From this morning’s New York Times, on a new report suggesting that income inequality retards economic growth:
Because the affluent tend to save more of what they earn rather than spend it, as more and more of the nation’s income goes to people at the top income brackets, there isn’t enough demand for goods and services to maintain strong growth, and attempts to bridge that gap with debt feed a boom-bust cycle of crises, the report argues. High inequality can feed on itself, as the wealthy use their resources to influence the political system toward policies that help maintain that advantage, like low tax rates on high incomes and low estate taxes, and underinvestment in education and infrastructure.
Among the researchers’ policy prescriptions, which are few and light, is more spending on education. Sent to the wastebasket were increases to the marginal tax rate and increasing social welfare benefits, as other more egalitarian countries have done.