Steve Roth at Angry Bear yesterday covered similar ground to one of mine from February, "Debunking the Notion that Inequality Wouldn't Impact the Economy". Roth's "GDP, Prosperity, The Wealth Effect, and Marginal Propensity to Consume", took a slightly different track. Whereas I discussed the impact on GDP from inequality of income, Roth looks at inequality of wealth. As of yet, it's hard to say which is the better angle, although as Roth notes, the distinction starts to blur with age, since "people nearing or in retirement start paying a lot more attention to wealth than income." That is, unless you're dealing with folks who have nothing but social security because -- among other possible reasons -- they never had high enough disposable income to put anything aside.
Either way, whether income or wealth is the more important factor, clearly inequality matters. It impacts our commerce, our GDP. At least so long as the people at the middle (let alone the bottom) have wants and needs they can't fulfill for lack of means, a reduction in inequality achieved with the effect of getting more means to those who will use it will increase GDP and general prosperity. Ironically, spreading the wealth around a bit should lead to more potential for our economy to support more wealth. [Caveat: of course, we shouldn't go overboard. Just more equitable ... not perfectly even.]
And by progressive policies leading to more equitable distribution, that would constitute a way that -- contrary to what both candidates said or implied in tonight's debate -- government most certainly can create jobs. What leads to more commerce generally leads to more jobs, and a more equitable distribution would mean more commerce.
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