1. Increasing Inequality: It’s happening, it matters, and we can do something about it. Jared Bernstein (bernstein@cbpp.org)bernstein@cbpp.org Ben Spielberg (bspielberg@cbpp.org)bspielberg@cbpp.org The Center on Budget and Policy Priorities Updated: 1/6/2015

2. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

3. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

4. Earnings Inequality Social Security Administration data Source: Wage data, tab 3Wage data, tab 3 Top 1%: Bottom 90%: Ratio: 1947 $131,072 $14,392 9.1 1979 $255,760 $27,110 9.4 2012 $648,541 $31,741 20.4

5. Earnings Inequality Bureau of Economic Analysis: National Income and Product Accounts data Source: Table 1.12Table 1.12

6. Income Inequality Census data Source: Tables F-1 and F-5Tables F-1 and F-5

7. Income Inequality Congressional Budget Office data Source: Calculations from Supplemental DataSupplemental Data

8. Income Inequality Congressional Budget Office data Source: Calculations from Supplemental DataSupplemental Data

9. Income Inequality Internal Revenue Service tax data Source: “Piketty and Saez”Piketty and Saez

10. Wealth Inequality Survey of Consumer Finances data Source: Federal Reserve Bulletin Federal Reserve Bulletin

11. Wealth Inequality Internal Revenue Service tax data and Federal Reserve Flow of Funds data Source: “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data”Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data

12. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

13. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

14. 1. Inequality may have negative macroeconomic effects. Mechanisms: A.Different spending propensities B.The bubble/bust syndrome Evidence:

15. 1. Inequality may have negative macroeconomic effects.

16. Mechanisms: A.Different spending propensities B.The bubble/bust syndrome Evidence: Cynamon and Fazzari Kumhof and Ranciére Mian and Sufi Mianand Sufi

17. 2. Inequality matters because it creates a “wedge,” channeling growth away from the typical worker. Mechanisms: A.Globalization B.Technological change C.Decreased worker bargaining power D.The tax code, financial deregulation, and corporate compensation Evidence: Source: Economic Policy InstituteEconomic Policy Institute

18. 2. Inequality matters because it creates a “wedge,” channeling growth away from the typical worker. Mechanisms: A.Globalization B.Technological change C.Decreased worker bargaining power D.The tax code, financial deregulation, and corporate compensation Evidence: Bernstein Danziger Mishel Mishel, Bivens, Gould, and Shierholtz Mishel, Bivens, Gould, and Shierholtz Saez

19. 3. Inequality matters because it undermines the democratic process. Mechanism: The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: Source: Gilens and PageGilens and Page

20. 3. Inequality matters because it undermines the democratic process. Mechanism: The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: Source: Gilens and PageGilens and Page

21. 3. Inequality matters because it undermines the democratic process. Mechanism: The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: Bartels Bernstein Gilens

22. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Reardon presentation at the Boston Federal Reserve, October 17-18, 2014

23. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: YellenYellen

24. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Duncan and MurnaneDuncan and Murnane

25. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Bradbury and TriestBradbury and Triest

26. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Pew Economic Mobility ProjectPew Economic Mobility Project

27. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Sherman, Parrott, and TrisiSherman, Parrott, and Trisi

28. 4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Bradbury and Triest Chetty, Hendren, Kline, and Saez Pew Economic Mobility Project Reeves and Sawhill Sard and Rice

29. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

30. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

31. Inequality is a problem we can combat with the right policy solutions. Full employment Source: Baker and BernsteinBaker and Bernstein

32. Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Source: FurmanFurman

33. Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Source: GouldGould

34. Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Access to quality education Source: SmeedingSmeeding

35. Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Access to quality education Regulation and Improved Fiscal Policy Source: CBPPCBPP

36. Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Access to quality education Regulation and Improved Fiscal Policy Safety Net Programs Source: CBOCBO

37. Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

38. Thank You! Jared Bernstein (bernstein@cbpp.org)bernstein@cbpp.org Ben Spielberg (bspielberg@cbpp.org)bspielberg@cbpp.org The Center on Budget and Policy Priorities