Who Sliced the Pie? An examination of the Unequal Distribution of Wealth in America
McKillop, Matthew J.
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Every day in America, children are taught that if they if they put their mind to something and work hard, they can achieve anything. This is generally referred to as the American Dream. It is as if a host of options is laid out on a platter for every child at birth and all they must do is choose which one they would like. Everyone begins at the same starting line and all that will matter is how fast they want to run. Unfortunately, all of this is little more than an historically long and steadfast example of wishful thinking and deceit. Indeed, there are a number of factors that will determine an individual's quality of life, and central among them (or the most important of these)is money. No, money cannot buy happiness, but, having no money can produce significant pain and struggle. It is this gulf between the haves and the have-nots that one begins to see problems with the glorified Horatio Alger model. It is nearly impossible to pull oneself up with boot straps when he/she cannot afford boots or has a five year old pair of laces that will break if pulled to hard. Every child does not come into this world with the same set of options, and this, in turn, manifests itself in a massive gap between those who have money and those who do not. Indeed, the United States has by far the most unequal distribution of wealth of any advanced industrialized country. According to the most recent statistics, the top ten percent of wealthy Americans enjoy nearly 70 percent of the nation's wealth. This is problematic because it means that while a few people enjoy unimaginable luxuries and unbreakable economic security, almost everyone else is left fighting for scraps and living pay check to pay check. This paper is divided in two parts. The first is an empirical analysis of the issue at hand. Throughout this section, the problem of wealth misdistribution is examined and the case is made for why wealth, a component of economic well being that is often forgotten and/or misunderstood, is just as important a determinant of economic well being as income. Moreover, the egregious level of wealth inequality is discussed and supported by a comparative analysis with Great Britain and Sweden. Finally, the implications of this problem are addressed as we look at how this problem is particularly prevalent within the African American community. Part two takes more of a normative path. It is of little use to point out and complain about a problem without offering any solutions for improvement. My primary prescription for basic redistribution is the expansion of the current wealth tax system of the United States. Such an expansion has been consistently advocated by Edward Wolff, an economist at New York University and preeminent scholar in this area of research. There is significant precedent for such taxation in other advanced countries and evidence to suggest that it could have an important impact in America. Other suggestions will include the expansion of Individual Development Accounts (matched savings accounts for poor people); raising the minimum wage; and increasing the awareness of the Earned Income Tax Credit. The order of these prescriptions is based on the level of impact they would have in creating a more equal distribution. I had some ideas and personal beliefs when I began the research for this project eight months ago. Some of these ideas have been substantiated, and others have not. I began with three questions in mind, "What is the problem of wealth distribution in the United States?" "Why does it matter," and "How can it be improved?" I believe I have largely answered these questions for myself. My hope is that the information I provide in this paper can serve as a catalyst for debate. I sense that people who read this will either very much agree with my arguments or fervently oppose them because this is a provocative issue that taps into people's core value system. Regardless of the particular reactions this paper receives, what matters is that it inspires people to consider this issue and its importance because it is something that has a direct effect on the daily lives of many people.