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Inequality is a Drag

Posted by Samantha Lewis on September 05, 2014 at 4:01 PM

Income redistribution as it pertains to economic inequality continues to be a hot topic of discussion. On August 7, 2014, Paul Krugman penned this piece for The New York Times, on how redistribution can lead to a stronger economy. 

For more than three decades, almost everyone who matters in American politics has agreed that higher taxes on the rich and increased aid to the poor have hurt economic growth.

Liberals have generally viewed this as a trade-off worth making, arguing that it’s worth accepting some price in the form of lower G.D.P. to help fellow citizens in need. Conservatives, on the other hand, have advocated trickle-down economics, insisting that the best policy is to cut taxes on the rich, slash aid to the poor and count on a rising tide to raise all boats.

But there’s now growing evidence for a new view — namely, that the whole premise of this debate is wrong, that there isn’t actually any trade-off between equity and inefficiency. Why? It’s true that market economies need a certain amount of inequality to function. But American inequality has become so extreme that it’s inflicting a lot of economic damage. And this, in turn, implies that redistribution — that is, taxing the rich and helping the poor — may well raise, not lower, the economy’s growth rate.

Read the full story, here: http://www.nytimes.com/2014/08/08/opinion/paul-krugman-inequality-is-a-drag.html