I heard an interview on the radio today with Dan Ariely of Duke University, one of the authors of a study asking Americans how much inequality in income distribution exists, and how much is desirable. The vast majority of respondents seemed to have no idea just how unequal our country's income distribution has become. The rich are much richer, and the poor are much poorer, than people think they are. Most people apparently think the wealthiest 20% control only about 59% the nation's wealth, when they actually control about 84%. Respondents in this survey were also asked what sort of income distribution they would prefer. The overwhelming majority, across all ideological lines, when asked to choose whether they would prefer to live in an unspecified country where the top twenty percent control more than 80% of the country's wealth (USA) versus a country where the top 20% only control about 40% of the wealth (Sweden), chose a distribution resembling that of Sweden.
People also may not realize that this condition has changed significantly over time. As I discussed in a previous post, we had levels of income inequality similar to today's levels in the 1920's and 1930's, then a relatively equal period from the 1940's through the 1970's, then rapidly rising shares of income going to the wealthiest among us, as this chart shows:
causes and cures can be debated, the cited study suggests that people would find it more just and harmonious to live in a place where the incomes and shares of wealth are more equal than those that currently exist. One thing Ariely said he does not understand is why people have such an aversion to any talk of taxes that they seem unable to contemplate that raising taxes might be a way to get to a place that they evidently want to reach.
If people had a better understanding of these facts, would they have less of an aversion to making the tax system more progressive? And now that Republicans and Democrats have staked out such divergent positions on the budget, with Republicans seeming to favor taking even more from the poor so as to give even more to the rich, will the issue of inequality itself will come to the forefront in next year's election campaigns? Would that debate foment social unrest? Or is it the rising level of income inequality that is posing risks to social cohesion?
(chart from Animal Spirits)