There are ways of bridging the gap between the current occurrence in the society and commerce as in the inequality in the United States of America and what should be happening in the society and commerce. Inequality in the United States of America has been constantly widening for several decades. The main problem is the consumption problem. When one main interest group holds more power, it will succeed in getting policies that enable it to help itself in the shortest term instead of helping the society as a whole in the long term. This is what is happening in the United States of America and it needs to be put to an end (Cavanagh 112). This is what causes a gap and it applies in public investments, tax policies as well as regulatory policies.
There are consequences of channeling income gains as well as wealth in one specific direction. This is evident in an ordinary household expenditure and is one of the American economy’s engines. Higher net incomes will be achieved once inequality is reduced. This will happen through progressive taxation. This will lead to the economy growing at a fast rate. Whenever huge amounts of money are concentrated at the society’s topmost cream, the spending by average American low-income earners will be reduced. Movement of money from the bottom average people to the top most people lowers consumption mainly because high individual consumer’s consumer lesser than the entire lower income individual (Stiglitz 97).
Intervention can also be used as a means of bridging the gap. When more money concentrates at the top then there is a decline in the aggregate demand. Intervention can be done by global economic bodies or departments within the government. This has to happen however the economy’s total demand will lessen much more than what it can supply. Much of the inequality in the economy and among people arises from rent seeking which leads to inequality among people. To put an end to this, tough measures have to be set containing actions against anyone who gains more income inappropriately. This should also apply to leaders who use their positions to amass huge wealth for themselves instead of working towards the society’s enriching. Once this happens then inequality will be greatly lowered. Rent seeking must be done away with. This is because it does not lead to the growth of anything (Stiglitz 114).
Efforts that are aiming at getting larger pie shares than increasing the pie shares should be scrapped. Once rent seeking weakens the economy and distorts means of allocating resources then inequality increases and it is equal to increasing the gap between people from different societal classes. Other policies needed in order to bridge include increasing free public services as this is highly crucial in ensuring that there is a good playing field that will bring equality. One of them is offering better treatment. In countries like Sweden people do not care whether they are so sick or not since they are assured of good treatment. This can act as one of the equalizers in many other countries (Cavanagh 75).
Income inequality has become a signature issue. The current United States of America government administration has an economic team. The economic department relies on the same policies that have been previously used. These strategies have not played a small role in encouraging sustainable economic growth. Instead the economic policies have worked towards increasing Wall Street profits as well as an inflation of the value of bonds and stocks. These are disproportionately held and owned by rich people. The republicans have not made a big issue out of all this. There have been feelings that discussing it will catalyze supporting the redistributionist policies. These policies are anathema to the Republican Party that prides in increasing its share of the pie and not in any way dividing it again (Stiglitz 103).
However, many other policy options can be used in demonstrating the commitment of the Republicans to the average people. An instance includes the renewed fiscal discussions that talk on sequestration. The government needs to put significant tax reforms forward for the people. They should also make tax reforms to be a priority for everyone. This is another way that will help in bridging the gap. This is because tax reforms aid in ending all preferential treatment as well as investment income. This allows hedge fund managers to pay half of all the tax rates. This is not only a way of bridging gaps but it also helps in encouraging investments that help in job creations. The current investment funds have led to the creation of fewer jobs. This is because of rent seeking which leads to inequality. Getting rid of it will enable more investments and development. The widening of the gap between the poor and rich people is also being associated with recession. This is because of stagnant wages. Rising debt coupled up with stagnant wages describes the current state. According to the New York Times, income inequality has continually gone up after the Great Depression. This has peaked every other period before any main economic crisis of the 1920s. If this continually happens then it will deter 100% success in the United States of America’s economy or the ability to climb out of financial crisis (Stiglitz 161).
Another main way to bridge gaps is to come up with unions. Scholars and researchers have agreed that countries that have high union density always tend to contain less inequality as well as a low gap between people. There are many reasons for this. Countries that have high union membership have left-leaning governments and this means generous transfer policies that lead to the reduction of inequality. Unions bargain for an increase in low wages for middle income workers and this greatly reduces inequality.
Another means is in the promotion of trade in the high skilled professions. A discussion that focuses on the effects of immigration and trade often tends to focus on low skilled workers’ impact. These workers produce goods and services for the United States of America’s market while others come to provide services with fewer wage. There are reforms that the U.S. can enact in order to remove any barriers to the entry of all the foreign-born lawyers, doctors and other technology professionals. This move will lead to pushing down wages for lawyers and doctors in the country and this will lead to saving of money for programs like Medicare. This will bring equality across the board and therefore bridge the gap (Noah 38).
Cavanagh, Gerald. American Business Values: A global Perspective 6th ed. New Jersey: Prentice Hal, 2009.
Noah, Timothy. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Kent: Bloomsbury Press, 2012.
Stiglitz, Joseph. The Price of Inequality. Westmisnter: Penguin Books Limited, 2012.