William_T._Bianco,_David_T._Canon]_American_Polit

582 Chapter 16Chapter 16 || Social PolicySocial Policy

investment, and jobs, and thus ensure a healthy economy (see Chapter 15). From this

perspective, income inequality may in fact be a necessary condition for bringing people

out of poverty, because wealthy people are the only ones who have enough money to invest

to create jobs. Indeed, Rick Santorum argued during the 2012 Republican presidential

primaries, “There is income inequality in America. There always has been and, hopefully,

and I do say that, there always will be.”^23 Donald Trump came close to this direct

endorsement of inequality when he said, “We’re gonna make our county rich again. We’re

gonna make our country great again, and we need the rich in order to make the great.”^24

Democrats, on the other hand, argue that making the wealthy pay a larger share of

their income in taxes could fund programs to help the poor directly and would be more

efficient than waiting for the trickle-down effect of tax cuts for the wealthy. From this

perspective, a direct trade-off exists between income inequality and reducing poverty,

and progressive taxes are needed to help the poor.

FIGURE

16.2

Cumulative Growth in Average Income, by Income

Group, 1979 –2014

Social policies such as Social Security, Medicare, and progressive income taxes have a big impact on reducing income inequality.

How much greater would income inequality be today without those transfers and taxes? How much income inequality remains?

Source: Congressional Budget Office, March 2018, The Distribution of Household Income, 2014, https://www.cbo.gov/system/files?file=

115th-congress-2017-2018/reports/53597-distribution-household-income-2014.pdf (accessed 8/7/18).

26

28

9595

–25

0

25

50

75

100

125%

–25

0

25

50

75

100

125%

1980 1985 1990 1995 2000 2005 2010

69

42

97

1980 1985 1990 1995 2000 2005 2010

Income before transfers and taxes Income after transfers and taxes

Highest Quintile

Middle Three Quintiles

(21st to 80th Percentiles)

Lowest Quintile

Highest Quintile

Middle Three Quintiles

(21st to 80th Percentiles)

Lowest Quintile

“Why

Should

I Care?”

Income inequality is one of the central issues of the past decade. It emerged as an

important issue in the 2018 midterm elections. Democrats and Republicans alike agree

that steps need to be taken to address inequality, although obviously they differ in their

approaches. Democrats emphasize increasing the minimum wage and improving the

affordability of health care and housing, while Republicans tout the benefits of the 2017

tax cuts and the low unemployment rate. A recent survey showed that 47 percent of

Americans couldn’t come up with $400 to pay for a car repair or health care emergency,

while one in five say they have more credit card debt than emergency savings.^25 If you

were in this category, who would you turn to for help?

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