Erwan Quinton and Jason L. Saving provide and excellent article on the interrelationship between Income Inequality and Poverty, by exploring current theory on the issue; I scalped this link from Mark Thoma (a tendency I should quit, but a lot of bloggers find better material than I can). My essential position on Income Inequality states that economic growth does not demand such inequality with the advent of modern banking practices, and effective Markets cannot be established with the existence of Income Inequality (the concept of Consumer disenfranchisement). One cannot get sustainable growth without full utilization of Consumer potential, and growth should not be geared to massively reward innovative, effective economic behavior because the reward system has to be changed to institute full Consumer participation (Returns must eventually be Percentage-reduced to gain superior Sales). The issue is very important as the great Wealth sectors are rarely focused prior to their development, and little evidence exists that this specter was a factor in initial development.
I often disagree with Mark Perry and WSJ editorials, finding them to be a tad ruthless in their expounded Conservatism. This time they have a decided Point, much as the Politicians would like to ignore it. Simple creation of Debt is not an economic stimulus. The ‘leaky bucket’ does exist. There is the added dictum that economic stimulus which is too weak may be worse than no stimulus; I have always claimed that any Rebate less than a Week’s Income will only pay down bills (finish off previous Consumption), without providing venue for additional expenditures.
I think Tim Worstall is talking about me, as I have always doubted the projected benefits of the Laffer Curve. My major problem with the Concept origins in all effects are focused in creation of a specialized Wealth class under the tax modification, with no real transference to the general class of Taxpayers. The later inevitably are faced with a heavier Percentage taxation, or a greater Debt burden–which is the current preferred stream. The Laffer Curve may simply extol the beauty of Tax evasion. Tim also makes a somewhat outsize claim that somehow the Laffer Curve can produce a greater progressivity of taxation, through the use of Personal Exemptions. This effect might occur, but in what manner of tax neutrality? I am not saying precisely that national debt is taxation of the future; my claim states simply that We must accept a consistent 4% Inflation rate to maintain Debt Service into that future. lgl