America’s Income Inequality Is Reaching a Tipping Point

Photo: Hyejin Kang/Getty Images

Inequality is wrenching the nation’s poorest and richest households farther and farther apart, the Census Bureau reported on Thursday. The gap is now so wide that income inequality is the highest it’s been in 50 years, and the nation’s Gini index has increased to match. It’s now 0.485, an increase from 2017’s figures. To put matters into global perspective, Canada has a Gini index of 0.31.

Well-intentioned liberals may be tempted to blame this news on Donald Trump, but they should be cautious. The scale of the problem is much bigger than three years of one presidency, even if that presidency is uniquely corrupt. Inequality began to rise well before Trump became president, and his predecessor, Barack Obama, bears at least some blame for the fact that our postrecession gains have been distributed mostly among the already rich. Trump simply took an existing wealth gap and widened it. The “economic resurgence” he promised is real — it’s just for the rich.

This year’s Gini index tells us that America has not become a poor country but an unfair country. The poor aren’t necessarily making less money, but as the wealthy get wealthier, people on the bottom end of the income scale are running in place. Thursday’s data “showed an increase of 0.2 percent in the inflation-adjusted median household income for the country as a whole — an increase of just $130 for a typical U.S. household and a slowdown in growth compared to the past three years,” explained the left-leaning Economic Policy Institute.

As Jill Lepore noted for The New Yorker in 2015, some economists, like Thomas Piketty and Emmanuel Saez, believe that the Gini index actually understates a society’s level of income inequality. It only measures income distribution, which means that while it accounts for the secular rise in prices, it doesn’t account for inequality in the way those prices are felt. We know, for example, that the cost of child care is increasing, which burdens lower-income households, and as rents continue to rise nationwide, safe and stable housing becomes more precious with every year. And in the U.S. health-care costs are increasing, too, fueled by rising expenses associated with private health-insurance plans and pharmaceutical monopolies on life-saving drugs. A breadwinner’s paycheck might not be getting smaller, but there are greater demands on it, and that undermines a family’s economic mobility. It’s possible to think of the disparity between the nation’s poorest and wealthiest households as a wall, or a ceiling; invisible but impermeable.

Widening inequality is cause enough for moral outrage. Greed is not a victimless crime. The rich abhor a tax, and officials in both parties are eager to appease them. But the revenue they deny the state could help alleviate burdens on others. Wages have not kept up with the basic costs of staying alive. When people cannot afford to go to the doctor or buy their medicine, they die. But if the wealthy will not be moved by pity for their fellow man, pragmatic considerations should trouble them. An unequal society, marked by the ultraconcentration of wealth and power, is an undemocratic one. Eventually, that becomes a problem for the rich. Wealth can only insulate them from instability for so long. “Widely unequal societies do not function efficiently and their economies are neither stable nor sustainable,” economist Joseph Stiglitz wrote with Linda Blimes in 2012. “The evidence from history and from around the modern world is unequivocal: There comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price.”

Economic inequality contributes to varieties of domestic unrest — uprisings, violent crime, sometimes even civil war. The rich ought to be relieved that the clearest social reaction to inequality has been a strike wave and newly popular politicians who would like to redistribute their money by peaceful and democratic means. When Representative Alexandria Ocasio-Cortez floated a 70 percent marginal tax rate during an interview with Anderson Cooper, Wall Street howled. But so what? We live in a society, bankers. At some point, you have to care, even if it’s not out of compassion. It’s more costly to ignore inequality than it is to fix it.

Inequality Is a National Crisis