some students. Washington is now sharply split by party and by a vision about what constitutes good economic policy.

2. Issue is not equality – no serious observer is recommending that or imagining it as a desirable possibility. The issue is to reduce the historically large disparities between top 1% and the rest of the country that has seen its income and wealth stagnate. ​

Christian Weller, Professor of Public Policy, University of Massachusetts Boston, Senior Fellow, Center for American Progress

Bottom line is that the U.S. needs to reduce excessive inequality, so that people actually have a chance of living a middle class lifestyle if they work hard and play by the rules. Some inequality will always exist, simply because of different circumstances, but a growing economy should benefit everybody, regardless of where they work and how much money they earn. For the past few decades, only the top have seen any income gains, while the vast majority of Americans have lived with stagnant incomes and rising costs.

Leslie McCallProfessor, Department of Sociology, Nortwestern University

The basic idea of middle-class economics is that the middle and not just the top should be gaining from economic and productivity growth with higher earnings and family incomes. It’s just assumed that people in the middle as well as the top are working hard and playing by the rules while *some* of those at the top are not, perhaps by engaging in the kinds of speculative and predatory investments that led to the mortgage crisis or by taking ever higher shares of profits for executives at the expense of greater profit sharing with employees throughout the corporation. So the idea is that there will always be inequality but just not as much as there is now and not so skewed that *absolute* growth in incomes in the middle stalls. That is, if inequality were as high as it is today but “all boats were lifted,” then it would be less of an issue, but inflation-adjusted median household income is lower than it was at the end of the 1990s.

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