Question

discuss the degree of economic inequality in our society.

Answer 1

The root cause of economic inequality, IMHO, is an inherent disconnect between the real value of an economy, as reflected in the prices of goods and the wages paid to make them, and the perceived value of the economy as reflected in stock market indexes determining the paper worth of the stockholders.

The biggest single cause of income inequality is that those who are already wealthy, who control the means of production in an economy and basically make money from their money, make money when the economy looks good, and the stocks and other investment instruments they own increase in value as a result of this perception. The rest of us, who earn a wage by working for one of these people, only make money when the economy is good, and the higher productivity and demand for labor increase wages.

95% of people in the U.S. economy have to get out of bed and go to work for a living; our investment, if any, is typically in our home (which is actually a money sink for most, as we typically mortgage the home to buy it, and have a minority of equity or even negative equity) and in our retirement funds, which we typically grow over the middle third of our lives in order to live off of it for the last third. If we don't have a job, we're losing net worth every day. The stock market index is just a number.

The other 5% have basically already retired; their day is spent managing the money in their "retirement fund" that is usually several times more than they realistically need to maintain their current standard of living for the rest of their lives. They can make money in virtually any economic situation, especially if they see changes coming (which, as this is their "job" now, they have more tools and knowledge to predict than the average Joe). The stock market index is money in their pocket.

The problem is that there's an inherent difficulty in making that kind of money, and that's that the guys at the top already have it, want to keep it, and have the means to game the system in their favor. The current system of taxation in the U.S. is extremely disadvantageous to a wage-earner; if the majority of your income is paid to you by someone else in return for doing a job, then as your compensation increases, your marginal tax rate increases disproportionately.