Homer gets a tax cut: Inequality and public policy

For the past thirty years, the United States has been conducting what one observer (Samuelson 2001) has called “a massive social experiment ” regarding the political and social consequences of increasing economic inequality. The share of national income going to families in the bottom 40 percent of the income distribution declined by about one-fifth, from 17.4 % in 1973 to 13.9 % in 2001, while the share going to families in the top 5 percent increased by more than one-third, from 15.5 % to 21.0 % (Mishel, Bernstein, and Boushey 2003). Meanwhile, the share of income going to the top one-tenth of one percent quadrupled between 1970 and 1998, leaving the 13,000 richest families in America with almost as much income as the 20 million poorest families (Krugman 2002). The economic causes of these trends—technological change? demography? global competition?—are a matter of some scholarly controversy. But the important political point is that, whereas most rich democracies have significantly mitigated increasing economic inequality through government action, the United States has mostly been content to let economic trends take their course, doing “less than almost any other rich democracy to limit economic inequality ” through employment and wage policies, taxes, and transfers (Jencks 2002, 64). In light of these developments, business writer Robert Samuelson (2001) argued that “If Americans couldn’t abide rising inequality, we’d now be demonstrating in the streets. ” Instead