Your statement makes a nice, pandering story, but it's really a very complex issue.

There's some truth in the idea that the rich get richer, faster than the rest of us. But today, in a practical sense, what does it mean for someone to have much more money than I do?

And what causes it? It's certainly not that some plutocracy is holding our heads below water, as much some people like to paint that picture.

I'd encourage you to read this article, which has a pretty insightful analysis of where this inequality originates, and why: http://www.the-american-interest.com/article-bd.cfm?piece=90...

Actually the Foreign Affairs article makes it pretty much as simple as that. We were going pretty good in the 1960s and the moneyed plutocracy, angry that they were losing power, financed and fomented a conservative counterrevolution to undermine all the progress that had been made. They got obscenely wealthy, while we got the shaft. Pretty cut and dry.

I agree that's what the FA article says. Anybody who really thinks that's the start and finish of the topic is standing there with their fingers in their ears singing "la-la-la I can't hear you".

The real world is a complex place. It's rarely possible to point to a single cause of anything.

How about the Paul Graham argument that income inequality is not a problem if it means that everyone's standard of living is raised?

http://www.paulgraham.com/gap.html

Clearly everyone's standard of living is not going up when approximately 10% of the nation are unemployed.

Clearly we can distinguish a general trend (a rising tide lifting all boats over a period of decades) from a short term blip (a bubble bursting and causing a recession).

If you put it that way: the average salary for most Americans, when inflation adjusted, has been largely unchanged for the past 40 years. We know this.

Bubble or no, most people are not seeing a general trend of more personal wealth.

No, the average salary has been largely unchanged when adjusted for chained CPI. Chained CPI != inflation since the basket of goods changes with time. To measure inflation, you need to measure the cost of the 1970's basket of goods in 2010 dollars. Modern medicine, cell phones, computers, HDTVs, etc must all be excluded. CPI doesn't do this.

Further, even taking chained CPI as a measure of inflation, it's known to overestimate inflation by about 1.3% at least until 1996 (http://en.wikipedia.org/wiki/Boskin_Commission). Taking Boskin-corrected CPI as a measure of inflation, wages have increased 40% over 40 years.

See the other thread about wealth where people's standard of living is measured mainly by how much richer they are then their friends.

It is pretty easy to make the argument that someone 5,000 years ago who was at the top of his tribe is happier than someone today at the bottom, even though the guy at the bottom today has far more comforts than the 5,000 year old.

You (and Paul Graham) need to look into the studies that very clearly show people's happiness is a relative measure, not an absolute one.

Who said anything about happiness? Are you implying that income is proportional to happiness?

That would be nice if it were true. But it's not.

I like PG but that doesn't mean he's infallible. Income inequality to a degree isn't a problem when and if the tide does float all boats, so to speak, but the problem is the tide doesn't seem to be raising all boats and that the middle class has all but vanished in America and what's left are the upwardly mobile upper-middle class and the working poor. Kudos to them they can now DVR a show and have broadband internet available at an affordable rate, but when you're essentially a wage slave, it means very little. When the top 20% have 85% of the wealth in America, the other 80% are left to fight over the crumbs. That is a terrible foundation for a supposedly democratic nation.

"but the problem is that the middle class has all but vanished in America and what's left are the upwardly mobile upper-middle class and the working poor. When the top 20% have 85% of the wealth in America, the other 80% are left to fight over the crumbs."

Can you link to some evidence showing a slowdown in mobility? Also, I would assume a key metric to showing whether income inequality increase is a problem is to see whether the speed of improvement of standard of living is slowing or not. I'd like to see figures on this as well.

The startup world demonstrates there's nothing systemically restricting people from being upwardly mobile. The formula for wealth in America is simple; create a product that people want.

The fact that creating something people want is difficult is a universal truth, not an indictment of our democracy.

What you're missing is that nowadays to make it you have to corner a market - thats how internets works.

Not many mom and pops type business opportunities on the net.

I disagree that the only type of business on the internet is a google or a facebook. However, assuming they are, they were still started as the brain child of a few people who were not rich when they started.

Also, both google and facebook cornered markets that didn't exist 20 years ago. Where did that market come from? No one else got wealthy because of search or social networking?

I just implied that to really make it (in context of this thread mind you), to get into top 5% of income you have to corner a market (existing or new).

That means risk. East German swimmer or Chinese gymnast kind of risk. For each billionaire there are such and such number of people who "got to grow as people".

In my humble opinion the swing towards egalitarianism was an anomaly in human history. Can we make this anomaly into a new status quo? Recent developments show that very unlikely.

Income inequality can be ignored (by politicians) until a large segment of the population cannot find jobs and can't afford food/gas/healthcare. Oh wait, we're there.

Census estimates suggest 1 in 6 Americans live in poverty

http://www.latimes.com/news/nationworld/nation/wire/sns-ap-u...

1 in 7 Americans rely on food stamps

http://money.cnn.com/2010/12/21/news/economy/food_stamps/ind...

Labor Force Participation Rate Drops To Fresh 25 Year Low, Adjusted Unemployment Rate At 11.7%

http://www.zerohedge.com/article/labor-force-participation-r...

> Census estimates suggest 1 in 6 Americans live in poverty

Which definition of poverty are we using?

I have two. According to one, 90% of Americans live in poverty. According to the other, less than 1% do. Which one is correct?

Note that the 1% is based on world-standards for poverty....

> 1 in 7 Americans rely on food stamps

And taxing rich people more is going to change that how?

Govt aid is basically a no-work/low-pay job. How is reducing the amount of money in the private sector going to put more people to work?

Note that reducing the amount of money in the private sector doesn't necessarily increase the amount of money in the public sector. The US govt has never managed to collect more than 20% of GDP in taxes, so if your plan assumes that we can, you get to explain why this time will be different.

But income inequality has fallen during the recession. We've all become poorer, the rich in particular. Tax revenues took a big hit because the rich lost a lot, and the rich pay the lions share of taxes.

http://www.census.gov/compendia/statab/2009/tables/09s0673.p...

http://www.census.gov/compendia/statab/2011/tables/11s0695.p...

(Preliminary figures have suggested inequality is on the rise, now that we are recovering.)

And income equality can mean that we're all poor. Is that really preferable?

As long as people's basic needs are fullfilled I think it really is the relative wealth that decides their happiness.