Paul Krugman writes about the impact of income inequality on the economy as a whole and political polarization HERE:
For the past century, political polarization has closely tracked income inequality, and there’s every reason to believe that the relationship is causal. Specifically, money buys power, and the increasing wealth of a tiny minority has effectively bought the allegiance of one of our two major political parties, in the process destroying any prospect for cooperation.
And the takeover of half our political spectrum by the 0.01 percent is, I’d argue, also responsible for the degradation of our economic discourse, which has made any sensible discussion of what we should be doing impossible.
Now, however, the Republican Party is dominated by doctrines formerly on the political fringe. Friedman called for monetary flexibility; today, much of the G.O.P. is fanatically devoted to the gold standard. N. Gregory Mankiw of Harvard University, a Romney economic adviser, once dismissed those claiming that tax cuts pay for themselves as “charlatans and cranks”; today, that notion is very close to being official Republican doctrine.
This chart below shows the correlation between income inequality and political polarization that Krugman speaks of. The writers of the report say (Source):
For the period since the onset of renewed polarization, we find strong evidence that “gridlock” has resulted in a less activist federal government. The passage of new laws has been curtailed due to the increasing difficulty of generating the requisite bipartisan coalitions. The effects on social and tax policy have been especially dramatic as real minimum wages have fallen, welfare devolved to the states, and tax rates have diminished. We also show how polarized politics has affected administrative and judicial politics.
The Social Security Administration released a report last year with some alarming statistics:
The gap between the United States’ rich and poor continued to grow last year, according to new government wage data.
With pay down and fewer jobs available, the Social Security Administration’s figures highlight one of the major issues of the Occupy Wall Street movement – widening income disparity, the Associated Press reported.
The SSA said 50 percent of workers made less than $26,364 last year — and most Americans have fewer job opportunities available to them. But the wealthiest Americans are relatively unscathed, with those earning $1 million or more jumping 18 percent from 2009.
Total employment fell again last year, dropping from 150.9 million in 2009 to 150.4 million in 2010. And in 2007, at the height of the recession, there were still 5.2 million more jobs than in 2010, the AP wrote.
The average income for Americans was $39,959 last year, but the median wage was just $26,364. The SSA wrote that this shows “the distribution of workers by wage level is highly skewed,” the AP reported.
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