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Research: Wealth Gap Harms Everyone

October 24, 2011

AUSTIN, Texas - The central rallying cry of the so-called "99-percenters" occupying Wall Street, locations in Texas, and spots around the world has been one of economic fairness. While their protests are disparaged by some as "class warfare," research indicates rich and poor alike suffer when the gap between them grows too big.

"The reason a lot of people are getting involved in this movement is that the economic disparity is really affecting practically everyone."

Austin occupier Ihor Gowda points to studies showing economies are consistently healthier when wealth gaps are smaller, as was the case in the U.S. from the 1940s through the '70s. That was before a succession of tax and regulatory reforms increasingly benefited investors and corporations.

The idea behind such "supply-side" economics is that everyone gains from a ballooning economy. But when wealth is distributed mostly upward, the balloon is destined to deflate, according to Clinton-era Labor Secretary Robert Reich, now a professor at the University of California at Berkeley, because consumer demand is essential for a growing economy.

"The only way the vast middle class and working class can keep the economy going and keep spending, is by going deeper and deeper into debt. And of course those debt bubbles eventually explode."

Fiscal conservatives argue that continuing to lower taxes on businesses would help spur job creation. Reich disagrees. He says businesses already have two trillion dollars in the bank they're not willing to spend until consumer demand goes back up.

Wealth inequality also contributes to a host of social ills affecting almost everyone, according to Richard Wilkinson, an epidemiologist at Britain's University of Nottingham Medical School.

"Mental illness is say three times as common. Life expectancy is lower. Teen-age births are much, much higher. Rates of violence measured by homicide are much higher."

As a society becomes less equal, Wilkinson says, the importance of status increases, causing elevated levels of stress and dissatisfaction to kick in, leading to an increase in health problems, substance abuse, obesity, even infant mortality.

The good news, Wilkinson thinks, is that lawmakers have a clear path for improving many of these social conditions simply by enacting policies that promote a return to a more equal distribution of wealth.

"We haven't known what to do about any of these problems, but now I think we have a handle on it. There are things that policymakers can do."

That to be sure would require an about-face from the economic priorities of recent decades in the United States. The nation's income disparity is now greater than that of most other countries, including Egypt, Tunisia, and Iran, according to the CIA, which tracks wealth distribution worldwide.

U.S. Census figures show that among states, Texas ranks third from the bottom on income equality.

The CIA Gini index is at 1.usa.gov/4ETDj8

Peter Malof, Public News Service - TX