How should we think about inequality in the United States? Are the differences between the rich and the rest so large that we should make an effort to redistribute some of the wealth of the wealthy?

Since 1970s, the percentage of all national income received by the top 1% of earners has jumped from roughly 10% to roughly 20%.In other words, their real income has doubled, such that the top 1% now gets roughly one in five of all dollars earned by American workers. The median yearly income for this group exceeds $600,000.The mean exceeds a million. The top 1% are now positioned where they were at the end of the 1920s, the so-called Roaring ’20s.

As you read in your lecture on income and welfare policy, the wages of most Americans have stagnated while the income of the top wage earners have skyrocketed. There are many reasons for this change: tax cuts that mainly benefits the rich, the decline of unions,  globalization, a decline in manufacturing sector, and a progressive tax system that is less progressive.

Let’s first look at the ideas of two political figures. First, during the election of 2012 President Obama said the following:

There are a lot of wealthy, successful Americans who agree with me–because they want to give something back . . . look, if you’ve been successful, you didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something–there are a whole bunch of hardworking people out there. If you were successful, somebody along the way gave you some help. There was a great teacher somewhere in your life. Somebody helped you to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen. The internet didn’t get invented on its own. Government research created the internet so that  all the companies could make money off the internet.

On the other side, his opponent said:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has the responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it—that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. These people who pay no income tax. . . My job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.

These are two very different ways of looking at the role of the government. The one side is based on the idea of using the government to help people. The other side believes that the government should limits its actions and allow individuals to take personal responsibility for their actions.

The question this week focuses on the role of the government in a democratic society in fostering a fair system. Should the government make an effort to redistribute wealth from the rich to the poor, or should the government’s role be very limited. For example, should it enforce laws, provide for the common defense, and prosecute criminals?

Let’s first get a little deeper understanding of this issue by looking at two philosophical ways of viewing this issue. One argument is that we should take some of the wealth from the well off and give it the poor. Why?  The philosopher John Rawls argues a person cannot claim credit for being born with greater natural endowments (like superior intelligence or athletic abilities), as it is purely the result of the “natural lottery.” As a consequence, people that benefit from this natural lottery do not deserve the fruits of their talents, such as a very high salary. They were just lucky that they won this “natural lottery.”

The thinker Robert Nozick completely disagreed with Rawls. He argues that to treat people’s natural talents as a collective asset takes away a person’s agency. Nozick argues that Rawls’ suggestion that not only natural talents (intelligence, athletic ability) but also the virtues of character like hard work and persistence are endowments that are not within a person’s control results in taking away the self-ownership of individual actions. If everything that a person does is preordained at birth or by family influences, then what role do individual decisions and individual responsibility play in success?

The stakes in this argument could not be higher. If people are not responsible for their actions, then the government should help those who fall into poverty. If people are responsible for their actions, then the government owes them little to nothing.

Our question this week focuses on the applications of these ideas to the great inequality that exists in American society today. I would like you to reflect on the ideas of Rawls and Nozick and apply their ideas to our current economic situation.

First, take a look the a few Pew Research short reports on economic inequality. Pew Research Center  and Pew Research Center . There is also a good article in the New York Times that review how the upper middle class are doing. Income Inquality and the Upper Middle Class

Next, take a look at these two very short videos on social mobility and the effects of hoarding great wealth on the actions of the rich.

You can then review a conservative viewpoint on wealth in America and why income inequality is not a threat to opportunity.  Review the Executive summary only.

Income Inequality Not a Threat to Opportunity

Finally take a look at this article on how to “sensibly” tax the rich.

How to Sensibly Tax the Rich

Your question this final week of class is an important one.

What, if anything, should we do about economic inequality in the United States?


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