Current Issues Ms. Galvin Income Inequality Current Issues Ms. Galvin

Essential Questions What are the causes of income inequality in America? What are the effects of income inequality? (social, economic, political) Should measures be taken to reduce the gap between the rich and poor in America? What can be done to reduce income inequality?

Opening Activity– Step 1 The class has been divided into 5 groups. Each group has received 5 pieces of colored paper and 100 “wealth objects.” Each piece of paper represents one quintile (1/5) of the US population In your group: Lay the papers down across your desks in order (from lowest to highest). Distribute the “wealth objects” on each of the papers according to how you think wealth is CURRENTLY distributed in the United States.

Current Distribution of Wealth Walk around the room and compare the way your group views the distribution of wealth, with others. Did you mostly agree in your group about how wealth is actually distributed? How much did the other groups differ in how they allocated wealth?

How SHOULD Wealth be Distributed? In your group move around your “wealth units” to show how your group believes wealth SHOULD be distributed in the US. Compare your group’s decision, with the others. Discuss…

How SHOULD Wealth be Distributed? Was it hard to come to an agreement on how wealth should be distributed in the US? What kinds of issues came up in your group? What were arguments for making the distributed more equal? Less equal? What did you notice about how other groups chose to distribute wealth? Were their similarities/differences?

“Wealth Inequality in America” Next, we are going to watch a youtube video on inequality in America that went viral a few years ago. Be prepared to discuss the video and how it connects to the activity. https://www.youtube.com/watch?v=QPKKQnijnsM

Income Inequality: What does it mean? Involves differences between individuals and between nations. Wealth gaps between individuals and nations worries policy makers and sociologists Seen by many as a threat to social and economic stability

Why is this more of an issue NOW? US experienced incredible economic growth in the 1990s. Overall wealth and income increased and poverty declined. So what’s the problem? Economic growth did not benefit everyone most gains were made by the richest Americans Low unemployment rates, stock market growth, increased minimum wage BUT gap between rich and poor grew wider

Wealth? Income? Statistics on income and wealth show the gap is widening. Wealth: all of the assets of a household. Wealth includes money, investments, real estate, personal belongings. Income: what someone earns in salary, wages, and benefits.

Median Household Income in the US

Income Differences Median household income in US was over $40,800 in late 1990s. BUT, large differences in income between different groups in America depending upon race, gender and age.

The Rich are Getting Richer…. Widening gap between the households at the top and the households at the bottom. Poorest 20% take home less than 4% of national income Wealthiest 20% take home ½ of the nation’s income

The Shrinking Middle Class Many analysts see the gains of the wealthy class seem to be at the expense of the middle class. The number of households below the poverty level (less than $8,100/year) decreased, but the percentage of national income earned by the middle class decreased.

A little historical background The 1950s were a time of economic boom (for some). President Kennedy cut taxes in hopes of continuing the boom of the 1950s. The Civil Rights movement worked to bring an end to social, political and economic racial segregation. JFK also planned to work to end poverty in America. Lyndon Johnson’s first State of the Union address promised civil rights reform and a “War on Poverty”

“War on Poverty” Lyndon Johnson attacked poverty through: Education: Head Start and the Elementary and Secondary Education Act Income Maintenance: expanding Social Security, strengthening minimum wage laws, Food Stamp Act Job Creation: Job Corps, College Work Study Program LBJ’s programs and economic boom helped to cut poverty in ½ in the 1960s Conservatives were unhappy with the growth of “Big Government”

The Reagan Era Economic recession when Ronald Reagan became president. Planned to reform the “welfare state” and change federal economic policy. “Trickle down”/ “supply side” economics: when job creators (corporations, wealthy business men) are wealthier, they will create more jobs and EVERYONE will benefit.

Reagan Era Tax Cuts and Policies 1981: Sweeping tax cuts. Richest 1% got reduced tax rate (6%) and they got richer 1983-1987, their wealth grew by 33% Tax reductions for corporations too Hard line stance towards unions Wealthy citizens and corporations got wealthier. Bottom 40% paid more taxes. Government spending cut for programs like school lunches and subsidized housing Trickle down economics did not work

Attacks on Welfare In speeches, Reagan introduced the stereotype of the “welfare queen” With the 1994 “Republican Revolution” there were more limits put on federal social welfare programs Personal Responsbility and Work Opportunity Reconciliation Act (1996)– signed by President Clinton, ended the 60 year old federal guarantee of cash aid to people living in poverty, decentralized “workfare” programs

1990s Prosperity to Economic Downturn Incredible economic growth in the 1990s Economy slowed in 2000s “dot-com” stock bubble burst, March 2000 9/11 attacks (2001) Wars in Afghanistan and Iraq 2001: George W. Bush brought in new tax cuts for the wealthy to stimulate economy Less people receiving welfare (“workfare”) assistance Growing number of “working poor”

Richest Country The US is the country with the richest economy in the world. 16 million people live in deep or severe poverty 49 million Americans do not have health insurance 18% of the children in America live in poverty 1:3 African-American, Latino and Native American children live in poverty Majority of adolescents in the US believe economic inequality is “normal” and that poverty comes from a lack of “individual merit and effort”

What do you think can be done to tackle the problems of income inequality?