The Gap Widens: Income Inequality in America


“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little”

Franklin D Roosevelt

Personal Interest:

My topic is income inequality in America, not only that it is growing rapidly but that it also threatens democracy. In English this year, one of our main focuses is to analyze the American Dream in literature. I have been born and raised in America and it wasn’t until this year that I became truly interested. Out of curiosity, I researched more on the topic and learned that income inequality prevents most Americans from attaining the American Dream.

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Historical Problem:

The Founding Fathers

Historically, the increase of income inequality has threatened America’s democracy due to the wealthiest Americans influence in the government. The problem started in 1776 when America declared itself as an independent nation. After successfully waging the Revolutionary War, America’s founding fathers were able to take leadership and rule the new nation simply because they were the “elite of the day [and were] involved in the highest levels of society”(Wood). Since the beginning, it has been clear that owning large sums of money grants power in America. Thomas Jefferson, a rich southern slave-owner, was able to draft the declaration of independence, serve two terms as the third president of America, and his legacy has been followed all the way up to the modern day, which wouldn’t be possible if he wasn’t part of the wealthiest class.

In 1816, Thomas Jefferson was one of the first people to really identify the problem of income inequality in America. During this time, known as the Era of Good Feelings, the economy was prospering, causing many small companies to turn into larger corporations. Jefferson saw this change as a danger, and warned the nation to “crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength, and bid defiance to the laws of their country” (Kennedy). Jefferson saw that the largest money-making corporations were able to get involved in politics because of their economic power, which benefited their own needs. Because of this, the wealthy had the power to impact government decisions while the poor did not, which threatened democracy.

Although income inequality began at the start of America, the first time it got particularly bad was during the Gilded Age. Between 1860 and 1896, America shifted from an agricultural base to an industrial one, causing an imbalance in the distribution of wealth where most of the money was in the hands of the factory owners. Considering that the new industrial machines were much more efficient at producing products and were much cheaper, a large number of the working population lost their jobs because their talents weren’t needed anymore. This made it impossible for small companies to compete with the factories’ monopoly, granting full economic control to factory owners. With this power, large corporations were able to not only control the economy, but also were able to heavily influence the government in politics, which threatened democracy.

In the past, there have been several efforts to address income inequality. For example, Franklin D Roosevelt implemented the Commonwealth Club Address where he stated that “Clear-sighted men saw with fear the danger that opportunity would no longer be equal; that the growing corporation, like the feudal baron of old, might threaten the economic freedom of individuals to earn a living” (Roosevelt). In the rest of the speech, Roosevelt explains that “only enhanced government power at the federal level could offset the economic imbalances fostered by large corporations, manage a huge industrial economy, and redistribute wealth in order to ensure that ordinary workers shared in the bounty”(Ellis 110). By giving the government the power to enforce restrictions on the wealthy’s influence in the government, Roosevelt and the government at the time attempted to decrease the wealth gap and help the poor and middle class. This was successful for the next half of a century, until President Ronald Reagan took office in 1981. Opposing Roosevelt’s “New Deal”, Reagan addressed the problem by saying  that “in this present crisis, government is not the solution to the problem, government is the problem”(NPR). Reagan wanted “to cut taxes, to deregulate as much of the economy as possible”, which opposed Roosevelt’s former policies from the 30’s and were in favor of the large corporations (NPR).  Toward the end of Reagan’s presidency, there was a sharp increase in the wage gap, which was mostly due to Reagan’s Tax Reform Act that cut taxes on the rich. This changed everything and gave the rich more power in the  government.

Roosevelt’s Presidency: 1933-1945
Reagan’s Presidency:1981-1989
As you can see, during the Great Depression the debt was highest; it then fell drastically because of Roosevelt’s New Deal, and then rose again due to Reagan’s anti-government policies.

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Present Day Problem:

In the modern age, income inequality has gotten so bad that it is almost impossible for a middle class or poor American to achieve the American Dream. Income inequality, which is unfair to the average American, has the possibility of getting much worse in the near future if the problem is not fully addressed.

According to Joseph J Ellis’ book  American Dialogue, “the United states has a higher level of income inequality than any other democracy in the developed world”(Ellis 105). Ellis explains the current statistics for the distribution of wealth in the USA. As of 2012, “the richest 10 percent [of Americans] own nearly 60 percent of the wealth…the top 1 percent now earns about 30 percent of the total income; the top .1 percent earns more than 10 percent. Between 1972 and 2012, after adjusting for inflation, the average income for most Americans declined by 13 percent; it rose by 153 for the top 1 percent”(Ellis 105). Considering these extreme statistics, it is clear that this gap is out of hand and is growing rapidly.

Today, there are many reasons why income inequality is growing in America. One reason is the tax laws that the government has recently passed. President Donald Trump’s tax plan “cuts individual income tax rates, doubles the standard deduction, and eliminates personal exemptions” (Amadeo). In this plan, Trump lowers the highest tax bracket, which benefits the rich. This act furthers the gap between the individuals in the highest tax bracket and all other taxpayers, therefore increasing income inequality.

Another reason why income inequality is growing is inflation. While the rich “benefit from the strength of the stock market… the poor… rely solely on their own income, which could be significantly weakened with rising inflation, because their money is worth less” (Carver). As inflation increases, but wages stay the same, the average worker will start to lose a lot more money than they did before. The rich, who do not rely solely on their income but on the stock market as well, are not affected as much because they are losing money at a much slower pace. Considering that the poor lose more money than the rich, inflation causes a greater imbalance in the distribution of wealth.

Edgar Ghossoub, an economics professor who is the author of Journal of Development Economics, stated in his journal that “normally we associate income inequality with poverty… There’s always this feeling of unfairness. If you’re rich, you have the resources to defend your interests, but the poor are left behind” (Ghossoub). Considering that the “poor are left behind”, the wealthy have all the power. They can influence government laws, including finding loopholes in economic restriction laws by donating large sums of money to the government in order to benefit their own needs, which threatens democracy. For example, Trump’s tax plan has been “vastly more generous to corporate America, and vastly more expensive for taxpayers” (Gandel).While the average American suffers financially, the corporations are able to prosper. Trump, a owner of a large corporation, is benefitting from his own tax law at the expense of all the Americans that he is supposed to represent.

Considering that this problem is predicted to get worse than it has in the past, there are many organizations that have attempted to help the problem. DonorsChoose is an organization that is helping the problem. Considering that proper education can help children have the opportunity to make a living in the future, DonorsChoose is an organization that takes donations to help give children in underfunded public schools resources in order to learn in a proper environment. Unfortunately, it does not make a large impact in income inequality because it is not widespread enough, but it has provided a new generation of underprivileged children with proper education and an opportunity to make a living which may impact the problem in the future.

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Elizabeth Warren
Candidate for 2020 Election

While the problem cannot be solved by one solution, there are many things that both the government and the individual can do to help the problem. The government could tackle the problem by implementing new laws and Acts that would help close the gap between the rich and poor. This tactic has worked in the past when Franklin D Roosevelt used Keynesian Economics, a system used, especially during recessions, to help economic output by government intervention in the economy. Roosevelt used this to help pull America out of the Great Depression, a period where income inequality was high. Today, as many economists predict that America will fall into another economic recession in the near future, possibly as bad as the Great Depression, Senator Elizabeth Warren, a candidate running for president in the 2020 election, is going to propose an annual wealth tax. Her “proposal [is] to levy a 2 percent wealth tax on Americans with assets above $50 million, as well as a 3 percent wealth tax on those who have more than $1 billion” (Stein). By increasing the taxes on the wealthy, Warren’s proposal could start to close the income inequality gap. Warren’s proposal is one example of the government tackling the problem and has a possibility of being successful in America’s future.

Although, as an individual, it is hard to make a significant change in income inequality, there are things that one could do to help the problem. Non-violent protests are a great way for individuals of all economic classes to address the problem and fight for change in America’s economic system. The 2011 Occupy Wall Street Movement in New York protested social and economic inequality. Some of the movement’s biggest accomplishments were bringing worldwide awareness to the problem, rallying against the system that gave unfair political power to the wealthy, and influenced “elected officials, people running for office, and pundits all feel they have to address this issue” (Leonhardt). By influencing political figures, the Occupy movement demonstrates how individuals can be heard in the government. Protests are one way that an individual can get involved in the problem and make a change in income inequality.

Occupy Wall Street Movement

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  1. April 28, 2019 by Andrew S Wu

    Interesting read! I think there is something to be said here, however, about the connection between wealth and political power. I don’t think simply levying a tax on the wealthy does much: they may have slightly less money, but at the end of the day, they still have far more than the other 90% of Americans. Now, I’m not saying we should levy more taxes: do we really care if someone has a much, much more money than we do? Instead, I think the important issue with income inequality is a gross misdistribution of power: rich individuals far too easily gain influence in our political system, and we have few laws in place to stop it .

  2. April 29, 2019 by Taylor Wong

    Hey Duncan, I did a similar topic to you and it was interesting to look at it from another viewpoint, even if we do share similar ideas. I was wondering, do you think capitalism is uniquely responsible for inequality or is it specifically the policies of America? Finally, I suggest you check out Thomas Piketty. He’s a French economist who recently published a book, Capital in the 21st Century, where he proposes ideas to curb inequality.

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