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The Problem Isn't Growth; the Problem Is Inequality

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Headlined to H3 2/10/13

On February 12, 2013 US President Barack Obama will give his fifth state of the union address to Congress. Early reports are that he will focus on economic growth.

The cumulative inflation-adjusted growth in the US economy since Barack Obama took office has been just 3.2%. Not per year. Total. Over the past four years the US economy has grown by less than one percent per year.

The US population grows by about 0.95% per year.

The net result is that the income per person generated by the US economy has been essentially flat for four years. You can't blame the President for wanting to focus on boosting economic growth in his second term. Too bad he didn't feel the same way in his first term.

But that's not the real story. Today's levels of income per person in the United States are essentially the same as those prevailing in 2006. That's not great, but that's not terrible.

Some of us are old enough to remember 2006. The unemployment rate was 4.6%, not 7.9% as it is today. The long-term unemployment rate was one-third of current levels.

The poverty rate was 10.6%, not 13.1%. Homeownership rates were higher. Labor force participation rates were higher. Most Americans were, simply put, better off.

How can things be so much worse now when the economy is essentially in the same place it was five or six years ago?

The answer in two words is: Rising inequality.

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As the economy as a whole has remained flat, the plutonomy -- the economy of the super-wealthy -- has continued to rise. Executive pay continues to rise. Bankers' bonuses continue to rise. Corporate profits continue to rise.

The only way the plutonomy can rise while the economy remains flat is for the realonomy -- the economy of ordinary people -- to decline. Your eroding pay, your lost benefits, and (God forbid) your lost job have paid to keep the party going in the plutonomy.

It's not advanced statistics. It's simple arithmetic. We have the same real national income per capita as we did in 2006. If we had the same income distribution as we did in 2006, everyone would be living just as well as they did in 2006.

Rising inequality since 2006 has meant that the rich are getting bigger and bigger slices of the same pie, leaving less and less for the rest of us.

Growth is great. Hopefully President Obama will get the growth he's looking for. But it's not that easy to foster growth. If it were, every president would do it.

Reducing inequality, on the other hand, is easy. Raise taxes on the rich, or at least enforce the taxes that are already on the books, and spend the money on everyone else. That's how you reduce inequality. It's not statistics. It's arithmetic.

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Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney in Australia and an associate fellow at the Institute for Policy Studies (IPS) in Washington, DC.
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How can things be so much worse now when the econo... by Salvatore Babones on Sunday, Feb 10, 2013 at 3:44:18 AM
At some point, aren't articles like this one going... by Ned Lud on Sunday, Feb 10, 2013 at 1:41:45 PM
Obama works for the elite , not for you.  And... by Textynn N on Sunday, Feb 10, 2013 at 1:51:39 PM ... by Ned Lud on Sunday, Feb 10, 2013 at 2:14:47 PM
Let's address them with bold ideas!See my article ... by Mark Goldes on Sunday, Feb 10, 2013 at 5:05:19 PM
It won't be popular on this site but it's as true ... by Lee Beacham on Sunday, Feb 10, 2013 at 5:05:52 PM
The "overspending" by the government is supporting... by BFalcon on Sunday, Feb 10, 2013 at 5:36:39 PM
The Problem Isn't Growth; the Problem Is Inequalit... by Deborah Dills on Sunday, Feb 10, 2013 at 6:13:47 PM
Please support food sovereignty and small farmers,... by Ned Lud on Monday, Feb 11, 2013 at 7:13:37 AM
not socialism nor equality of possesions is what w... by David Chester on Monday, Feb 11, 2013 at 2:03:00 AM
Inequality not growth is the problem, as this arti... by George Flower on Monday, Feb 11, 2013 at 6:02:32 AM
simple saturation. The Earth is full, and we're fu... by molly cruz on Monday, Feb 11, 2013 at 9:06:54 AM