The rich, Washington, and income inequality
By Mac McPhail Contributing columnist
Income inequality. Get ready, because you are going to hear a lot about it over the next couple of years. The subject was highlighted in President Obama’s State of the Union address Tuesday night, and is a subject much discussed recently by politicians and the media. Income inequality has been defined as “the difference between individuals or populations in the distribution of their assets, wealth, or income.” Income inequality can be simply described as the gap between the rich and the poor, the haves and the have-nots.
It was recently reported that the 85 wealthiest people on Earth own as much as the entire bottom half of the world’s population. But what about here in the U.S.? A recent Associated Press article by Christopher Rugaber and Josh Boak stated, “Three decades ago, Americans’ income tended to grow at roughly similar rates, no matter how much you made. But since roughly 1980, income has grown most for the top earners. For the poorest 20 percent of families, it’s dropped. Incomes for the highest-earning 1 percent of Americans soared 31 percent from 2009 through 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, an economist at University of California, Berkeley.”
So, while the gap between the rich and the poor in the U.S. has grown since 1980, it has really widened since 2009. It’s ironic that this widening has been during the administration of a president that is now so concerned about income inequality. It is U.S. government policies that began at the end of the Bush Administation and have continued and expanded during the Obama presidency that have actually contributed to the expanding gap between the rich and poor.
Back toward the end of 2008, the U.S. economy was in crisis. The housing bubble had burst and home prices were dropping like a rock. With so much of the economy tied to housing, the stock market crashed, with the Dow bottoming out under 7000 points in March of 2009. With financial giants folding, (nobody listens to E.F. Hutton anymore) and major corporations in danger of bankruptcy, (General Motors) the politicians in Washington, pressured by their big business, labor union, and Wall Street buddies took action. They deemed certain financial institutions and corporations as “too big to fail,” and bailed them out to the tune of billions of U.S. taxpayer dollars. These bailouts came at the very end of the Bush administration and continued on after President Obama came into office.
Since 2009, the economic tampering has continued during the Obama administration, highlighted by the stimulus and quantitative easing programs. The $800 billion stimulus program, proposed by President Obama and passed by Congress, was designed to grow the economy with “shovel ready” government projects and the sending of federal funds to assist state and local governments. The program quickly turned into a hodgepodge of government pork divided up by congress to their districts, with little effect on the economy as a whole.
Quantitative easing was (and is) a program where the U.S. government buys back bonds in order to pump money into the economy. By injecting more funds into the money supply, the stated hope was to keep interest rates low inorder to stimulate borrowing for large purchases, such as houses and for business. The program has now injected around a trillion government borrowed dollars into the U.S. economy, adding to the now $17 trillion national debt. Interest rates are at historically low rate for borrowers, but, with that, banks are also paying historically low rates on deposits.
The low interest rates have sent money flowing into the stock market. Now the Dow has more than doubled and sits at around 16,000 points. Who primarily benefits? Those who have a lot of stock. Who has a lot of stock? The rich. Who primarily benefits from low interest rates, and who primarily has the capital and the means to borrow at those low rates? The rich. Who primarily benefited when their financial institutions and corporations were bailed out? The rich. So, many of the same politicians who are now bemoaning “income inequality” have been actually contributing to widening the gap over the past few years by their actions.
Of course, some will say that these programs have saved jobs and benefited many average Americans by helping avoid a collapse of our economy. But, as the economic downturn lingers into its fifth year and our national debt skyrockets, a question needs to be asked. Are we really better off overall because the actions of Washington over the past few years relating to the economy? We can argue that, but we know for sure one group that is prospering. That’s the rich.
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