Economic Inequality in The United States

Introduction

The United States undoubtedly maintains an extremely high standard of living. Those considered “poor” in the US still earn a considerably higher amount than most people in the world. It is almost easy to disregard the idea of economic inequality when a majority of US citizens have food to eat and a bed to sleep in. Nonetheless, the United States boasts the second-highest level of income inequality in the world (Piketty, 2014).

Political Influence and Economic Inequality

US politicians love talking about “leveling the playing field” and creating a free and fair economy when in actuality favoritism is a driving force in the US economy. Politicians handpick winners and losers by means of bailouts, subsidies, tax breaks, and government policies. Ultimately, a company is nothing without a proper lobbyist. This favoritism further exacerbates the divide between the wealthy and the less fortunate, undermining the principles of a truly free market (Stiglitz, 2012).

Income Disparity: A Historical Perspective

The rich get richer and the poor get poorer, or so they say. Forty years ago, middle-class income not only rose in accordance with economic growth, but it also rose at a higher percentage than that of the rich. Currently, a majority of US citizens are seeing little to nothing of the economic health we are currently experiencing. According to the National Bureau of Economic Research, income earned by the bottom 50 percent fell from 20 percent in the 1980s to 12.5 percent in 2014. Meanwhile, income rose by 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent. The economic bounty is evidently going straight to the top (Saez & Zucman, 2016).

The Role of Government Spending

The effects of economic inequality are only perpetuated by the United States government’s inability to properly allocate government spending. Americans give up about 30 percent of their income to federal, state, and local government taxes. Nonetheless, government redistribution has done little to offset pretax inequality. Government redistribution has gone largely to the elderly and the middle class. Individuals in the bottom 50 percent earn an average of $25,000 in after-tax income, only slightly above the $20,000 someone in the bottom 50 percent earned in the 1970s. Ultimately, the US tax system is failing at what it was designed to do, help the poor (Hacker & Pierson, 2010).

Future Implications

The current state of economic inequality is troubling enough; nonetheless, the situation is likely to worsen. One explanation for the drastic rise in inequality relates to the rise in globalization and technology, which has allowed a small portion of skilled individuals to capitalize on the shift, disproportionately affecting economic income and wealth. The increasing automation and digitalization of industries may further concentrate wealth among those with access to technology and education, leaving the less skilled further behind (Autor, 2014).

Conclusion

Ultimately, it seems as if the American dream no longer exists. The US economy is a rigged system in which wealth and poverty are circumstantial. Those born poor are likely to stay so, just as those born rich will likely stay rich. The myth of upward mobility is increasingly challenged by the stark realities of economic disparity, calling for urgent reforms to address the systemic issues at play (Chetty et al., 2014).

References

• Autor, D. H. (2014). Skills, education, and the rise of earnings inequality among the "other 99 percent". Science, 344(6186), 843-851.
• Chetty, R., Hendren, N., Kline, P., Saez, E., & Turner, N. (2014). Is the United States still a land of opportunity? Recent trends in intergenerational mobility. American Economic Review, 104(5), 141-147.
• Hacker, J. S., & Pierson, P. (2010). Winner-take-all politics: How Washington made the rich richer--and turned its back on the middle class. Simon and Schuster.
• Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
• Saez, E., & Zucman, G. (2016). Wealth inequality in the United States since 1913: Evidence from capitalized income tax data. Quarterly Journal of Economics, 131(2), 519-578.
• Stiglitz, J. E. (2012). The price of inequality: How today's divided society endangers our future. W. W. Norton & Company.