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Why is income inequality so high again?

WASHINGTON (Reuters) - In 2007, when the world was on the brink of financial crisis, U.S. income inequality hit its highest mark since 1928, just before the Great Depression.

Coincidence? Maybe not.

Economists are only beginning to study the parallels between the 1920s and the most recent decade to try to understand why both periods ended in financial disaster. Their early findings suggest inequality may not directly cause crises, but it can be a contributing factor.

This raises a host of social, economic and political questions. Should public policy aim to reduce inequality, and if so by what means? Does concentrated wealth at the top of the income spectrum generate asset bubbles, or vice versa? Could raising taxes or interest rates ward off financial meltdowns?

 
sweet-a-kins

Asked by sweet-a-kins at 10:14 AM on Oct. 22, 2010 in Politics & Current Events

Level 34 (67,502 Credits)
This question is closed.
Answers (44)
  • Good question. Fdrdid some things to help. They did help...especially his social works program. You can read many people's eye witness accounts and see that some programs did work. These people would have starved otherwise. The unemployment rate was 25% in the 1930's...so something or someone had to step in and try to allievate the problems.Then Reagan came along and those tax cuts once again widen the gap between poor and rich.  I do not think we have fully recovered since.  This is an opinion piece but very interesting. 


    http://www.nytimes.com/2008/01/21/opinion/21krugman.html

    Mom2Just1

    Answer by Mom2Just1 at 10:45 AM on Oct. 22, 2010

  • Should public policy aim to reduce inequality.

    No. FDR and Johnson did that already - they screwed things up worse than what they already were.
    NotPanicking

    Answer by NotPanicking at 10:16 AM on Oct. 22, 2010

  • Fdrdid some things to help. They did help...especially his social works program.

    You do realize, don't you, that most of the programs he proposed were declared unconstitutional? He attempted to overthrow the SCOTUS in an effort to get them approved anyway. The few programs he had that did get through were ones initially set up by Hoover before he left office. His social programs are responsible for most of our spending today. They were intended to be temporary. It was in Johnson's time they were instead expanded and made permanent. Government in general is not educated enough to tamper with the economy in the ways required for social engineering. Anyone can be elected to office, that doesn't mean they have even a remote understanding of economics. Just like most of the posters here - any could be elected, that doesn't mean they'd have a clue what they were doing. They are the LAST people who should be tampering.
    NotPanicking

    Answer by NotPanicking at 10:59 AM on Oct. 22, 2010

  • it's how they do it
    ---
    Explain to us how they do it. Because if you really KNEW how they did it, Wouldn't YOU be doing the same thing?People who know how to make a bundle, usually use those skills to go out and do so. Just a hunch on my part.........
    jewjewbee

    Answer by jewjewbee at 1:20 PM on Oct. 22, 2010

  • I think it is a problem when only a few hold all the wealth, and the rest of us get the leftovers
    -----
    Why would you want to " get " anything.
    What the hell is wrong with you going out and earning your own?
    jewjewbee

    Answer by jewjewbee at 2:45 PM on Oct. 22, 2010

  • Conspiracy theorists have been saying for decades that "they" want to eliminate "the middle clas" and the rich would therefore,have all the money and control the lower class which will be ALL of us. That sounds bad. I hope they are wrong and just nuts.
    kerp1960

    Answer by kerp1960 at 10:49 AM on Oct. 22, 2010

  • "It is usually only left-leaning rich people that care about inequality in the U.S.," said Carol Graham, a senior fellow at the Brookings Institution think tank who studies the economics of happiness

    ******************
    Here's an idea, if they care sooooooooo much, they can give THEIR riches to people to make things more equal! Yeah, I don't see that happening at all, they just want to talk about it and take it from the middle class.
    DSamuels

    Answer by DSamuels at 11:00 AM on Oct. 22, 2010

  • I think it is a problem when only a few hold all the wealth, and the rest of us get the leftovers. Between 2002 and 2007 The top 1% had an income gain of over 10% when the rest of the 99% of us had a gain of a little over 1%. While we are struggling as a nation, wall-street and the super rich are thriving seeing record profits. There is only so much the super rich an spend to help the economy, they hoard their money and invest it, the middle class is what will make the economy sound again, when every one is spending.

    mommom2000

    Answer by mommom2000 at 11:18 AM on Oct. 22, 2010

  • I think it is a problem when only a few hold all the wealth, and the rest of us get the leftovers

    So you have issues with the entire history of post-neolithic society?
    NotPanicking

    Answer by NotPanicking at 11:42 AM on Oct. 22, 2010

  • And that's an excuse for taking the middle classes wealth away now? Every ones wealth? You have a warped sense of justice.
    itsmesteph11

    Answer by itsmesteph11 at 11:44 AM on Oct. 22, 2010