Question

Based on the data in the text, describe the degree of income inequality in the U.S. Make a case for or against government policy to reduce income equality in the U.S. Be aware that government policy could be directed toward improving work skills and earning potential or redistributing work income through taxes or subsidies

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Answer 1

Income is distributed in an uneven manner in US economy. This leads to high level of inequalities among the different income group in US. US shift relatively less income from higher income households to lower income household. This inequality in economy having high impact over slower GDP growth, reduced income mobility, higher poverty rates and greater usage of household debt will leads to higher risk in the financial market and political polarisation. One of the most important causes of this inequality is concentration of income and industry in some group of people. Now a days the tax and transfer policies of US is progressive in nature and this reduce the effective income inequality. This high level inequality will affect the employment rate and raise the unemployment level. The living standard of the people changed with respect to this. There is threshold set here for the accumulation of wealth.
Redistribution of income among the economic agents will reduce the level of inequality. Taking income from high income people and distribute it among the lower income group people. The welfare programme TANF, earned income tax credit, SNAP, Medicaid etc. reduce the inequality and also generate additional funding. This redistribution of income will reduce the poverty level and alleviate the social tension which come as a constrain over free growth. In US economy, this redistribution will make the condition more reliable and also increase the level of consumption in the society. This is focused on the principles like rationality, objectiveness, means and the effectiveness of the policy.