DISCUSSION BOARD: THE DISTRIBUTION OF INCOME IN THE USA

Opposing Views

While much of the discussion that takes place about economic issues is somewhat theoretical and abstract, when the conversation turns to money and individual income, it suddenly becomes much more personal. This all begins at a very early age when we realize that money can bring the things that we want.

Most of our experience with money is very much at the micro level. We see what we earn and we also see what it will buy. It is not a common thing to think much about the broader questions at the macro level. How is income really distributed in this country? How does our tax policy influence that distribution? Even more importantly, is this a question that we should worry much about or does the free market always allocate income and wealth in an efficient manner? If you think back to Unit 1, the free-market view is that those who are more efficient and inventive will be rewarded with more income. Of course, it was also assumed that perfect competition existed and markets could not be influenced in any way by vested interests.

During the semester, we are looking at two major macroeconomic problems that currently exist-instabilty, which we deal with using fiscal and monetary policy (unit 3)-and the distribution of income and wealth. The latter is more abstract but is contributing to a number of problems-even instability.

I would ask you to consider these questions. The same guidelines that we have used for the other discussion boards will apply.

QUESTIONS: (discuss these fully)

1. What does "progressive taxation" mean? What is your opinion about the role of government regarding taxation? Should we worry about taxes that have a regressive effect on the taxpayer?

2. As a society, should we worry about the distribution or income or simply allow market forces to make that determination. What do you think would happen if there was no attempt to influence the distribution of income and wealth...would the distribution: stay the same...become less concentrated...become more concentrated in the hands of fewer people?

3. We hear many politicians suggesting that lowering taxes will always increase economic growth, create more jobs and ultimately mean more tax revenue. Is this true?

4. Does "trickle-down economics" really work? If we allow those at the top of the income ladder to make more and more, does that trickle down to those at lower income levels and increase the number of jobs?

5. Regarding the recent changes in tax law...what is your opinion. Will these changes be beneficial to the economy or a detriment? Does the new law still favor those at the top?

6. What is your opinion about the distribution of wealth-which is much more disparate than income. Should we be concerned that so few have an investment in the system?

7. What is government's role in the overall distribution of income and wealth?