Gilded Expectations, Essay Example

In this paper I will describe why I support the statement that the way income and wealth inequality (stratification) has changed over the past decades in the United States today is beneficial for our individual citizens as well as serving the greater good of our American Society. I will then address what, if I were in charge of the country, I would do to re-design the effort/reward system so that children of the upper-, middle-, working-, and lower-class families all had equal chances to participate in the socio-economic competition for success. My source of information will be two New York Times articles: 1) by Louis Uchitelle, entitled Gilded Paycheck: Lure of Great Wealth Affects Career Choices. It was published in November of 2006, the last full year of the great housing-led economic boom, a boom that has since totally busted; and 2) by David Cay Johnston, Income Gap Is Widening, Data Shows, published in March of 2007, but dealing with data from the year 2005, the latest available year.

The way that income and wealth inequality has changed in the past decades is mentioned in the Uchitelle article: that until 1980, tax rates were an oppressive 70% on incomes above a certain level. Estate (“death”) taxes could also be confiscatory. But (as of 2006), top marginal income taxes were 35%, and estate taxes  had “faded in importance.” Massive new capital markets and then philanthropy took over the role that high tax-rates had played in helping those in need. But these new income streams were fed and starved cyclically by two boom-busts that came and went: internet stocks (the dot.com boom); and the subprime housing-market, which itself was the spillover from a boom in conventional housing, which in its turn was caused by the Federal Reserve’s low interest rates to facilitate recovery from the so-called dot gone bust.

In the Johnston article, the reader is warned of a widening income gap: Americans with incomes of more than $348,000, being the top one percent, received the biggest share of national income since 1928, one year before the disastrous stock market crash that led to the Great Depression. And those earning more than $100,000, being the top ten percent, reached income levels not seen since the post-crash 1930s. A UC Berkeley economist is quoted as saying “If the economy is growing but only a few are enjoying the benefits, it goes to our sense of fairness.  It can have important political consequences.”

But what if the economy is shrinking, and far fewer are enjoying any benefits? That is the question that hindsight gives us, because we now know what the authors of those two articles did not know: that the good times, as imperfect as they were, were about to end. One part of the answer is to realize that things are not always as bad as they seem: they can get worse.

What would I do to ensure equal access to opportunity and prosperity? I know what I would not do: I would not foster an easy-money policy — like the one the Fed is fostering now — for the short-term advantage of getting us out of one mess at the cost of creating a bigger one down the road. But in a democratic republic today, there is no alternative. No part of the economy is beyond political meddling, not even the supposedly independent Federal Reserve.

I would order a plan of stability that all businesses and their upper-, middle-, working-, and lower-class employees’ children could count on in place economic roller-coasters, fortune-tellers, Bitcoin dreams, and liar loans. Nobel Prize–winner Milton Friedman suggested that the Fed be abolished, and in its place simply increase the money supply at a rate of 4% per year whether times were good or bad — period. I would do it, and so pave over the yellow brick road.