Reducing Income Inequality Is the Key to Economic Growth — Time to Pass the Buffett Rule

Robert Creamer – Political Organizer, Strategist, Author; Partner Democracy Partners

Posted: 04/10/2012 10:04 am

It’s not rocket science. 

The chief goal of our economic policy is to increase per capita economic output — measured by per capita Gross Domestic Product.  That’s what allows people to live better next year than they did the year before.  That’s what allows our children to live a better life than we do.  That is the basis of the American Dream.

      Increased per capital economic output is made possible by increases in productivity. When productivity increases, the same number of hours of work generate more goods and services.

      But it should be obvious to anyone that if all of the income that results from increases in economic output flow to the top one percent of the population, then the rest of us won’t have that income to buy the increasing number of products and services that result from the increased productivity.

     What happens, then, is simple: economic growth stalls.  Companies won’t hire people to produce more products and services if no one has the money to buy them, so they lay people off.  Taken as a whole, the economy then has even fewer people with the money to buy new goods and services.

     Simply put, increasing economic inequality is a straight-forward formula for economic stagnation.

      At the beginning of the Great Depression, income inequal