A recent research paper by University of California, Berkeley, Professor Emmanuel Saez showed that in 2007, the top .01 percent of American earners took home 6 percent of total U.S. wages – almost twice as much as in 2000, and surpassing even levels seen during the Great Depression.

The top 10 percent of American earners raked in 49.7 percent of total wages, a level that, quoting the research paper, “is higher than any other year since 1917 and even surpasses 1928, the peak of the stock market bubble in the ‘roaring’ 1920s.”

Bush's tax cuts for the rich were the main culprit, making the federal tax system much more regressive than at any time in recent history. The evidence is clear that this windfall for the well-off did not trickle down to working families. Read more here.

In contrast, Brazil has succeeded in dramatically closing the gap between the rich and the poor in recent years, as shown here. The government of Lula claims credit for having rescued the economy, especially the neediest, with assorted tax breaks, consumer credit from public banks, and large increases in cash transfers to the poor.

My question is: does income inequality matter? It is interesting that most OECD countries have much lower income inequality than the US, which shares the rankings with Third world countries.

What are the implications of growing income disparity? (Republicans, I already know your answer, even if you are poor and lacking opportunity: it is "Great!!") If negative, what should the US do to address it?

Sorry, I don't buy that. On the contrary, I think that the United States poor Gini index is a more accurate picture of the corruption that is widespread in the US economy. The only difference is that this type of corruption is simply legislated, ergo, it is legal. In sub-Saharan Africa, India, or many south American countries, you pass the brown envelope or bag filled with cash to get the contract. Here, you pay into a Political Action Committee (PAC) to get the legislation passed to get you the contract. Or you have a quiet understanding during golf that the Congressman will become a highly paid lobbyist for you after they retire from Congress. All nice and legal. Every budget is packed with pork. What is pork? Mostly the result of PAC money. Scratch my back and I'll scratch yours.

The US led the world into a near-depression and it was because of the deep rooted corruption of mortgage brokers, realtors, and banks. Let's call it what it was. And let's not forget the sweet masses who lied shamelessly about their income. Medicare is also hopelessly corrupt, especially in places like Florida. I could go on. So corruption under another name is still corruption, no matter how 'perfumed' it is...

Growing income inequality cannot be a good thing in any country, the US included. Those without tend to feel that they have no stake in the economy and however hard they work, there is no way they can break through the "steel ceiling" that separates them from the elite. With nothing to lose and no upward mobility, you run the risk of social dysfunction and crime. I wonder if there is any research examining the correlation between income inequality and crime.

Income disparity is only one symptom of a greater danger, not only to economies, but to the continuing existence of humanity. We live in a physical world, but the present monetary economic system is symbolic construct that does not take into account the fact that survival depends on action not thought. Only the individuals that physically produce things are acting in the real world, and although controllers and organizers are necessary for its functioning, they are scooping off large amounts of money that should be correlated with physical not mental effort. The system can only stand a certain number of controllers and organizers and when too much non-physical effort money is taken by them from the system it collapses and a recession occurs.

The logic is simple:


a) In hunter-gatherer populations there was a direct physical relationship between effort and reward.
b) Once barter systems evolved we were on the slippery slope, because we ourselves, and not our relationship with the physical environment, determined the value of bartered objects.
c) When the magical pieces of paper and metal discs were introduced physical effort and reward completely parted company and the majority of the world's population and biosphere fell pray to the parasitic money jugglers.
d) The situation now exists whereby someone with one finger on a keyboard can buy a piece of land by sending symbols through cyberspace, and without a single thing physically changing, after the passage of a few years, perhaps double the money he paid for it. What does that profit represent in terms of physical effort and change?

Everything has become so symbolic and abstract that there is no longer a direct and balanced physical relationship between effort and reward - between the number of abstract units (money) and the physical reality they are purported to represent. The modern economic system is a religion which, as we have seen throughout its history, depends as much on faith as it does on reality.
Our economic system is like a massive pyramid scheme in which a few individuals at the top becoming rich on the backs of those at the bottom - the whole thing driven by the amazingly stupid assumption that it can expand and function to infinity.
We cannot continue to borrow and steal from the future as the natural economy of a finite earth and its biosphere will ultimately determine if mankind has a future. If we carry on along the same path, I cannot see anything other than a final catastrophic collapse and a bloody return to subsistence farming.

It has to be admitted that the prosperity of the first world has been brought about by the financial dealings of those who have been parasitic on the mass of humanity and the biosphere, but sadly these individuals are also the reason why we will lose all that we have gained. If humanity is to exist in relative comfort for a long time into the future, the only answer is to index money more closely to the realities of the physical world in some form of steady state economy.