Category: Response Papers (Apr 24) (Page 2 of 2)

The United States is a democratic society in which every person has an opportunity to grow, invest, and become rich. However, Sarah Glazer in her chapter “Wealth and Inequality” suggests that these opportunities appear to be occurring less often nowadays as the income gap between the rich and poor is growing exponentially. According to Thomas Piketty, a professor of economics, there is an increasing economic inequality in American society today, such that invested money is growing much more than income driven money; so the rich who own the investment money are growing wealthier, while the rest of America, who are trying to make their stagnant income keep up with their daily living expenses, is becoming more destitute. Emmanuel Saez, professor of economics at the University of California, Berkeley says that the richest ten percent of Americans make up half the income in the United States.   Moreover, the top one percent richest had an income rise of 31 percent after the most recent recession, compared to the other 99 percent of society that had an income gain of less than one percent. Thus the rich are getting richer and the poor are getting poorer. This reflects a lack of opportunity for those who are starting out with less- a finding that is incongruent with the values of our democratic society.

Professor Hacker of Yale University says that the middle class has not grown because of government policies that protect the rich. This would suggest that one way to remove such injustice is to tax the rich of society such that they pay their fair share of income tax. I am not advocating that their tax rate should go up to a very high level so that it discourages income growth, but rather that the rich should pay the full tax dollar amount associated with their tax rate. The government should ensure that there are specific fair tax rates for every income level and there should be no loopholes or tax breaks that enable one to avoid paying or reducing the rate of one’s taxes. Many of the rich, although taxed at a higher bracket than the poor, end up paying fewer taxes than low and middle income families because they either hide their income altogether or use deductions and loopholes that either help them avoid paying any taxes or reduce their tax rates to a much lower level. In contrast, those who have less income don’t have the advantage of having investment money that enables them to reduce the amount of taxes they pay. I would propose a fair tax system, one with income-driven tax rates, that ensures that people fully pay their taxes; there should be no tax deductions allowed because they provide a much greater advantage to the rich who often shelter their money and thereby pay fewer taxes. This appears to me to be a more democratic policy which taxes everyone fairly based on income and does not allow the rich to unfairly avoid paying their due.

Whenever the topic of wealth and inequality is discussed, the one thing that never ceases to surprise me is the statistics behind it all. According to Chapter 10 of Urban Issues, the top 1% of the world’s richest own about half of all global wealth and the bottom half less than 5%. This is quite alarming because wealth inequality now exists on a worldwide basis but in the recent years, the United States has become the country where it is most prevalent. Wealth inequality poses a serious problem because it threatens democracy. We see that the wealthier people are, the more the government listens to them. This is because they are supposedly paying “more taxes” and because America has now become corporate America where the CEOs have much more influence in terms of policy making and getting what they want in order to secure the future of their businesses. One interesting point that Urban Issues highlighted was the fact that once the economy picks up and unemployment goes back down to 5%, the income inequality will go away again. Now, most economists believe that recessions and booms are virtually unavoidable. The real question therefore is how do we mitigate the effects of a recession, that is how do we make it less severe for those who are already struggling to survive in a power hungry world?

Urban Issues states that as income rose for the top 1% by 156%, hourly wages for the ordinary workers only increased by 9% and an enormous transfer of wealth was made from the middle and poorer classes to the wealthiest people. This is very clear evidence that the gap between rich and poor is not only widening more but at a much quicker rate. A surprising claim that was made by a critic of wealth inequality was that the rising wealth at the top doesn’t hurt those at the bottom because if the economy grows, all will benefit. This claim would only be true if there was simultaneous growth between the profits made by corporations and their CEOs, and the amount of money their workers receive. Based on this also very surprising statistic which states that after the recession, the top 1% annual incomes of more than $394,000 saw their incomes grow by 31% compared with a less than 1% gain of the other 99%, we see this is clearly not the case, in terms of a strong correlation between profits made by corporations and the minimum wage of workers. In addition, another claim that was made was that raising taxes on the rich would hurt the economy because the wealthy would have less money to invest in job-producing industries that benefit the rest of society. The truth is, yes investment does in fact lead to higher income but the question again is who benefits from such higher incomes? Again it is not those who really need an increase in income that benefits from it.

Globalization contributes to the outsourcing of jobs overseas, which explains why it affects the employment rate in America. Americans however, benefit from it because of the reduced cost of products and business benefit since they earn a net profit due to lower production costs. Hence, in my opinion CEOs and other business owners should take this into consideration and use the very net profits they make and pay their American workers more. In countering every argument that critics make of wealth inequality, it comes down to one main reason, greed. Realists for the most part believe humans are selfish and tend to only look out for themselves if something is affecting them and this tends to explain why corporations don’t really care about the welfare of low income workers. To really fix the problem of wealth inequality, we would need the wealthy to be more empathetic in the situation and that can only happen if they choose to do so.