More on the economy
First of all, I agree that there are alot of factors that make flat comparisons with other countries problematic. But the trends remain, and (assuming an income gap is bad, which I will get to in a minute) if our economy is growing more disfunctional faster than other countries, we should be doing something to mitigate the causes. For instance, if racism or the lingering effects of slavery are contributing to the problem here, that may be a valid reason for the existance of the problem, but it is not a valid reason to accept the problem as a way of life. I think we should be making progress addressing the problem (which is why Obama's comments about civil rights make sense).
Secondly, Mark is also right that this study of incomes does not account for relative cost of living/buying power, and we may be able to assume that the group living at the "wealthy" end of the spectrum could also have a real quality of life that isn't so far separated from those at the bottom. I happen to believe, just from experience, that this is generally not the case. The study also suggests that there is a connection between wide income gaps and low social mobility. I happen to prefer thinking of the US as a country of high social mobility, but if you believe the conclusions in the report, it seems we are losing that quality. But this is certainly arguable, so we can just disagree about these points if you see it differently.
But really, why is this gap "bad?" I don't know of an easy way to explain my thoughts without using some pictures, so I'm including some graphs (brought to you by MS Paint) to illustrate why I don't like the growing gap. (But these graphs are not based on real data, so they should be view as simply abstactions of my points).
This is the way the income distribution has been descibed in the middle of the century, with a healthy middle class where alot of people make a middle income:
This is the way that graph would change if everything stayed the same, except inflation and population growth:
Ideally, this is how it would change, with most people getting more wealthy:
But this is how I'm afraid it will change, with more people earning low incomes, less people earning middle incomes, and only a few of the already-wealthy becoming ultra-wealthy:
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So I wonder how the current financial crisis has effected the income distribution stats. Assuming that the ultra rich have most of the stocks and investments, then with a 10-20% decline in the stock market it would seem that the rich would have lost 10-20% of their wealth while the poor would have stayed the same (making them look relatively wealthier). No stats to back that up just a thought.
I wonder if we just have a sliding scale of "what is wealth" that throws these statistics off. Who is wealthier - a "millionaire" from 1920 who has the only car in town and heats his house with a wood furnace, or a grad student in 2000 who has a car, computer, and cell phone?
Second, I still find no reason why a spike at the rich end of the spectrum should concern me. I know in extremes - think colonial Africa - it would show that there's a ruling class that dominates the masses, but I don't feel that's true here. I do fear that it creates class warfare. The idea of reeping benefits from the "other" is always disturbing. Ask me about the Durham Food Tax for more ranting (Vote No!)
Final note - my reasoning for identifying the unique reasons for income diversity in the U.S. - vestiges of slavery, etc - is that I fear the next step in a comparison like this is to say, "Hey, Sweden has a much better ratio - let's make our government like their's!" when they are in the place they are perhaps despite, not because of, their government.
I don't think you should be concerned about the spike at the top. I'm not (good for them).
But it's the sag in the middle, and the lack of sag at the bottom that I think people should be concerned about.
My original point was that I feel there is an element (including McCain of the last few weeks) who would like Americans to think that if we want to focus on buttressing the middle and lower end of the spectrum, that means that we want to do it by stealing from the wealth of the rich, which I think is a myth.
One other thought - no stats to back this up:
Could the "poor getting poorer" be the result of immigration? Not so much that the poor people of yesteryear are poorer, but that they have been displaced by people who are poorer than they are, even if the original poor and moved up to lower middle or just stayed the same? Hope you follow.
I think of these Guatemalan workers who are 6 to a one-room apartment.
P.S. Trickle down economics - now ridiculed by mainstream media - but the idea does make theoretical sense. Why doesn't it work if it doesn't? Don't the rich have to spend their money on something?
Immigration could contribute, I'm sure.
Maybe trickle down doesn't work because rich people spend money either way, so giving them more money to spend doesn't equal more money being spent?
No data to back this up, just idle and very general speculation.
When all of America received the tax rebate checks, the hope was that everyone would go spend that money and that the spending would give the economy a shot in the arm. But many Americans put that money in their retirement accounts or paid it towards their credit card debts instead of actually buying something new. (I'm not at all criticizing these choices.) Maybe the money that is supposed to be trickling down is being spent/invested in a not-so-trickling kind of way.
It seems like to me that trickle down probably doesn't work because the rich/those-who-are-supposed-to-trickle-their-wealth-down don't spend or invest those additional dollars in proportions and in ways that benefit Americans who are supposed to benefit from the trickle. When they make a bigger profit because they must pay less in taxes, those bigger profits don't translate in adequate proportions to the job creation and the spending that eventually benefit Joe the former textile worker.
In college I studied the incomes of teachers and the cost-of-living in certain areas. While the cost of living in Connecticut is indeed higher than the cost of living in NC, the difference doesn't nearly make up for the discrepancy in teacher salaries. Controlling for cost of living, teachers in CT still make far more than teachers in NC. (Not to mention the fact that the job looks quite different in CT where teachers have a daily lunch break, etc.) And again controlling for cost of living, teachers in areas like Wilmington, Raleigh, Durham, etc., make far more than teachers in poor, rural areas of NC due to the salary supplements paid for by local property taxes.