Joe Stiglitz Explains How Inequality Is Holding Back The Recovery

Stigltz wrote an excellent book on the cost of inequality.  In this article he connects inequality to our slow economic recovery.  Around 93% of our growth in income has gone to the top 1% which saves most of their income.  Middle income households, which spend most of their income, have less real income than they had in 1996.  Consequently, the growth prior to the Great Recession was based on credit.  The bottom 80% of households spent 110% of their income.  The middle class has less money to invest in their future.  They have to borrow to educate their children, and they cannot afford to invest in new businesses.  Government tax revenues have also fallen because of stagnant income growth in the middle class.  Those in the top 1%, which has received most of the growth in income, are able to avoid taxes by using loopholes that government has provided for them.

There are lots of reasons for growing income inequality but none of them are inevitable.  We elect governments to shape our economy, but our government listens more to those who fund election campaigns than it does to ordinary citizens.  The Obama administration had to overcome many political obstacles to roll back some of the Bush tax cuts went to the top 1%.  They have done nothing to reduce the loopholes that benefit the top 1%,  and those who earn most of their income on capital gains and stock dividends.