The United States of America is a country built on ideals. The U.S. being the product of violent revolution, this should come as no surprise; the very ideals for which the revolutionaries fought became the foundation for the newly formed nation. One such ideal was equality. America’s social structure is somewhat unique. Ever since the days of the Thirteen Colonies, America has never had a class of nobles considered to be socially above the vast majority of the population. Of course, there have always been social classes in the USA. The thing that makes America exceptional is that these classes were believed to be determined by the hard work and thrift of the individuals in question, not simply inherited by a perpetually propertied and wealthy group of people. This is equality, economic equality, at work; anyone is able to rise to the top of the socio-economic hierarchy through his or her own merits. American society today seems to be drifting farther and farther from this idealized balance of equality and liberty. Even as the economy grows, that growth in wealth disproportionately goes to the already wealthy, essentially making the rich richer while the incomes of the middle and working class stagnate. Out of the entire international community, the United States is ranked 41st in the GINI index, a scale that measures income disparity; this is the highest ranking among developed nations with an advanced economy (“Country Comparison: Distribution of Family Income – GINI Index”) . In the period between 1979 and 2007, the top one percent of wealthiest households saw its income grow by 275 percent, even as four-fifths of the American population saw its income decline (“Trends in the Distribution of Household Income Between 1979 and 2007) . This should be considered the foremost social issue of our day, and we as a nation must take the appropriate actions to combat this toxic development. Income equality isn’t just a buzz word or trendy political topic, it is a legitimate threat to the U.S. that has the potential to do significant damage to the American economy and create a more closed society. Something needs to be done to bring equality back to America.
What exactly is economic inequality? It is a complex, multifaceted issue, but when people discuss it they usually discuss the concept of income inequality. Put simply, income inequality is when national income is distributed unevenly throughout the population. As defined by Thomas Piketty in his book Capital in the Twenty-First Century, national income is the combination of domestic output in addition to the net income from foreign sources (45) . Piketty classifies domestic income as the sum value of all goods and services produced in a given country (this is the same as the GDP figure) minus the cost of maintaining the capital that produces those same goods and services (roads, buildings, machinery etc.) (45) . Net income from abroad can be more easily explained; it is simply the amount of money that flows in or out of a nation’s economy through such outlets as investment, rent, and international trade (Piketty 45) . Depending on the country, this value has the potential to be either positive or negative. In all world economies, national income is divided between two groups: labor and capital, labor being those who work for a wage or salary and capital being the people who own the means of production and reap the majority of the profit of any given enterprise – after paying their labor that is (Piketty 41-42). In recent years, ever increasing proportions of national income have been going towards capital (i.e. the rich) while labor’s (i.e. the middle and working class) share of the pie slowly diminishes.

Beyond simply understanding the definition of income inequality, it is also helpful to understand the history of wealth disparity in America. Once again, Piketty does a marvelous job of illustrating the dynamic state of income equilibrium in the United States in his work, Capital in the Twenty-First Century. As far as we can tell, inequality was very high in the U.S. during the late nineteenth and early twentieth centuries (Piketty 23) . However, America saw a historic shift in income distribution that effectively ended this period of high inequality that scholars dubbed the “Gilded Age”. From around 1913 until the mid-to-late 1970s, income disparity had fallen dramatically and leveled off; while the wealthiest ten percent of Americans received forty five to fifty percent of national income in the 1910s, the same class of wealthy elites collected only thirty to thirty five percent of national income as the 1940s were drawing to a close (Piketty 23). By the 1980s, inequality was once again on the rise, until by the 2010s the distribution of national income was as uneven as it had been a century prior (Piketty 12-13) . Clearly, the United States has a certain history when it comes to the demon of income inequality. After having experienced a long period of relatively high disparity, the nation was blessed with several decades of a comparatively more equal economic situation only to see earnings diverge again in what economist Paul Krugman has christened a “new Gilded Age” (“For Richer”) .

Surely it is safe to say that inequality most certainly exists in the United States. But what exactly are the implications and consequences of this form of economic injustice? There are plenty of conundrums that stem from wealth inequality. Alan Kruger, the chairman of Obama’s council of advisers, discusses these new obstacles brought about by the unequal sharing on national income in great detail during his speech, “The Rise and Consequences of Inequality”. Among all of the consequences Kruger lists, two stand out as the most important. First, the most recent rise in income inequality that began in the 1980s has also been a period in which the American economy as a whole has grown at a slower rate compared to the decades of lower inequality that characterized the 1940s to 1970s. Thomas Piketty often refers to the period of higher growth that followed World War Two as the “Trente Glorieuses”, which is French for the “glorious thirty [years]” (96-99) . The thirty year time span between the 1940s to the 1970s saw the U.S. economy growing at an average rate of about four percent a year, while the reemergence of higher income disparity beginning in the 1980s and continuing to the present day yielded an average growth rate of only two percent per year (Piketty 85-87) . Returning to “The Rise and Consequence of Inequality”, Alan Kruger also warns of the decline in social mobility that has accompanied the rise of increasingly uneven economic gains. Social mobility is a term to describe whether a person has the ability to earn more money in his or her life, than that of his or her parents. Essentially, it is the ability for an individual to move up in an economic sense by making more money. Kruger found that social mobility has steadily been decreasing as income inequality has risen. In other words, people are now more likely to end up making the same amount of money that their parents made with little opportunity to move up in terms of personal wealth. If this persists, the rich will become even more entrenched than they already are and the poorest members of society will have an even harder time escaping the cruel cycle of poverty. This development goes directly against the American Dream that anyone can exceed in this country if he or she is willing to work hard enough. This nation is becoming a place where only the rich can succeed. Income inequality is more than some superficial claim made to incite class conflict. It is very real, frighteningly so, and it poses a legitimate threat to both the American economy and the nation’s society as a whole.

It’s all well and good to be able to recognize a problem, but there’s a crucial step that must be taken before any viable solution can be proposed. The causes of the issue at hand must be identified and scrutinized. Paul Krugman, Nobel laureate in the field of economics, sheds significant light on this subject in the online article he wrote for NYTimes.com titled “For Richer”. Krugman identifies many possible catalysts for the rampant increase in income inequality that began in the late 1970s, but most of them revolve around the stagnation of (or in some cases actual decrease in) real wages for most people. These include the globalization of the world economy and the subsequent competition with lower paid foreign workers that many Americans faced, especially in the manufacturing sector. Another likely culprit for the decline of wages is that technological progress has created many high-skill jobs that require either higher education or advanced training to perform proficiently; American workers have simply not been able to keep up in this regard. Michael Lind also offers his own supposed sources of the growing uneven distribution of national income in his economic history of the United States, Land of Promise. Lind puts a considerable amount of blame on the financial sector of investment and speculation, and the neoliberal policies that empowered and emboldened it, for leading the nation to the levels of higher income inequality that it experiences today. According to him, the neoliberal tradition of deregulating the financial system and crushing labor unions allowed for business executives (those in the financial sector in particular) to dramatically increase their considerably large incomes (Lind 439) . This process of deregulation and rising inequality in income was a key factor that led to the speculation bubble that culminated in the Great Recession, Land of Promise argues. From what can be plainly seen, the relatively recent rise in income equality among Americans is by no means an open-and-shut case. There are both market forces as well as the consequences of public policy to blame for this troubling phenomenon. Our nation has to face this intricate and perplexing dilemma.

Examining an issue from every possible angle can be rather ponderous and unexciting, but it is absolutely necessary to understand a problem in all its complexity before brainstorming solutions. Thankfully, the time has come when solutions to the great headache that is income inequality can be fully considered. Michael Lind, author of Land of Promise, proposes that the government take the leading role in reducing income inequality through drafting legislation that will counteract the neoliberal policies of the 1980s (470) . Key aspects of this proposed set of legislation resemble the New Deal in their scope. Lind advises that the financial market be reeled in using the same sets of regulations that FDR imposed during his presidency and Reagan removed when neoliberals took over the government (467-469) . Doing so would make the financial system far less volatile by decreasing the rampant speculating that causes both a disproportionate increase in income for financial workers and economic crises such as the Great Recession. Another way to tackle the out of control commercial sector of the economy would be to implement a Tobin tax, a tax on financial transactions that has the potential to raise great sums of money while also discouraging overly risky investment (Lind 469) .  Paul Krugman also has plenty to say on the subject. In his article “For Richer”, Krugman argues for a revival in both labor union participation and the welfare state established by such legislative programs as the New Deal and the Great Society. Both of these actions would work to increase the incomes of middle and working class Americans, either through the superior bargaining power when negotiating wages brought about by union membership or government transfer payments made to poorer Americans (“For Richer”) . The end result would be that a larger proportion of national income would end up going to the majority of U.S. citizens, not just the wealthiest ten percent. Taxing capital itself is another interesting solution. By levying taxes based on how much capital a person owns (land, buildings, stocks, etc.) the massive earnings that the rich earn off their investments will be curbed, preventing them from hoarding wealth at the expense of the greater population (Piketty 515-539) . The question of how to deal with income inequality can seem daunting indeed, but there is already a plethora of proposed remedies. Imagine what could happen if governments worked to actively reduce disparity! This is a monumental task. It will require hard work and sacrifice, but these solutions show, if nothing else, that are ways to address this issue of American society.

America is, and mostly always will be, a land of ideals. However, it takes effort to ensure that these ideals are actually practiced rather than relegated to sentimental campaign slogans of manipulative politicians. At this very moment in time, the American value of equality is under threat. For the past forty-so years, the gap between the richest U.S. citizens and the poorest has grown at an astonishing speed. The economy grows, but it grows to serve the wealthy rather than the entire nation as the top ten percent claim more and more of the USA’s national income. This development threatens the economic and societal well-being of the country. Despite all of this, I am optimistic. Already, plenty of scholars have thought up different ways to handle the beast of income inequality. With a cooperative government and experimental mindset, real progress can be made. Is this not a nation for everyone? People from all around the world have made the U.S. their home. The kind of diversity one finds in this nation is hard to find anywhere else, and this is due in no small part to its belief that all are equal. It’s about time the United State lived up to that promise.

Works Cited
Piketty, Thomas. Capital in the Twenty-First Century. Cambridge, Massachusetts: The Belknap Press of Harvard University Press, 2014. Print.
Lind, Michael. Land of Promise. New York City: Harper-Collins Publishers, 2013. Print.
Krugman, Paul. “For Richer”. The New York Times Magazine. The New York Time, 20 Oct. 2002. Web. 1 Jan, 2015.
“Country Comparison: Distribution of Family Income – GINI Index.” The World Factbook. Central Intelligence Agency, 2007. Web. 29 Dec. 2014.
“Trends in the Distribution of Household Income Between 1979 and 2007.” Nonpartisan Analysis for the U.S. Congress. Congressional Budget Office, 25 Oct. 2011. Web. 30 Dec. 2014
Krueger, Alan. “The Rise and Consequences of Inequality in the United States.” WhiteHouse.Gov. Council of Economic Advisers, 12 Jan. 2012. Web. 3 Jan. 2015