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Vast economic disparity is harmful to the US economy

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Voting Style: Open Point System: 7 Point
Started: 2/13/2015 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 1,151 times Debate No: 69982
Debate Rounds (3)
Comments (3)
Votes (1)




The growing income gap between the affluent part of society and the less fortunate is arguably one of the most defining challenges of our time. Therefore, this debate is of vital importance to everyone, regardless of socioeconomic background.

Gini-coefficient indicates how great the economic inequality is in each country. The US is ranked on 92th place amongst developing countries in terms of economic inequality. We are even valued to have one of the highest Gini-coefficient in the world. It is higher than nations like Uganda and Bolivia which respectively have 43.0 and 44.7 while we have 46.0. [1] This unequivocally shows that the income distribution and economic inequality are immense in the US. And the thread of inequality to our economy will be explained excessively in the next paragraphs.

That is why our existing policies are so upside down. When the biggest tax exemptions and the lowest tax rates benefit the richest, all in the name of job creation, it only results in the very fact that the rich get richer. This assertion is sustained by substantial and unambiguous economic figures. Since 1980, the share of income for the top 1 % of Americans has more than tripled, whereas our effective tax rates have gone drastically down by fifty percent. [2] If it was true that lower taxes for the rich and more wealth for the wealthy led to job creation, today we would by drowning in jobs. And yet, unemployment and underemployment has in recent years been at record heights. And if you look at the unemployment and income distribution statistics in the period from 1950 to 1970, it tells us that the unemployment and the economic inequality were low while the economy was stable. [3] This corroborates the very necessity and validity of the societal ambition of more economic equality.

The outcomes of great economic disparity is indisputably detrimental; it weakens social cohesiveness, it encumbers macroeconomic growth and finally it impairs social mobility. Contrariwise, a more equal society provides a stronger and more stable market economy, and it ensures opportunities for a better life for more people. Thus, a whole bunch of initiatives working toward breaking this negative trend of higher inequality must be considered. These include regulation of the financial sector, a progressive taxation system, better access to education, universal health care insurance, fiscal policies directed toward less unemployment, an active labor market policy and finally a prohibition on financial support to political parties from companies in order to curtail its current unproportioned influence on the Capitol Hill. All these aforementioned recommendations are as a matter of fact from the well-respected economist, Joseph Stiglitz.

A rationally strong state is required in order to attain greater economic equality. I want to challenge the tacitly accepted Chicago school-based assumption that government intervention in the best case breeds inefficient results and in the worst case brings deleterious effects on the market economy while the invisible hand of the market is the universal solution to everything. This is not a zero-sum game. The state and the market are preconditions for one another. They are both partners in a dynamic economy with a blooming middle class. Unregulated markets do not always create the best results and are thus not the most suitable framework for society. Even neoclassical economists such as Hayek and Friedman would concur that an absolutely free market economy without any government is merely hypothetical imagination and devoid of any chance of success. So, government intervention is an expedient means to protect citizens from recessions by regulation of the financial market and unemployment by means of boosting public investments, according to Keynes and his General Theory of Employment, Interest and money [4]. And finally, the state is imperative in order to keep the economic inequality under a reasonable level by the redistribution of income. Stiglitz contends that deficit expenditures, when it is implemented properly, can be major stimuli to economic growth and in point of fact alleviate long-term federal debt. [5] When economic growth is back on healthy terms, this leads to increased tax revenues, which eventually diminish the necessity for government to borrow money. The key is to devote these resources on things like education, technology, and infrastructure that lay the groundwork for future economic expansion. We will not remain competitive with other countries for long if we don"t have decent roads, efficient airports, adequate clean water supplies, and sufficient school facilities.

To make the middle class grow and thrive is by any measure the single shrewdest thing we can do for the middle class, for the poor and ultimately for the rich. This is beneficial for America. This is a step toward realizing the American Dream. This is beneficial for every single American individual and well-being of society as a whole. All these points will be elaborated in next round.

I have high hopes for a thought-provoking and rational discussion. Let me finish off by quoting William Penn: "In all debates, let truth be thy aim, not victory, or an unjust interest."

List of References

4-Keynes, John Maynard " The General Theory of Employment, Interest and Money (1936)
5-Stiglitz, Joseph E. " Whither Socialism (1994), Stability with Growth (2006)


R1) Income inequality is large and growing

The argument my opponent makes is fairly indisputable. He argues there is a large rich-poor divide in our country, something I would not deny. However, all market economies function best with *some* income inequality as productivity drives wages. It must be noted, however, the income gaps actually do not account for social services such as welfare, social security, and of course taxes. When this is accounted for, income inequality has actually decreased in the past decade [1.]. Thus, assuming income inequality is an issue, the effect it has had on the economy has actually become *less* harmful over the last ten years.

Further, a supposed hallmark of income inequality “growth” is that the middle class is disappearing and that they are essential for growth. But this is untrue. Some estimates actually suggest the middle class has been growing--at least over the short term--at the same time inequality is supposedly increasing. The middle class is larger and more diverse. What is also interesting is a large amount of inequality is due to immigration, as immigrants tend to be poorer than citizens born in the US [2.]. Inequality may actually not be a major issue because, at least in part, it is being fueled by increased immigration, not because we are getting poorer.

In fact, we are getting richer--at the same time my opponent claims we are not. The rich get richer… but the poor also have been getting richer. It must be noted income is not necessarily a good indicator of wealth. Wealth includes possessions, assets, etc. A retired family would have an income of $0, however their wealth could still be fairly significant as they may own a mansion, multiple Ferrari's, and have $20 billion in a bank account. Wealth is a better indicator of economic status, not mere income. For example, the average income of people over 65 is half of those who are under 35 - 45. But their wealth is nearly three times larger than those who are younger. Further, those in the bottom 20% of the income bracket had their income increase by 91%between 1996 and 2005. Those in the top 1% in the same period had their income fall 26%. This means, in many cases, it is the poor who are benefiting in the modern world where inequality exists, not the rich [3. Thomas Sowell. Economic Facts and Fallacies, pp 152 - 153].

R2) Government intervention is needed

This really is irrelevant. Whether or not a market economy functions best with or without regulation has no bearing on the debate. Even extremists like me accept some regulation probably benefits the free market. Though it tends to do more harm than good. Regardless, this is a debate as to whether or not inequality (at current levels) is harmful, not a discussion as to whether or not the government should intervene.

R3) Taxes

Although not directly relevant, it is important in this debate. If low taxes on the rich harm the economy, then my opponent wins the debate. Low taxes = more inequality. Thus, I will refute this.

My opponent claims the economy grew in the 1970s when taxes were high and inequality was low. This is not entirely true. Measurements of income inequality has been researched significantly. An interesting paper in the American Economic Review suggests income inequality may be a good thing. It was noted that many one percenters--doctors, lawyers, and other productive professions--obtain higher income here than anywhere else in the world. This has attracted high skill immigrants to come to the US and increase productivity and economic growth. Thus, inequality has fueled immigration for skilled workers. To cite a personal anecdote, my father is an Opthamologist. In his office, he has hired a Cuban immigrant who fled Cuba in order to have a better life--this Cuban is also a doctor. He works for my father until he can obtain a US practicing license. Thus, inequality for high skilled workers actually attracts productive human beings to the US. The paper also has interesting points:

There are many types of inequality. There is bad inequality--that is, you are rich because you inherited the wealth. But there is also good inequality: you are rich because you worked hard and made a company. In the 1970s there was actually high inequality, and it was the ‘bad’ kind. But it began to reverse in recent years as family fortunes have begun to wither and the wealthy now, for the most part, is highly productive. In other words, to get rich, they have to help other people [4.].

Taxing the rich would disincentivize their behavior. They would no longer become rich--or, they would contribute less to become rich--because taxes would be onerous. The economy grew in the 70s in spite of high tax rates, not because of them. Many cross-sectional studies have indicated lower marginal tax rates actually promote economic prosperity [5.]. A review of the economic research by the Tax Foundation notes how a significant wealth of studies suggests lower tax rates promote economic growth. The review notes, “the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy.” [6.]. Taxes constrain economic growth. Reducing tax rates, then, would help us.

My opponent argues if tax rates were a factor, we would be experiencing a lot of growth currently. However, he forgets more factors than merely taxes affect economic growth. Past economic recoveries which use tax cuts actually have spurred economic growth. Currently, tax rates have stayed the same or increased. Other factors--spending, regulation, etc. all affect growth rates, too. This recovery, which has used stimulus packages, regulation, and health reform, has lengthened the recession, not shrunk it. This is proven by the fact only in this recession has job growth been so slow [7.]. The US also has the world’s highest corporate tax rate in the world at 35% [8.]. So, again, economic contraction is occurring in spite of low income taxes, not because of them. The weak growth is because of high corporate taxes, regulation, and spending. Not supply-side policies.

== Summary ==

(1) Income inequality may or may not be increasing. As inequality has increased, the wealth of the poor has also increased. Between 2000 - 2010, inequality has actually decreased.

(2) Inequality can be good and bad. If people are unequal because one group is more productive, it is good. This means inequality exists because of economic growth. If it is due to inheritance, it is bad as they are unjustly wealthy. The current inequality is ‘good’, meaning our economy is not damaged because of it.

(3) Low tax rates on the rich spur economic growth.

Debate Round No. 1


Thanks for challenging this notion and for participating in this debate, 16kadams.

(1) Income inequality may or may not be increasing. As inequality has increased, the wealth of the poor has also increased. Between 2000 - 2010, inequality has actually decreased.

Let us be clear about the evidence; the above-mentioned assumption is simply erroneous, since poverty maintains its level if not getting more rampant in the US. [] And economic income inequality has, on the long term, been on the rise in the past two-three decades. []

Here is an incredible fact: If the typical American family still retained the same share of income that they did in 1970, they would earn about $45,000 more per year. Significant privileges have come to rich, for being perceived as job creators at the center of the economic universe. The language and metaphors we use to defend the current socioeconomic arrangements is telling. This discourse obviously was not chosen by accident, and it is only honest to admit that when a CEO calls himself a "job creator", he is not just describing how the economy works, but more particularly, he is making a claim on status and privileges that he deserves. Speaking of special privileges, the extraordinary differential between the 15 % tax rate that capitalists pay on carried interest, dividends and capital gains and the 35 % top marginal rate on work that ordinary Americans pay is difficult to justify without a touch of deification. We have had it backwards for the past 30 years.

The notion from my opponent which states that inequality has decreased is flawed. According to Emmanuel Saez, an economics professor at UC-Berkeley, and his research, U.S. income inequality has been increasing steadily since the 1970s, and now has reached levels only experienced in the year of 1928, not accidentally before the "Great Depression". This also indicates a crystal-clear correlation between global economic crisis and vast inequality. How can a vast inequality not be detrimental when the facts tell us that inequality peaks just before a recession occurs, like in 2007 and 1928 just before the two world recessions.

(2) Inequality can be good and bad. If people are unequal because one group is more productive, it is good. This means inequality exists because of economic growth. If it is due to inheritance, it is bad as they are unjustly wealthy. The current inequality is "good", meaning our economy is not damaged because of it.

I concur to your viewpoint that economic inequality is not intrinsically malevolent to the economy; if the average American enjoys increasing wealth, i.e. a growing GDP per capita, then there is no problem. Although the increase in income has not been distributed to a wider range of the population. Concentration of wealth. The counterargument that may belie your argument is the profound ethical unfairness in the distribution of income. As long as everyone benefits from the economic growth, regardless of how big the profit pie may be, then everything is fine and dandy.

However, this is not the case in reality; in the US, the wage of ordinary workers has stagnated if you take into account inflation over time, while the rich now receives substantially higher wages compared to the 1970s. [] Low and middle class individuals gradually experience less wealth. Thus, so-called "bad" economic inequality is undoubtedly present in the US and is currently damaging the economy.

Tax is not necessarily a deterrent to innovation and productive behavior. [] This is a myth created by Wall Street speculators pressuring for lower wages without regard to actual economic figures. [] Even though it is frequently claimed that income tax is a disincentive for people to work because it takes money away, it is not always true according to these reliable sources.

Again, let me make myself abundantly clear: An utopian model in which everybody is equal economically is most certainly undesirable. Entrepreneurship is driven by additional profit. That being said, there is an ethical limit of how great the profit for business leaders may be. Immense gains for the top 1 percent of incomes are given at the expense of stagnating wages for the middle class. And economists unanimously agree that a strong middle class is of vital importance to economic progress. Therefore, the government, which is the tool to creating a stable economy, should be efficient and offer political solutions toward more economic equality.

Let us put the US In comparison to the world to see how other nations with different levels of economic disparity perform in terms of other socioeconomic scales. Rich industrial countries in which people enjoy greater economic equality, performs better regarding social cohesion, social mobility, life expectancy, infant mortality rate and last but not least economic growth. [] [] Countries with stronger social cohesion has lower inequality. Strong local communities as well as a strong bond across America are essential/desirable in running a stable and well-functioning nation. Inequality leads to more social evaluation anxiety, a strengthened status insecurity and a heightened social insecurity. And when it comes to equality of opportunity where the US has one of the weakest, it is also interconnected to the wide difference in income in the US. The distance between the steps on the social mobility ladder has at an increasingly speed been enlarged in the same pace as the economic inequality has increased. Less income differences derive either from low income differences before tax (e.g. Japan, Switzerland) or by means of progressive taxation systems taxing the rich more (Sweden, Iceland). This is not fabricated data but presented by UN officials. [] So, if rich people in countries like Sweden contribute more in tax, how come that they do not have a low economic growth? This indicates that there are other more prevailing factors in relation to economic growth, such as low economic equality.

(3) Low tax rates on the rich spur economic growth.

Substantial evidence proves my opponent"s statement to be misguided, if not fallacious.

This idea is wrong-headed in the sense that there can never be enough super rich people to power a dynamic economy and spur economic growth. Somebody like Don Thompson, CEO of McDonalds makes 10000s of times as much as the median American. But he is not capable of buying 10000s of times as many products. His family owns 3 cars, not 3000. In other words, he cannot purchase a sufficient amount of anything to make up for the fact that millions of unemployed and underemployed Americans cannot buy new cars, clothes or occasionally enjoy meals out. Nor can he make up for the falling consumption of the vast majority of middle-class families that are barely squeaking by, hurried by spiraling costs, and trapped by stagnant or declining wages. As a side effect, this additionally contribute to the issue of vast economic disparity which by the majority of American economists are proven to impeding the economic growth of a nation and its citizens" opportunities to be master of one"s own life.

Rich people do not create jobs. Jobs are simply a consequence of an eco-systemic feedback loop between customers and businesses. When the middle class thrives, businesses grow and hire and subsequently owners profit. Tax is rather an investment for the health of our society than a burden for the individual. That is why taxing the rich to pay for investments that benefit all is such an expedient deal for the middle class and the rich. In a capitalist economy, the true job creators and the real drivers of our economy are middle class consumers. If the middle class thrives, economic growth will spur. If the upper class only contributes with a low tax rate, economic growth will not spur. I also want to debunk the myth asserted by neo-liberalists that if the rich get richer, wealth will eventually leak down to the middle class. This trickle-down theory which defends tax cuts for the rich, is invalidated by pure economic figures that actually tell us the exact opposite. []

--- Summary ---

As you have mentioned, precautions have to be taken, like economic disparity is not bad in itself since a small inequality incentivizes entrepreneurism and leads to higher productivity as a whole. Nonetheless, the very essence of the proposition I put forward "Vast economic disparity is harmful to the US economy" remains irrefutably valid.


R1) Inequality growth

Technically, if you look at long term rates, the rate is unchanged. It increased throughout the 70s, fell, and then has increased to levels to those at about the 1920s [1.]. And, again, this begs the question as to whether or not this matters. As I stated, income is not necessarily a good indicator of wealth as it fails to take into account assets and other things.

I would like to ask my opponent where his ‘incredible fact’ comes from. The middle class is likely not under stress. Most of the ‘poorer’ middle class did not enter lower income brackets. Most of the middle class has actually gotten wealthier over time. Those with an income of over $100,000 has increased whereas those who earn less than $30,000 has decreased [2.].

Even assuming the rich are getting richer, it doesn’t mean much. A lot of the increased wealth in the upper class has been due to technological advancement--something which benefits everyone. The rich, for example, produce a new breakthrough product and get billions. This is not harmful. As economist Gregory Mankiw notes, “most of the very wealthy get that way by making substantial economic contributions” [3.]. This means, in order to cause inequality, they have to produce something which benefits everyone. Thus, increasing inequality benefits society.

My opponent seems to suggest income inequality caused the great depression. This is untrue. Many economists have pointed to the gold standard as a leading cause of the great depression [4.]. And again, this type of inequality is bad. In the 1920s, most wealthy people were rich due to family lineage [1]. Today, however, most are wealthy because they contribute to the economy [3]. The 1920s inequality is bad because they produce nothing. Today, however, increased inequality means more goods produced based upon the way they become the 1%.

Non-farm businesses in the time period my opponent suggests inequality increased had increased compensation (wages) and productivity [5.]. So I don’t know where his ‘incredible facts’ come from. Wages and productivity has increased in a period in which my opponent seems to think we have been getting poorer.

R2) Inequality is bad

My opponent states inequality is getting worse. It first states wages are falling. Not really, the website notes how the wages increased but have slightly decreased between 1999 - 2012. Between 1997 - 2008, there is really no change. The decrease happens in 2008. There was a recession--of course wages would fall! The conclusions the website seems to come to are ideological in nature and they cherry pick their dates. The second evidence they present is that the 1% share of income has increased. But as I noted above, it has increased because they are producing goods and services. This means even though the 1% gets richer, everyone else benefits due to their wealth. This is not indicative of potential harm.

My opponent agrees *some* inequality is good. He even agrees in some cases inequality benefits the world. As I noted, the vast majority of modern inequality stems from genuine productivity of the 1% and due to the fact they have produced goods and services. Thus, the inequality which exists is directly related to them helping the economy.

Recent research suggests economic mobility--the ability to enter higher income brackets--has remained fairly stable in the United States [6.]. Being able to move up and down the ladder is more important than a single snapshot. Movement is indicative of growth--the ability to become rich. A single snap shot ‘hey, on this year this many people are poor’ is a flawed measurement. As people have the ability to become rich due to hard work and productivity, the inequality we are seeing now is not really bad. If you are poor, you can become rich. That is more important to well being than being poor for a specific year. For all we know, they will be in the 1% in the next year, which is not a bad thing.

The American Enterprise Institute suggests, “income inequality doesn’t seem to correlate with lower living standards in advanced economies, particularly America’s. And income inequality doesn’t seem to be reducing upward mobility. These would seem to be an important conclusions to acknowledge before beginning an all-out War on Inequality.” [7.] (emphasis added)

R3) Taxes

To suggest the wealthy—like McDonalds—does not create jobs is insane. McDonald’s They serve 68 million people per day, have 35,000 locations, and have almost half a million employees [8.]. McDonalds also employs people by promoting other business (e.g. the cow industry), etc. So to say Don Thompson does nothing to help people is a flat out misconception.

My opponent claims ‘reliable’ sources help him, but I cited a literature review of over twenty peer-reviewed studies and cross-sectional research done between the US and France. So to suggest my sources are unreliable is simply untrue.

My opponent claims the rich create no jobs. But he seems to be focusing on the direct effect of job creation, not how the rich indirectly create jobs. Steve Jobs, for example, created jobs directly—workers at apple—but created others indirectly. People who make his products, people who work with his company, people who helped him develop the ideas, etc. etc. To say the rich do not create jobs does not even make sense. In order to become rich, they produce something. And producing things create jobs. In order to produce something, investments must occur. When taxes are increased, there is less capital to be invested in order to create a company/product. In fact, the rich actually—directly or indirectly—create almost every job [9.].

“Jobs are simply a consequence of an eco-systemic feedback loop between customers and businesses.”

This is partially true. But your whole explanation assumes inequality harms the middle class—it doesn’t. When the rich get richer, they put more into the economy, which helps the middle class. This enhances my opponent’s feedback loop, it does not harm it.

== Issues of income measurments ==

My opponent seems to have ignored an important point: measures of income inequality are very flawed. Many of them fail to include benefits, tax rates, and wealth not related to income. The amount of income inequality when this is accounted for is actually much smaller than my opponent is suggesting. The inequality decreases from $14 dollars earned by the rich in comparison to $1 to persons in the lowest quintile to a $4 - $1 ratio [10.].


Is vast economic disparity harming the US currently? No, due to the fact it does not currently exist (in a 'vast' form) when certian measurments arecorrected. And it is not a harm in and of itself as it can be good and bad. As I have noted, the 'good' economic disparity--one based upon merits, not corruption, actually may benefit the world. This is proven by the fact as I argued inequality in cross-sectional datasets is not associated with reduced economic outcomes and in many cases countries with economic disparity have an economically healthier populace. So:

(1) Inequality may or may not be increasing

(1a) Measurments of inequality are flawed

(1b) Measurments exagerate income inequaliy

(2) Economic disparity can be good under certian situations

(2a) The 'good' economic disparity is what exists in the modern economy

(3) Economic disparity is not associated with economic woes

Debate Round No. 2


"The incredible fact" is calculated by the sources mentioned underneath.

Source: U.S. Census Bureau; Minnesota Population Center/IPUMS
Explanation and analysis:

For the sake of fairness (and partly due to my exam tomorrow of which I must bone up), let us use the last round on waiving off. It has been a delightful, if not gratifying, debate. Disagreements aside: You are one hell of a debater. You definitely deserve credit for your deep thoroughness and clear dedication to the wonderful science of economics. I wish I could shake hands with you, 16kadams. Thank you, once again.


I also thank my opponent for an excellent debate. I will reiterate my last round summary:

(1) Inequality may or may not be increasing
(1a) Measurments of inequality are flawed
(1b) Measurments exagerate income inequaliy
(2) Economic disparity can be good under certian situations
(2a) The 'good' economic disparity is what exists in the modern economy

Thus, inequality is really not an issue now, and in the future it probably will never be. I have proven vast economic disparity may not actually be an issue--how the economic disparity is created could be an issue. I provided two studies suggesting the way the inequality has come to be is the 'good' form of inequality which actually improves the lives of everyone--even those who are not super rich.

Good luck on your exams!

Vote Con. :D
Debate Round No. 3
3 comments have been posted on this debate. Showing 1 through 3 records.
Posted by ResponsiblyIrresponsible 3 years ago
some of PRO's*
Posted by ResponsiblyIrresponsible 3 years ago
It looks as though at least some was PRO's argument was lifted from a TED talk by Nick Hanauer--in much the same way he did in his "debate" against me .
Posted by ResponsiblyIrresponsible 3 years ago
Ahhhhhh I just found this! Bleh, one of you totally should have told me this debate existed, lol.

I can't wait to read this and vote. DDO needs more debates like this, lol.
1 votes has been placed for this debate.
Vote Placed by Commondebator 3 years ago
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Total points awarded:03 
Reasons for voting decision: This debate was pretty good overall. However, Con's arguments were really thorough and structured. Con was able to rebut pro's arguments more clearly and used data to strike down many of Pro's points. In the end, con showed how economic inequality does not equal a bad thing. Pro's arguments were also pretty good, and conduct was fantastic on both sides. Nice job to both of you