(and What It Will Mean for the Economy)
My Comments: I’ve written previously about the danger of income inequality. You only have to look at countries in the middle east to understand the chaos and turmoil in countries where the middle class barely exists.
Any population without a realistic ability to rise above poverty is sooner or later going to get pissed and cause systemic chaos. That’s not to say the US is anywhere near Pakistan, for example, but that’s a country run by a few with the rest of them scratching to earn a living.
For many reasons, if anyone reading this wants to Make America Great Again, there has to be a focus in generating income equality. When you reach adulthood and there’s a reasonable path to prosperity, that’s a good thing. And like the author says, people with more money spend more money and there’s an economic rule called the multiplyer. For every dollar I spend, it increases several fold since the store where I spend my money hires other people who in turn spend the money they earn. And so on…
If your goal is to push as much wealth as possible to the top 1%, sooner or later the bottom 90% is going to get pissed and create chaos. That’s because much of the money at the top is not spent, but saved, meaning the store worker I mentioned above doesn’t get hired. Without him or her spending money, there is downward pressure on those in the middle.
More than anything else, that’s why we have a shrinking middle class.
by Chris Hughes, Co-Founder of Facebook, Co-Chair at Economic Security Project, author of Fair Shot: Rethinking Inequality and How We Earn, on Quora: 2/13/2018
Democracies do not last long without strong middle classes. I believe unless we make significant changes today, the income inequality in our country will continue to grow and call into question the very nature of our social contract. It is such a fundamental idea behind America that if you work hard, you can get ahead — and you certainly don’t live in poverty. But that is increasingly less true today. Many scholars smarter than me have looked at how democracies slide into authoritarian rule, and growing class resentment and the emergence of nativist or populist leaders is a recurring theme. (This is the concern that I share with many about Donald Trump’s dangerous lack of respect for the rule of law.)
Economically speaking, the biggest driver of growth in our economy is consumer spending. If we want to grow our economy, we have to put more money in the hands of working people. If you put a $100 in the pockets of the poor or middle class, they’ll naturally spend the vast majority of it on products and services they need, spurring economic growth. That same $100 put in the hands of the wealthy will mostly go into the bank for savings. The Roosevelt Institute has looked at the effects of this practically speaking: a guaranteed income of $500 a month to all Americans could add as much as 7 points to GDP growth over the next eight years.
History has proven that the “trickle-down” economic worldview may be good for America’s corporations, but it is not good for Americans. Just because economists tell us the economy is healthy again does not mean the American dream is strong.
I spend a lot of time discussing this exact topic in my book, particularly in the last couple chapters.