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America’s disturbing wealth disparity

| Friday, April 25, 2014

Over the past few years, the increasing wealth disparity in the United States has gained the attention of academics, journalists and politicians. Just yesterday, The New York Times published an extensive story declaring, “The American Middle Class is No Longer the World’s Richest,” accompanied by a swath of alarming new data that shows substantial lags behind Western Europe and Canada.

Most would agree that these concerning patterns starkly emerged as a result of the tax policies put in place by the Reagan Administration, and were exacerbated by the decline of labor unions and subsequent policies of the Bush Tax Cuts in the early 2000s. Of course, some level of inequality is inevitable in a nation that values freedom as well as equality, but today’s dramatic disparity far surpasses what anyone can consider healthy.

Currently, levels of income inequality equal those of the 1920s and continue to grow. As Politico Magazine and Pew Research report, the top one percent of American incomes have increased nearly 280 percent over the past 20 years, as the bottom 20 percent of wage earners have seen growth of only 18 percent. Furthermore, the top 20 percent of the nation owned 88.9 percent of the total wealth in 2010, while the bottom 40 percent owned less than one percent. These figures are staggering and have severe consequences. Scientists have produced compelling studies that connect high levels of income inequality to many societal maladies, including lower quality of health, lower life expectancy rates, unequal political engagement, increased corruption and frail economies.

Most recognize these patterns as a problem that must be addressed — though many prominent conservatives continue to disregard the issue with the flippant label of “class warfare” — for 69 percent of Americans believe that the government should do something about the rising levels of inequality, according to a recent survey from Pew Research. However, proposed solutions are highly varied.

Some understand the key to lie in increased economic freedom for all Americans. This liberty must come in the form of lower tax rates across the board ⎯ for individuals and corporations alike ⎯ as well as cuts to programs that supposedly “perpetuate the cycle of poverty,” like welfare, Medicaid, food stamps and various other channels of discretionary spending. By allowing Americans to retain greater percentages of their annual income, rather than contributing to inefficient federal programs, the argument goes, families will have more discretion that will lead to opportunity. Much-needed reform to today’s social programs will also aid in greater upward mobility since poor Americans will no longer be trapped by incentives to remain on Uncle Sam’s dollar, but will be encouraged to seek employment and independence.

However, these ideas are sorely misguided. They fail to address the problem at hand and, in reality, would aggravate the existing trends even further. The guise of “personal liberty” masks the true outcomes of such a course of action, which would include significant tax breaks for top earners and crippling cuts to vital programs that have been proven successful by independent research.

According to The Washington Post, if Paul Ryan’s “Path to Prosperity” Budget Proposal, which encompasses many of the aforementioned ideas and was passed by the House on April 10, were to be enacted, it would cost the government $5.7 trillion dollars over the next nine years, in spite of cutting only $5.2 trillion to social programs — resulting in a loss of $500 billion. Therefore, in addition to increasing inequality and posing disastrous threats to millions of Americans who depend on governmental services, such solutions would bring about severely problematic fiscal consequences.

Instead, the proper solution for addressing rising levels of income inequality is based on legislative action in the form of progressive tax reform and education. Through tax policy that targets capital gains, corporate loopholes and the very top earners to which the “Buffett Rule” should apply, we can begin to slow the rising levels of inequality while simultaneously increasing federal revenue that is so desperately needed.

Beyond this direct approach, the more holistic solution depends on the restoration of our country’s shrinking middle class. Educational efforts like universal pre-K and increased funding to community colleges directly lead to adulthood success and pave the clearest path to a strengthened middle class. These ideas address the problems at hand through both broad and specific lenses and will begin to close the overwhelming gap between rich and poor.

Social scientists across the board agree that education is the clearest link to higher incomes, levels of employment, life expectancy, civic engagement and health. By choosing to invest in a proven stepping-stone to positive outcomes and reforming federal tax codes to promote equity, we will be taking the first steps in addressing a complex issue that invariably affects us all.

The views expressed in this column are those of the author and not necessarily those of The Observer.

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