MariyamJivani1

American Government
Research Paper
Mariyam Jivani
Period 2

MariyamJivani2

ShouldtheGovernmentundertakerigorousstepstocombatincomeinequality?
Income Inequality.The shocking level of such disparities in the US has set off
alarms that grow louder by the day, but little seems to be underway to reverse the
trends. According to Joseph Stiglitz ,Taken to its extremeand this is where we are
nowthis trend distorts a country and its economy as much as the quick and easy
revenues of the extractive industry distort oil or mineralrich countries1, (1).
The
problem of incomeinequality isanissue of greatimportance fortheoblivious common
man who struggles to improve his and his familys quality of life. What is income
inequality? It is the
measurement of the
distribution of
income that highlights the
gap
between
individuals or
households
making most of the income in a given
countryand
those making very little2 (
2
).
This issue
has many implications on all of us: right from
poverty, economic immobility to booming homicide and violence rates, drug abuse,
educational gaps, obesity and psychological problems. The current state of downright
income inequality andeconomic immobility calls upon forthe government toundertake
morerigorousstrategies.
Since the past three decades the US economy has beengrowingunequaland
less mobile by every measure, notes John Podesta inhis articleIncomeInequalitys
ripple effect,3 (3).
It takes decades to confirm that a nations economy is indeed

Stiglitz,Joseph."Essay:TheGrowingIncomeGapintheU.S.HarmstheEconomy."
www.nationaljournal.com
.TheNationalJournal,27Sept.2012.Web.16May2014.
<
http://www.nationaljournal.com/nexteconomy/essaythegrowingincomegapintheusharmstheeconomy20120927
>.
2
Thomas,Murcke."Whatisincomeinequality?definitionandmeaning."
BusinessDictionary.com
.WEbFinance,Inc,n.d.Web.16May2014.
<
http://www.businessdictionary.com/definition/incomeinequality.html
>.
3
Podesta,JOhn."IncomeInequality'sRippleEffect."
POLITICOMagazine
.PoliticoMagazine,9Dec.2013.Web.16May2014.
<
http://www.politico.com/magazine/story/2013/12/incomeequalityrippleeffectjohnpodesta100891.htm
l>.

MariyamJivani3

deteriorating
. Inthe past,most economists agreed thatinequality helped theeconomy
it spurred growth and creativity amongst the middle class and also created a pool of
concentrated wealth to invest in economic development4 (4). The
Organisation for
Economic Cooperationand Development(OECD)prominentlyexplains,
"
Ononehand,
inequalities in income distribution may create incentives for people to improve their
situationthroughwork, innovation or acquiring newskills,whileontheotherhand,such
income inequalities are often viewed as being linked to crime, poverty and social
exclusion,5 (
5
). While some disparity is necessary, too much of it would undermine
growth.
In his sixth speech at the State of the Union, President Obama spotlightedthe
issue of income inequality as the defining challengeof our time he further explained
that,..average wages have barelybudged.Inequality hasdeepened.6 (6).Thistellsus
thatthe government is wellaware of thecurrent scenarioofgrowingdisparity.Now,the
questionthatencompassestheintentofmypaperIsthegovernmentdoingenough?
President Obama announced an executiveorder to raise the minimum wage for
companies doingbusinesswith the government. Although thisorderwouldraisewages
for the undetermined low wage workers associated with the federal works, the move
would leave untouched, the millions of people whose jobs arent tied to federal
contracts. The President also proposed solutions such as extending emergency work
benefits andalso increasing overtime pay.If we gotosee,undoubtedlythesesolutions

Brodwin,David."SufferingundertheweightofInequality."
USNews
.U.S.News&WorldReport,12Sept.2013.Web.16May2014.
<
http://www.usnews.com/opinion/blogs/economicintelligence/2013/09/12/recordhighincomeinequalitythreatensusgrowth
>.
5
Elliot,Holly."IsIncomeInequalityasAmericanasApplePie?."
CNBC.com
.CNBCNews,8Jan.2013.Web.16May2014.<
http://www.cnbc.com/id/100361302
>.
6

Lauter,David."Loftygoalsbutlimitedoptions"

ChicagoTribune
.29Jan.2013.Print.16May2014.

MariyamJivani4

will affect theeconomy positively,however,they wouldntcompletely dilute theseverity

ofthisissue.
At the State of the Union, unlike earlier, the President did notrenew hiscallfor
the increasein incometax ratesfor thewealthy. While ononehandthePresidentfeels
that taxing the wealthy isnt the wisest option, on the other hand Joseph Stiglitz and
New York University professor of economics Nouriel Roubini, among others, believe
that a bit higher taxes, particularly for the uppermiddle class and up, will help even
things out, thereby
unlocking the U.S. economys growth potential in a sustainable
way.7 (7) Thirdly, President Obama introduced Obamacare, another programclosely
linked to other entitlement programs. Of course, these programs dohelp the poor and
needyto agreat extent. However,asthe Chineseproverbgoes,
Giveamanafishand
you feed him for a day.Teach aman to fish and youfeedhimfor a lifetimewe dont
wishtomakethelowerclassessodependentthattheyovercometheirneedtoexcel.
Theissueofincomeinequalityissueindeed,haslefttheAmericanswithalimited
spectrumof solutions toexperiment, however, it isalsoimportantforthegovernmentto
getmoreaggressivewhenitcomestosuchissues.
Firstly, in order to cope with theproblem ofincome imbalances thegovernment
needs to understand that free market capitalism has a limit. The administration cant
fund each and every project that comes at the door step.
McCall, the author of The
Undeserving Rich proposes that, Instead of free markets we can focus on

Fischl,Jack."RaiseTaxesOntheRichandFixOurEducationSystemtoClosetheInequalityGap."
PolicyMic
.PolicyMic,18Feb.2013.Web.16May2014.
<
http://www.policymic.com/articles/26805/incomeinequalityinamericawhatweshouldbedoingaboutit
>.

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marketbased redistribution, which translates into good jobs with fair pay.8 (8)
Moreover,
leaders in both political parties have come to accept free market ideology
without question and that the affluent have used their control of money and other
resources towield excessive powerover policymaking.Fieldhousewritesthatpolitical
capture by the elitesplayedabigroleinfinancialderegulation,which inturnhasgreatly
exacerbatedincomeinequalitygrowth.9 (9).
It is remarkable how the income gap dominoes over the educational gap and
widens it too. David Brodwin from the US News gives a thorough explanation in his
article, Suffering undertheweight of inequality, of howincome gaps pile upproblems
foryoungsters. Heexplains,
Consider two children,bothwith thesameinnatepotential
foraccomplishment,oneborntoafamilyinthetop1percentandtheothertoafamilyin
the bottom 20 percent. The first one will have parents who read to them as a
preschooler, stimulating his or her brain. The secondone, probably not. Thefirst one
will grow up surrounded by role models whose hard work brought them success the
second one will grow up surrounded by others whose hard work brought them
barelylivable incomes. Is it anywonder thatthe twochildrenwill enteradult lifewith a
different readiness to use their intellect, a different level of motivation and confidence
andadifferentawarenessofhowtobuildasuccessfulcareer?10(10)
.
Peoplefrompoor
families,orindisadvantagedethnicgroups, haveahardertimeobtainingamiddleclass
livingthantheirpeersfrommoreprivilegedbackgrounds.

Edsell,Thomas."CantheGovernmentActuallyDoAnythingAboutInequality?."
OpinionatorCantheGovernmentActuallyDoAnythingAboutInequalityComments
.The
NewYorkTimes,10Sept.2013.Web.16May2014.
<
http://opinionator.blogs.nytimes.com/2013/09/10/canthegovernmentactuallydoanythingaboutinequality/?_php=true&_type=blogs&_php=true&_type=blogs&_r=1
>.
9
Edsell,Thomas."CantheGovernmentActuallyDoAnythingAboutInequality?."
OpinionatorCantheGovernmentActuallyDoAnythingAboutInequalityComments
.The
NewYorkTimes,10Sept.2013.Web.16May2014.
<
http://opinionator.blogs.nytimes.com/2013/09/10/canthegovernmentactuallydoanythingaboutinequality/?_php=true&_type=blogs&_php=true&_type=blogs&_r=1
>
10
Brodwin,David."SufferingundertheweightofInequality."
USNews
.U.S.News&WorldReport,12Sept.2013.Web.16May2014.
<
http://www.usnews.com/opinion/blogs/economicintelligence/2013/09/12/recordhighincomeinequalitythreatensusgrowth
>.

MariyamJivani6

That's why some analysts, most notably Nobelwinning economist James Heckman,
have argued that the U.S. should invest much more in early childhood education
programs. Being welleducatedcan ensure a better futureforeverychildirrespectiveof
whathis/hereconomicbackgroundstates.
Id like to quote that,Something is better than nothing, therefore, in order to
reverse this trend of inequality we can implement smaller approaches too. Dylan
Matthews from theWashington Post proposes severalideasforeradicatingtheincome
gap
1. One of the primary expenses for most families is housing, and many local
regulations artificially increase the cost of rent and of owneroccupied housing.
For example,The D.C. HeightAct, which by limitingthe heightof buildingmakes
it impossibleto buildbig,highoccupancyapartmentbuildingslikethoseinmany
other cities. That reduces housing stock, which increases rents. Easing up
regulations like these would reduce housing costs, whichwouldoverwhelmingly
benefitlowincomepeopleandreduceinequality11 (11).
2. Thereis often adirect tradeoff betweenthe Fed'sdesireto maintainlowinflation
and its desire to promote full employment. When it errs on the side of keeping
inflation low, as it has lately, that helps wealthy lenders at the expense of the
poorer unemployed. Adopting a policy like NGDP targeting, which would allow
higher inflation for the sake of faster growthcould reorient Fedpolicyto benefit
lowerincomeworkers12(12).

11

Matthews,Dylan."Tenwaystoreduceinequalitywithoutraisingtaxrates."
WashingtonPost
.TheWashingtonPost,6Dec.2012.Web.16May2014.
<
http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/06/tenwaystoreduceinequalitywithoutraisingtaxrates/
>.
12
Matthews,Dylan."Tenwaystoreduceinequalitywithoutraisingtaxrates."
WashingtonPost
.TheWashingtonPost,6Dec.2012.Web.16May2014.
<
http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/06/tenwaystoreduceinequalitywithoutraisingtaxrates/
>.

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3. I think rigorous proposals that would bring about changes to the entitlement
programswouldworktoo.Suchprogramsneedtobemodifiedaccordingtotimes
intheeconomy.
4. Job creation and business innovation are also other short raangesolutions that
canbeundertaken.
Like all complex problems, the solutionwillbeextremely complex, butagain,we
never said it would be easy to run the US. Inequality is not a necessary evil for a
capitalist country it is an unstable, unsustainable economic drag that makes our
country morevulnerableto stagnation andvolatility. ItsuppressestheAmerican Dream
of equal opportunity and economic mobility, making us less competitive globally. And
this is why the Obama Administration needs to pull up its socks and get more
innovative at finding or more often, creating solutions to the problem of income
inequalityintheUS.

MariyamJivani8

WorksCited

Stiglitz,Joseph."Essay:TheGrowingIncomeGapintheU.S.HarmsthenEconomy."
TheNationalJournal,27Sept.2012.Web.16May2014.
Podesta,JOhn."IncomeInequality'sRippleEffect."
POLITICOMagazine.
PoliticoMagazine,9Dec.2013.Web.16May2014.
Thomas,Murcke."Whatisincomeinequality?definitionandmeaning."
WEbFinance,Inc,n.d.Web.16May2014.
Brodwin,David."SufferingundertheweightofInequality."
USNews
.U.S.News&WorldReport,12Sept.2013.Web.16May2014.
Elliot,Holly."IsIncomeInequalityasAmericanasApplePie?."
CNBC.com
.CNBCNews,8Jan.2013.Web.16May2014.
Lauter,David."Loftygoalsbutlimitedoptions"
ChicagoTribune
.29Jan.2013.Print.16May2014.
Fischl,Jack."RaiseTaxesOntheRichandFixOurEducationSystemtoClosetheInequality
Gap."
PolicyMic
.PolicyMic,18Feb.2013.Web.16May2014.
Edsall,Thomas."CantheGovernmentActuallyDoAnythingAboutInequality?."
TheNewYorkTimes,10Sept.2013.Web.16May2014.
Matthews,Dylan."Tenwaystoreduceinequalitywithoutraisingtaxrates."
WashingtonPost
.TheWashingtonPost,6Dec.2012.Web.16May2014.
Addy,Sophia,WillEngelhardt,andCurtisSkinner."Basicfactsforlowincomechildren."
NCCP
.ColumbiaUniversityNCCP,1Jan.2013.Web.16May2014.
Tyson,Laura."WhichPoliciesReduceIncomeInequality?byLauraTyson."

MariyamJivani9
ProjectSyndicateRSS
.ProjectSyndicate,31Dec.2013.Web.16May2014.
"MostSeeInequalityGrowing,butPartisansDifferoverSolutions."
PewResearchCenterforthePeopleandthePressRSS.
PEWCenterforthepeople
andthePress,23Jan.2014.Web.16May2014.