Income inequality, and really more importantly, wealth inequality, is a big topic in the US. In a truly free-market economy you would expect some variation in both income and wealth–some people work harder, some are more inventive, some have better health, etc. The extremes we see in the US appear to me to be driven more by rich people controlling the political system through contributions, and then getting both major parties to do things in terms of tax and spending policy that primarily benefit rich people. Think private foundations. Think all the renewable energy subsidies. Think taxing investment income at a lower rate than labor income. And so on.
Notwithstanding the flaws in our economic system, the standard of living for most Americans has risen steadily. Income and wealth inequality, however, should be addressed when they result from control of the political system and aberrations from true free-market economics. And if they aren’t addressed, they ultimately put our economic success at risk, just look at the rise of idiot socialists in places like New York and Minneapolis.
Useful data and an approach to understanding the data is provided in a Bureau of Economic Analysis article on the distribution of US personal income. The data show that over the last two decades or so in general lower-income households had more benefit from economic growth than did high income ones. But this is somewhat misleading, as the top 10% of households had the fastest growth and those households are accumulating much of the growth in wealth, and really the top 1% even more so. And there were sub-periods within this longer stretch that showed the reverse–more gains for high-income households. The other bad news is that much of the personal income growth in the very lowest income households is in the form of government transfers. This does not indicate greater or better work effort, and is not sustainable given our debt and deficits. (BEA Article)
