By Michael Shank

The huge costs of social deprivation make the US poorer, even as the top 1% gets richer. Fix that and you fix the budget deficit

On the heels of the US government’s announcement that personal income of Americans has dropped for the first time in two years, Britain’s Richard Wilkinson – co-author with Kate Pickett of the book Spirit Level: Why Equality is Better for Everyone – comes to Washington this week to talk with Congress about income inequality and its deleterious impacts on society.

Whether any of this will be news to an American audience is doubtful, as no one is under the illusion that the US is doing well economically. In fact, last month Americans learned they have the highest poverty rate since the second world war (one in six Americans living below the poverty line) and the highest youth poverty rate (one in five young people, with Hispanic youth suffering most). Last month also concluded multiple “Made in America” tours by the congressional black and progressive caucuses who were responding to the cry of the unemployed, which is only getting louder and more desperate. More recently, the Warren Buffet-inspired tax debate, regarding whether millionaires should pay at least the same tax rate as the common worker, has surfaced fractiously, pitting President Obama and Democrats against most Republicans. Underlying these recent trends, the US still maintains one the highest income inequality rates among all wealthy countries.

How vexing it is to witness America’s inability to push for policies that could ensure more economic equality. Paradoxically enough, many Americans believe that they are already in the middle-upper tier of income earners or will eventually end up there. This inspires a reluctance to enact policies that would more equitably balance economic burden-sharing. America’s increasing poverty rates may finally change this dynamic as a 20 September Gallup poll points out: Those who supported raising taxes on the rich outnumbered opponents by 66% to 32%.

America’s past penchant for income inequality, however, is not financially sustainable, let alone morally excusable or philosophically justifiable by capitalists who claim this to be inherent in the system. This is where Wilkinson and Pickett’s data is useful. It shows that with income inequality comes with a host of health and social problems. The higher a country’s income inequality, the higher its infant mortality rates, obesity rates, homicide rates, illiteracy rates, mental illness rates, teenage births, incarceration rates, drug addiction rates, social immobility and lower life expectancy. In other words, the bigger the gap between a nation’s rich and poor populations, the greater dysfunction in that nation’s society.

It may come as no surprise to some that America has the highest income inequality among the entire rich world. It was developed largely in the last 30 years, exacerbated by tax policies that benefited the rich at the expense of the poor. It became increasingly difficult for Americans to get ahead, get insured, get educated and get a job, all of which helps with getting respect. Consequently, the bulk of America’s economic growth over the last 30 years has gone to the top one-100th of 1%, who make $27m annually per household, leaving 90% of American households to subsist on roughly $30,000 a year.
Name a rich country and our inequality rates beat them by a long shot – though it’s hardly something to brag about. We also have the highest rates of homicide, infant mortality, teenage births, drug addiction, mental illness, incarceration, social immobility and illiteracy. Name the social ill and we excel at it.

These health and social problems wreak financial havoc on our society – not only in terms of lost productivity and potential, but also in terms of costs associated with containing the violence, healing the sick, and fixing the dysfunction. With each homicide, for example, the Centers for Disease Control and Prevention calculate that the economy loses $1.65m in medical costs, loss of lifelong employment and economic productivity costs. With each prisoner, the US spends on average $35,000 per year for a total of $80bn annually for its correctional system. Add to this the total cost of lost productivity of the incarcerated, which is another $97.7bn. And don’t forget violent crime, which cost America $94bn in 2009.

Given these enormous costs to America’s economy, advocates of income equality must have a seat at congressional budget super-committee’s table, as it continues to convene on cost-cutting, and must push for policies that promote equal opportunity, health, education and poverty alleviation. Reduce income inequality and you reduce the rates of every kind of social malaise that are draining our federal, state and local budgets and services. Eradicate both and you have a certain moneymaker for America – a wise and worthwhile move for a country that just raised its debt ceiling.

Michael Shank is a doctoral candidate at George Mason University’s school for conflict analysis and resolution, associate with the Global Partnership for the Prevention of Armed Conflict based at The Hague, and serves on the board of the National Peace Academy.

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