Increasing Inequality Its happening it matters and we

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Earnings Inequality Social Security Administration data 1947 1979 2012 Top 1%: $131, 072 $255,

Earnings Inequality Bureau of Economic Analysis: National Income and Product Accounts data Source: Table

Income Inequality Census data Source: Tables F-1 and F-5

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental Data

Income Inequality Internal Revenue Service tax data Source: “Piketty and Saez”

Wealth Inequality Survey of Consumer Finances data Source: Federal Reserve Bulletin

Wealth Inequality Internal Revenue Service tax data and Federal Reserve Flow of Funds data

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The

1. Inequality may have negative macroeconomic effects.

2. Inequality matters because it creates a “wedge, ” channeling growth away from the

3. Inequality matters because it undermines the democratic process. Mechanism: Evidence:   The influence

3. Inequality matters because it undermines the democratic process. Mechanism:   The influence of

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A. Residential

Inequality is a problem we can combat with the right policy solutions. • Full

Thank You! Jared Bernstein (bernstein@cbpp. org) Ben Spielberg (bspielberg@cbpp. org) The Center on Budget

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Increasing Inequality: It’s happening, it matters, and we can do something about it. Jared Bernstein (bernstein@cbpp. org) Ben Spielberg (bspielberg@cbpp. org) The Center on Budget and Policy Priorities Updated: 1/6/2015

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Earnings Inequality Social Security Administration data 1947 1979 2012 Top 1%: $131, 072 $255, 760 $648, 541 Bottom 90%: $14, 392 $27, 110 $31, 741 Ratio: 9. 1 9. 4 20. 4 Source: Wage data, tab 3

Earnings Inequality Bureau of Economic Analysis: National Income and Product Accounts data Source: Table 1. 12

Income Inequality Census data Source: Tables F-1 and F-5

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental Data

Income Inequality Internal Revenue Service tax data Source: “Piketty and Saez”

Wealth Inequality Survey of Consumer Finances data Source: Federal Reserve Bulletin

Wealth Inequality Internal Revenue Service tax data and Federal Reserve Flow of Funds data Source: “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data ”

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The bubble/bust syndrome Evidence:

1. Inequality may have negative macroeconomic effects.

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The bubble/bust syndrome Evidence: • Cynamon and Fazzari • Kumhof and Ranciére • Mian and Sufi

2. Inequality matters because it creates a “wedge, ” channeling growth away from the typical worker. Mechanisms: A. Globalization B. Technological change C. Decreased worker bargaining power D. The tax code, financial deregulation, and corporate compensation Evidence: Source: Economic Policy Institute

3. Inequality matters because it undermines the democratic process. Mechanism: Evidence:   The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Source: Gilens and Page

3. Inequality matters because it undermines the democratic process. Mechanism:   The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: • Bartels • Bernstein • Gilens

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Reardon presentation at the Boston Federal Reserve, October 17 -18, 2014

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A. Residential segregation by income B. Educational investment barriers C. Direct effects Evidence: • Bradbury and Triest • Chetty, Hendren, Kline, and Saez • Pew Economic Mobility Project • Reeves and Sawhill • Sard and Rice

Inequality is a problem we can combat with the right policy solutions. • Full employment Source: Baker and Bernstein

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining Source: Furman

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards Source: Gould

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards • Access to quality education Source: Smeeding

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards • Access to quality education • Regulation and Improved Fiscal Policy Source: CBPP

Thank You! Jared Bernstein (bernstein@cbpp. org) Ben Spielberg (bspielberg@cbpp. org) The Center on Budget and Policy Priorities