What is Income Inequality and Why is it a Serious Threat to the Entire Economy?
Monetary Policy cannot save us in the next recession. We must stimulate the right part of the economy.
The Problem with Income Inequality
Income inequality is a great danger to the American economy. Income inequality has decimated the middle class. Income inequality has hurt and continues to harm the entire economy.
It is important to stress that the opposite of income inequality is not income equality. No one is talking about everyone having the same income. Even the most extreme Marxist countries do not advocate for this. What we are talking about is a reduction in income inequality.
A reduction in income inequality is necessary because a large proportion of the population does not have sufficient income to afford the basic necessities required to live comfortably. Consequently, the optimal amount of basic necessities are not produced. Therefore, less than optimal amounts of people are employed to produce these products. Companies are not making as high a profit off these items because there are not enough buyers. Therefore, the economy is not working as well as it could be.
An example of a basic necessity is toilet paper. Rich or poor, an individual uses about the same amount. If…
