Yawning rich-poor gap could hobble economy
Income equality may lead to protectionism and slow down trade, among other things.
By David R. Francis | columnistfrom the July 30, 2007 edition
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Democratic presidential candidate John Edwards has been trying to put poverty reduction back on the national agenda. During an 11-city tour, Mr. Edwards spelled out his goal to eradicate poverty by 2036. He would do this not merely through economic growth, but with direct measures, such as healthcare for all, the creation of 1 million one-year transition jobs, housing vouchers, and eliminating tax benefits for the rich.
His lamentations over the poor have been echoed by the two leading Democratic contenders: Sens. Barack Obama and Hillary Clinton. Their efforts, accompanied by greater public awareness of the growing gap between the rich and poor in the United States, may even result in congressional action.
"We could even take some baby steps in the next couple of years" – that is, before President Bush leaves the White House, suggests Jared Bernstein, an economist at the liberal-leaning Economic Policy Institute in Washington.
If Democrats win the White House in 2008 and retain Congress, laws to deal with poverty and income inequality could multiply. "I'm hopeful that in 2008 we will see some changes," says Heather Boushey, an income expert at the Center for Economic Policy and Research in Washington.
She's troubled by the fact that the productivity of American business has been increasing steadily, but little of that new wealth and income reaches the poor – or even the middle class. The richest 0.01 percent has grabbed most of the gains, enjoying a 250 percent increase in income between 1973 and 2005. The entire economy grew by 160 percent during that period.
In 2005, 37 million Americans – 12.6 percent of the population – lived below the official poverty line. It was a slight improvement from 12.7 percent in 2004, but well above the 11.3 percent level just before the 2000 recession.
The Census Bureau is scheduled to release official poverty numbers for 2006 on Aug. 28. With continued growth in the economy, the percentage of Americans who are officially poor may have dropped again last year, Mr. Bernstein figures.
Nonetheless, the US probably will continue to have a much higher proportion of its people ranked as poor than almost all other rich industrial nations. At the turn of this century, it ranked 24th among 25 countries in the proportion of its population having incomes below half of the median income – the level where half of the people have a bigger income, and half have a smaller income.
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