Chap12: Richest Are Leaving Even the Rich far Behind/ Extra Credit

In this article, researchers discuss how economic mobility among Americans has actually stopped for a few decades, where Americans have been unable to find work to move their economic positions upward. Also, the most recent research has illustrated how economic mobility has also been decreasing for a few years in the U.S.

Since the 1980s, the gap between the rich and the poor has increased in the U.S. In particular, 0.01% of the wealthiest group earned almost twice its income in 2002 compared to their income in the 1980s. Other groups, such as the middle or upper middle class, have not had such large income growth. Furthermore, 90% of the national income growth had decreased compared to the 0.01% of rich Americans’ income growth. This means that the wealthiest Americans are accumulating more wealth, while the other 90% of Americans find it hard to improve economically, whether through finding better job positions, or by keeping their positions during the high 2001-2 taxation period. However, why does this problem occur in the U.S.?

The answer is related to tax policy, which was specifically created by George W. Bush’s administration. The U.S. has experienced different tax policies depending on the President and his administration’s policy and ideology about how to manage society. For example, Ronald Reagan’s administration gave benefits to the wealthiest individuals and also offered tax breaks to the working class. During Reagan’s era, wealthiest Americans were easy to accumulate money more and more. Compared to the Reagan, Clinton’s administration concentrated on the attribution of wealth to reduce the gap between the rich and the poor. Therefore, Clinton gave more tax breaks to working class Americans compared to a high income tax imposed on wealthy Americans.

Even though Clinton and his administration made an effort to decrease the gap between the rich and the poor, Bush’s administration created the worst situation that led to the largest wealth polarization. First, Bush’s administration did not impose taxes on the wealthiest groups, so that they would be able to invest money in business and innovation, so that other Americans could be better off. In contrast to this group, the middle or upper middle class needed to pay many taxes without tax breaks due to war expenses and the economic recession. For this reason, the middle or upper middle classes collapsed economically because they were overburdened by taxes during the recession. Therefore, individuals of these classes reduced their consumption and could not pay mortgages, which led to the worst economic recession. Due to the effects of Bush’s tax policy, the U.S. had the largest wealth gap with the most difficult conditions for economic mobility.

Similar to this example, the State’s policy directly or indirectly affects economic mobility among each social group. Obama’s administration is trying to decrease the wealth polarization by imposing income taxes on the wealthiest group, similar to what Clinton’s administration did in order to instill equality. However, the wealthiest group’s average income is still increasing because they use variety of skills to reduce taxes. In this situation, economic immobility and the gap between the rich and the poor are not easily resolved unless tax policies are organized well to have the wealth spread equally. Thus, Americans can overcome this deep wealth polarization, and the resulting effect of social hardship.