By Carol Hedges

It has been generally accepted that the free market is the best method of producing wealth and growth in this county and in order to harness that growth-engine we had to accept inequality.  We were long told that creating policies to mitigate inequality would reduce incentives for growth.  We were told that there was a natural trade-off between equality and growth: maximum growth had to be sacrificed to tame inequality.  This no longer seems to be the case.

As Joseph Stiglitz points out in his recent New York Times editorial, the notion that we must sacrifice growth to tame inequality is wrong.  Policies that mitigate inequality are not holding back growth.  It’s becoming clear that inequality itself is holding back growth.  Rectifying the chasm of inequality in our country, it turns out, is a pro-growth agenda.  Equality and growth are intertwined, not polar opposites.

Stiglitz enumerates several reasons why inequality is squelching the economic recovery.  The biggest reason is that the middle class is too weak to support the consumer spending that is a huge driver of economic growth.  As the top 1 percent of income-earners received 93 percent of income growth in 2010, it has left the middle class with lower household incomes and thus much less spending power.

The weakness of the middle class combined with the adroitness with which the top earners avoid taxes, has left the U.S. without the money to invest in our future.  As Stiglitz points out, “Low tax receipts mean that the government cannot make the vital investments in infrastructure, education, research and health that are crucial for restoring long-term economic strength.”

Inequality is not only an economic problem; the ramifications that it has for politics can create a negative reinforcing cycle.  “Even were we able to ignore the economic imperative of fixing our inequality problem, the damage it is doing to our social fabric and political life should prompt us to worry. Economic inequality leads to political inequality and a broken decision-making process”

Stiglitz concludes his editorial with words that are an excellent frame for why Colorado should invest in middle class families:  “The good news is that our thinking has been reframed: it used to be that we asked how much growth we would be willing to sacrifice for a little more equality and opportunity. Now we realize that we are paying a high price for our inequality and that alleviating it and promoting growth are intertwined, complementary goals.”

For the full article, see: http://opinionator.blogs.nytimes.com/2013/01/19/inequality-is-holding-back-the-recovery/

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