Income Inequality: The Rich and the Rest

President Bush has not commented on income inequality much during his two terms. It was never an issue during the candidate debates. But it is a very real and important issue, and finally he brought up the subject in his speech on January 31, 2007 on Wall Street: “The fact is that income inequality is real-it's been rising for more than 25 years. The reason is clear: We have an economy that increasingly rewards education and skills because of that education.” For a long time, income inequality—the gap between the rich and everyone else-- has been growing steadily in the United States. Bush’s speech as drawn some much-needed attention to this topic, but much more needs to be done. Democrats have repined over this issue for years, but the fact that the leader of the Republican Party now acknowledges it has finally stimulated the media into action. And this is not just a U.S. issue. The Wall Street Journal has been writing about the paralleling issue in Asia, specifically China: “China's economic miracle has lifted hundreds of millions of people out of poverty, but the country is showing signs that its poorest citizens are falling further behind.”
Due to the elevated media attention to these issues, I decided to probe the blogosphere and see what others have to say about this topic. I found two very interesting blogs, one dealing with the United States’ current situation and the other with Asia’s. Both comments can be found below.

Comment on Blog 1 about the United States' current situation:

The idea of implementing a progressive income tax (especially when it essentially already exists in the United States) is simply not best means to solve the issue of income inequality. As fellow blogger Kurt9 had mentioned, income inequality itself is not a problem. The main issue lies in unequal opportunities. America has an obligation to ensure that there is not a lack of equal opportunity for all Americans to achieve wealth. And, in that regard, it is higher education that is the main enabler of economic success in this country. However, over the past twenty-five years, the wages of the skilled and educated workers have grown faster than the wages of the less educated. For instance, in 2003, according to the U.S. Census Bureau, four-year college graduates in America earned an average paycheck nearly double that of high school graduates; moreover, holders of doctoral and professional degrees earned three to four times that of a high school graduate (see chart).

Federal Reserve Chairman Ben Bernanke (pictured) said “disparities in education and training are likely the single greatest source of the long-term increase in inequality.” Thus, “policies that boost our national investment in education and training can help reduce inequality while expanding economic opportunity,” he said. The key to income “fairness” is to make sure that the tools necessary for wealth (i.e., higher education) are available to all equally. Don’t look to tax the rich more for what they have earned. Instead, the poor should raise hell about a government-run school system that does an appalling job in educating children, and the high cost of university-level education. Bush has attempted to solve this issue by putting forth two distinctive programs, No Child Left Behind and American Competitiveness Initiative, which serve as vital steps into helping create equal opportunity among Americans. But it is not enough. Dramatic changes in education are needed, and fast. Or the income gap will just widen.

Comment on Blog 2 about Asia's current situation:

Asia’s economy as a whole (including that of China and India) has been growing very fast. With that comes the issue you discuss in your blog about the income inequality. You say that a widening income gap (see chart) is not a large issue to be concerned with. However, the true strength of a country comes from a strong middle class that can carry the load of commercialism. Rising inequality threatens economic growth, especially since it has meant declining or stagnant income growth for lower- and middle-income families. If the vast middle-class families do not see relative income gains (it is not enough “just to be doing better”), they cannot afford to purchase the goods and services that keep the economy moving. Their discretionary income will not be able to keep up with the rising inflation. Asian countries will soon become nations of haves and have-nots. It is good that everyone is “doing better,” and that is something to celebrate. But for long-term economic growth and heath, the income gap needs to be kept in check.