Because it so incredibly out there for all to see, it's easy to focus on the failures of our PNAC-driven foreign policy and forget that there are huge failures here domestically driven by the Republican policies of the last 25 years. In particular, what is happening to the middle class in infuriating.
By now, economists and others who do pay attention to the issue are aware that income and wealth inequality in the United States rose steadily during the last three decades of the 20th century. But now that we are several years into the 21st, what do we know about income and wealth distribution today? Has the trend toward inequality continued, or are there signs of a reversal? And what can an understanding of the entire post-World War II era tell us about how to move again toward greater economic equality?
The short answers are: (1) Income distribution is even more unequal that we thought; (2) The newest data suggest the trend toward greater inequality continues, with no signs of a reversal; (3) We all do better when we all do better. During the 30 or so years after World War II the economy boomed and every stratum of society did better -- pretty much at the same rate. When the era of shared growth ended, so too did much of the growth: the U.S. economy slowed down and recessions were deeper, more frequent, and harder to overcome.
The [..] mutual rise of increased household debt and income inequality leads to the general question, does one cause the other? Are people who aren't participating in the same degree with good economic fortunes using debt to finance their lifestyle? While the data does not provide a definitive answer either way, it is a very interesting question from an economic and policy perspective.
Last week, the FDIC and the Federal Reserve Board were forced to remind the nation's bankers to verify their customers' incomes -- adding that it might be a good idea to determine whether or not said customers could afford their mortgage payments. The new guidelines are expected to have a chilling effect on what the industry calls "home ownership." Many esteemed economists have expressed hope that the resulting declines in home values, which have been inflated by the lack of such guidelines, will not stop too many Americans from cashing out the equity in their homes to keep consumer spending up. In other words, the "new economy" is based on people slowly losing home ownership, not gaining it.