NYT: Inequality Is Causing Slower Growth Because . . .

According to the New York Times, a new study argues that income inequality is holding back the U.S. economy and making it harder for the nation to recover from the recession. Others have said this before, writes NYT columnist Neil Irwin, adding that what makes this report — entitled "How Increasing Inequality is Dampening US Economic Growth, and Possible Ways to Change the Tide" — is that it was written by economists at Standard & Poors, a ratings service for bond investors. It's a sign, he writes, that a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream.

Irwin writes: "Because the affluent tend to save more of what they earn rather than spend it, as more and more of the nation’s income goes to people at the top income brackets, there isn’t enough demand for goods and services to maintain strong growth, and attempts to bridge that gap with debt feed a boom-bust cycle of crises, the report argues. High inequality can feed on itself, as the wealthy use their resources to influence the political system toward policies that help maintain that advantage, like low tax rates on high incomes and low estate taxes, and underinvestment in education and infrastructure."

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