There’s a study from S&P that Inequality Is Damaging the U.S. Economy. Of course, there are no specifics of how exactly rising income inequality is bad for the economy, but but since economics has mostly devolved into a leftist social science that has become indistinguishable from sociology, to have actual numbers and empirical evidence would be too much to ask. So the best the left can offer are hunches that rising income inequality could be bad for the economy based prepositions that seem logically sound on the surface, but upon closer inspection are wrong. For example in an earlier post Revisiting Correct Predictions:
Many succumb to the Marxist fallacy that with increasing inequality and falling real wages, no one will be able to buy the stuff and capitalism will eat itself. Looking at the data there is no evidence the consumer’s propensity to spend has been hurt by inequality. Secondly, we can offer an argument based on empirical evidence that capitalism won’t cannibalize itself the future, too. The Marxist critique implies wealth is a finite resource like gold and once the 1% obtain it all there’s nothing left. This is wrong because wealth is constantly being created; for example, in the span of 15 years Facebook, Twitter, and Google sprung into existence creating half a trillion in wealth. It assumes that there is a fixed number of consumers with static purchasing power. This is contradicted by rising nominal wages the booming middle class overseas and the Pareto Principle that top 20% of income earners engage in 80% of the consumption. Because the highest of income earners have seen the most rapid and greatest increases in wealth, it means consumer spending can keep rising even if everyone else’s income is flat, in agreement with the economic data. That’s why we need policy that creates wealth and encourages consumption, instead of wealth spreading and class warfare.
We’re written extensively about how wealth inequality is not a big deal, including discussion of the Pareto Principle that debunks how rising income inequality will hurt consumption, as well as how raising wages is a losing proposition from a game theory perspective.
In summary, wealth inequality is an inevitable byproduct of the economic value rich people create. In a free market , resources will go where they are most economically useful, without some bureaucrat or leftist trying to spread the worth under a mistaken, detrimental effort of trying to stimulate the economy that will only backfire.
In order to hurt the rich, the left wanted America to default and the debt downgrade. Now again with the help of S&P, they are spreading lies about wealth inequality being bad for the economy. As a boycott, I recommend selling any S&P index-based financial instruments you have and replacing them with something more patriotic. S&P only has this influence because we’re complicit in giving it to them.