To the editor of THE EAGLE:
The AP article in the Dec. 18 Eagle says a majority of 30 economists surveyed believe that the income gap in the U.S. is hurting the economy. The arguments made in the article for this view suggest that what we need is increased spending by more people. It’s obvious that poor people can’t increase their spending unless their income increases. What’s not so obvious is the unstated assumption that if the income or wealth of the richest Americans were lower, the income or wealth of the poor would somehow be better.
It seems to me instead of focusing on the difference between the rich and the poor we should focus on creating jobs as a much more powerful way to improve the lot of the poor. If a person’s income goes from $0 to minimum wage, that’s a huge improvement. It’s a gross over-simplification to suggest that increasing the minimum wage (as the article suggests) will lead to reducing income inequality or more hiring than would be the case if the minimum wage were left as is or even decreased. While this may be the case if you assume nothing else changes, we all know in the real world that’s never the case. Our economy is a very complex dynamic system.
It occurs to me that not so long ago we were more concerned with the low savings rate and high spending rate. While our spending has fully recovered from the recession, our savings rate remains low. I have to wonder if we wouldn’t be better off as a society if our spending rate were reduced and our savings rate increased. While the poor don’t have any income to save, there are many middle income folks who certainly could reduce their spending and increase their savings. I wonder if the minority of economists surveyed maybe were thinking along these lines.