Pethokoukis, Economics, U.S. Economy

Why is Janet Yellen so concerned and disturbed about income inequality?

Image Credit: http://www.youtube.com/watch?v=XBW60d4PUfY

Image Credit: http://www.youtube.com/watch?v=XBW60d4PUfY

A “very concerned” Janet Yellen told a congressional panel today that she thinks income inequality is “one of the most important issues and one of the most disturbing trends facing the nation at the present time.”

But why, exactly?

1.) If you buy the thesis that a big jump in high-end inequality has been mostly driven by technology and globalization, then the alternative is more equality, perhaps, but less innovation here and more extreme poverty abroad. Now that’s a disturbing scenario.

2.) If you are concerned about upward mobility, then family structure, education, and geographic segregation are bigger issues than 1%-99%-style inequality, which has zero correlation with climbing the opportunity ladder.

3.) Along those same lines, here are e21′s Scott Winship and Donald Schneider, whose recent work undermines “the idea that rising inequality has hurt economic mobility … the accumulating evidence [is] that mobility has been stable and that there is little robust correlation between inequality and mobility levels across geographic areas. We argue that instead of trying to construct an unsupportable case that mobility is falling and that inequality is to blame, Democrats should simply point to the insufficiently high mobility levels experienced by poor children.”

4.) If you are concerned about poverty, income inequality is a distraction. Poverty expert Ron Haskins of Brookings: “If our goal is to increase opportunity, it seems unlikely that limiting income at the top of the distribution or taking more money from the rich will increase opportunity.”

5.) If you are concerned that crony capitalist links between big business and big government are promoting inequality and making the American Dream seem like a rigged game, well, right on! But Yellen didn’t talk about that.

6.) Does Yellen know that the top 1% own a slightly smaller share of US wealth than a generation ago?

7.) Here is social scientist Lane Kenworthy, a progressive who just wrote a book on creating a Nordic-sized welfare state in the US: “Faster economic growth would be a good thing (particularly if with  it came a shift towards greener growth). But there is little evidence that the American economy will grow more rapidly if the US manages to reduce income inequality. …  Income inequality is too high in the US. It would be good to reduce  it. But it is a mistake, in my view, to put inequality reduction at the top of the agenda.”

What disturbs me is the lack (a) economic growth, (b) good-paying, full-time jobs, (c) social mobility, and (d) educational opportunity in a time of advancing automation. Those are the disturbing trends Yellen, given her prominence and bully pulpit, should be talking about.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

20 thoughts on “Why is Janet Yellen so concerned and disturbed about income inequality?

  1. Why is Yellen concerned?

    1) She’s a marxist. This is how they talk.
    2) She’s working in concert with Obama and his sudden focus on income inequality – which he has undertaken for the same reasons.

    • Yes. Completely agree. Any one who doesn’t get up every morning and thinks new ways of cutting taxes for the superrich and new ways of cutting benefits for the middle class is a marxist. We all know Russia doesn’t have any gays and we don’t have any poor. These poor are so stupid. They are always talking about not having enough money but never think about selling some of the stock they own or sell their vacation home or fire some of their staff. That’s what jesus would do!

      • Taxing the rich will work as well as it has on the biggies like Google, G.E. and the rest; they just move; mobility is an option….. It’s funny how so many seem to ignore that reality; how much have we spent in poverty programs? Philosophically we are at the cross roads between Hobbes and Locke…. and at the moment the leviathan is winning.

  2. Yellen should concentrate on promoting economic growth…suffocating the economy with a monetary noose and then sniveling about inequality is a poor show…

  3. Hey, Janet, I’ve got a quick solution to income inequality. Stop pumping up the stock market with Easy money and see how fast the wealth of the “1%” drops. You can do it, girl.

    • Tax increases sometimes called fees, Obamacare, regulations, 92 million unemployed (9qes have not helped employment one iota) have all really hurt the middle class in addition the QEs you mentioned. When this bubble burst it will not just hurt the 1% it will added further misery to the 99%.

        • Yes, in the end the 1% pays more. With”Bush Tax cuts” the 1% paid a higher percentage and in absolute dollars a higher amout of federal taxes. The less tahn 50% pay nothing – in fact get more and more subsidies.. The folks taking it in the shorts are the middle class. Currently they are borrrowing more and will get hurt big time when the bubble bursts.

  4. It would be nice if Mr P had a reason to favor Scott Winship’s scholarship (other than the fact that it carries water for Big Business.) He does not. The scatter chart he keeps posting is a bad joke. http://equitablegrowth.org/2014/01/23/1767/a-mathematical-response-to-scott-winships-analysis-of-the-great-gatsby-curve.

    While we agree on Point 5, Mr P is wasting a terrific opportunity to address crony capitalism directly. At the next AEI board meeting, he should trot upstairs and ask Vice Chair Lee Raymond why ExxonMobil doesn’t give back its share of the royalty-free Gulf leases that Congress gift-wrapped for the oil industry in 1996.

  5. Yellen is concerned about “income inequality” because she is playing the politics of Democrat distraction from the worst “recovery”, the Great Recession, since the Great Depression.

    These people, the deep thinkers, obviously are clueless. Abolish the Fed. Let’s try freedom for a change. The two best recoveries of the 20th century were after the two world wars when Republicans blocked most artificial stimulus efforts. The growth was amazing.

  6. I wish there was a Tea Party heaven somewhere on the planet.
    No taxes, no gun control, religion= state, almost no government, no gays or minorities rights,.
    Wait a minute! there is..are
    Sudan, Sierra Leone, …(but tea bagging would be illegal there. Well, nothing is perfect.)
    onward tea baggers

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