The Congressional Budget Office just released a report Monday indicating that household income between 1979 and 2007 grew by 275% for the top 1% of earners and fell by 2 to 3% for middle class Americans. This disparity has risen even more since 2007.
There are many, many ramifications of this growing income disparity for public policy. One is the sense of unfairness that Americans feel both about the economy and our government. This sense of alienation has contributed to the volatility and polarization we are seeing in politics today. The lack of response by Democrats and Republicans alike has led to spontaneous movements like the Tea Party and Occupy Wall Street.
Secondly, if a higher proportion of the nation's income and wealth is going to the very richest, a segment that spends significantly less of their income than the middle class, could that be contributing a lack of consumer demand in the economy?
On top of this, recent BLS data indicates that the wages of college graduates has fallen steeply since 2000 as college tuition has increased and student debt has sky-rocketed. The estrangement and frustration felt by young people today does not forebode well for the future productivity of our country as college debt increases to record levels in response to sky-rocketing tuition.