Make America Great Again?

Over recent weeks, carnage, mayhem, high employment, rising inequality and deaths (over 100,000 from Covid-19) reflect the current scene in the U.S. Has that made America great again?

Two police cruisers drove into a crowd of protestors in Brooklyn

(www.nytimes.com)

George Floyd (and others) represents the inequality of America. The average black household gained USD18,000 in wealth between 1983 and 2013. Over the same period, the average white family gained USD301,000.

A new report called “The Ever-Growing Gap” (“Report”) shows that U.S. policies and politicians made it easier for the rich to accrue wealth compared to the poor.

The above chart shows where the average households will end up in 2043 if growth rates continue to hold.

On a practical level the American economy will suffer greatly. On a moral level, there are at least two distinct classes of people with little opportunity for the poor to climb upward. In the past, the Federal Government made it harder for minorities to accrue wealth. The Federal Housing Authority, for example, helped families secure home loans but they refused to assist black people. A practice called redlining meant black people could not invest in the same real estate as white people could. That goes for Social Security, wage protection or benefits under the GI Bill (of 1944).

The former Federal Reserve Chair, Janet Yellen, testified (to Congress) that the widening gap is a “very disturbing phenomenon”. The chances are less money is spent by America’s wealthy – the marginal propensity to consume is lower. It is not about working harder but national policies that deter the poor. That’s why Bernie Sanders would have made a better President.

If you have played “Monopoly”, it is easier for people with more money to build more hotels – and get even more money.

Or think of it as where some people aren’t allowed to collect USD200 when they pass “Go” but the game resumes with everyone is said to have a fair shot to win.

So, what could be done?

Several proposals were made in the Report. One is for a retirement product; another is for children’s saving account for education that the Government credits into. Other possibilities include helping people buy their first homes (with subsidies) or have a higher graduated inheritance tax, so that tax revenue is increased while the wealth gap is reduced.

And if nothing gets implemented then it is game over just like in Monopoly!

References:

1. Racial Wealth Gap in the United States, Is There a Way to Close It and Fill the Divide? Kimberly Amadeo, April 27, 2020 (www.thebalance.com)

2. America’s Wealth Gap is Split Along Racial Lines – and It’s Getting Dangerously Wider, Alvin Chang, Aug 18, 2016 (www.vox.com)