Economy

Inequality is Great Again

JM Ashby
Written by JM Ashby

Income inequality in America has been rising for a long time, but it has reached a new milestone under Trump by widening to the largest gap in over 50 years.

In full context, the widening gap can attributed to Trump's policies from his tax cuts for the rich to his trade war which has reduced trade particular in some states that voted for Trump.

From MarketWatch:

Three of the states with biggest gains in inequality from 2017 to 2018 were places with large pockets of wealth — California, Texas and Virginia. But the other six states were primarily in the heartland — Alabama, Arkansas, Kansas, Nebraska, New Hampshire and New Mexico.

A variety of factors were at play, from a slowdown in agricultural trade and manufacturing to wages that haven’t caught up with other forms of income, economists say.

While some states have raised the minimum wage, other states like Kansas haven’t. At the same time, the sustained economic growth from the recession a decade ago has enriched people who own stocks, property and other assets, and have sources of income other than wages, said Donna Ginther, an economist at the University of Kansas.

It's this group of people -- people who have "sources of income other than wages" -- that received the most significant benefits from Trump's tax cuts for corporations and wealthy shareholders.

Americans with passive income from stocks and investments received a windfall as corporations used their tax cuts to pay for $1 trillion in stock buybacks and dividend payments.

At the same time, Trump's trade war has directly hit people who make a living with their bare hands on farms and in factories. Trump's tariffs have reduced domestic demand, cut access to foreign markets, and led the manufacturing sector into recessionary territory.

Wild swings on Wall Street and relatively normal or healthy looking quarterly reports buoyed by financial stocks and tech companies that don't actually make anything are masking what's happening underneath the surface of the economy.

I believe the key to rolling back or replacing Trump's tax cuts for the rich is to make the argument that we actually do engage in wealth redistribution in this country, but we've redistributed wealth upward, not downward. This argument has the benefit of being empirically true while sending the message that average Americans have been short-changed.

  • muselet

    Income inequality can be addressed, to a degree, by progressive taxation of all sources of income. But more needs to be done, starting with countering what Robert Reich recently called “The 4 Biggest Conservative Lies About Inequality” (if you’re not reading Reich, why not?).

    Rs have deliberately distorted the US economy for decades. It’s going to take decades of determined pushback to correct those distortions.

    –alopecia