Determinants Of The Crisis Of Colander 's A Manifesto For Economic Sense

James Madison once stated inequality of the rich and poor predicament to be “evil” and believed that the government should avoid an “immoderate, and especially unmerited, accumulation of riches” (Johnston, 2016). As one of the founding fathers of our nation, James Madison had a concern about the separation between the rich and the poor. He felt the government should do what it could to avoid the separation, which one can infer that he meant for the government to tax the rich by a greater percentage, thus reducing the financial burden on the poor. A rift has always been present between the rich and the poor throughout history. Depending upon the job, the working class may or may not make enough to support a family. At this point, the

In the United States, high standard of living is not equally shared with in the Americans. The 1970s and 1990s was period where economic inequality began to grow. Emmanuel Saez, an economics professor at UC Berkeley has been doing a research for the U.S. income inequality. He states that there has been an increase since the 1970s, and has reached levels that have not been seen since 1928. “In 1928, the top 1% of families received 23.9% of all pretax income, while the bottom 90% received 50.7%. But the Depression and World War II dramatically reshaped the nation’s income distribution, by 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades. But starting in the mid- to late 1970s, the uppermost percent income share began rising dramatically, while that of the bottom 90% started to fall.”(DeSilver) Ever since then, economic inequality continues to increase, especially in the last three decades.

In other words, America has a widening gap between its wealthy and poor. As the rich get richer and the poor get poorer, there is a problem emerging: the disappearance of the middle class. Low-wage workers continue to fall behind those who make higher wages, and this only widens the gap between the two. There has been an economic boom in the United States, which has made the country more prosperous than it has ever been. That prosperity does not reach all people; it seems to only favor the rich. Rising economic segregation has taken away many opportunities for the poor to rise in America today. The poor may find that the economic boom has increased their income; however, as their income increase so does the prices they must for their living expenses (Dreier, Mollenkopf, & Swanstrom 19).

Everywhere you look at the United States you can find economic stratification. From the kind of vehicle you drive, to the kind of house you live in, to the kind of restaurants you eat at the most you will find economic stratification. Some might ask, does any of that truly matter today? Yes, unfortunately, it does. An important goal for most people is what’s referred to as The American Dream. Whether it is to attend a good college, get a respectable job, purchase the perfect house, and have a small family or maybe just to start your own business; that dream starts with wealth. People with more money will have an easier time with achieving the dream than a lower income person would. With wealth comes power and prestige as well. People with more money have better life chances because they can afford better healthcare, education, healthier food, and safer neighborhoods just to name a few things.

A nation’s economy plays a vital role in how a nation operates. The United States economy faces a large variety of problems in this paper; we will focus on 4 major economic problems, unemployment, inequality, federal debt, and the financial/credit market. All four issues are interconnected in some way with deep social and economic implications. These issues were emphasized during the Great Recession that hit the U.S. economy in 2007.In the following paper, we will look at each of the four topics individually as well as look at how each plays a significant role in one another’s overall impact on the U.S. economy as well as individuals in the United States. The United States plays a crucial role in the world economy, meaning that every issue and difficulty faced the United States economy has implications far outside the U.S., understanding how these issues relate to one another sheds insight into just how connected every area of the economy actually is.

Wealth inequality in the United States has grown tremendously since 1970. The United States continuously reveals higher rates of inequality as a result of perpetual support for free market capitalism. The high rates of wealth inequality cause the growing financial crisis to persist, lower socio-economic mobility, increase national poverty, and have adverse effects on health and well being.

Presently the United State 's income gap between the middle class and wealthy is undoubtedly significant. Some say that income inequality is

During 1997-2006, house prices rose 85 percent. This led to an irresponsible consumer spending spree. Millions of people bought a house that they could not afford. Government regulatory agencies and mortgage lenders became less strict with credit restrictions so that people could buy homes without making any down payment. In 2007, however, the home values and sales began to decline. Due to the loss of trillions of dollars in home value, a record number of borrowers defaulted on their mortgage payments. America was put into a recession in 2008 because of the contraction of corporate spending and consumer purchased. The prices of consumer goods spiked, while employment declined. On October 3, 2008, former President Bush signed the Troubled Asset Relief Program; however, the bill did not restore the economy as a whole. By June 2009, America's economic recovery was at its weakest since the end of the Second World War. I chose this event in history because it had a major effect on America’s economy and changed the course of history. Historians need to study the Great Recession because America should learn from their mistakes. The Great Recession was due to different factors; however, if the regulations on credit restrictions were not tampered with, then the severity of the recession could have been

This time saw much prosperity for certain areas, such as the stock market. Investors were receiving astonishingly high returns on stocks and were seeing their incomes skyrocket. Overall, during the 1980s real GDP per capita increased by 23% and the value of the stock market almost tripled. However the economic choices Reagan made—transferring the weight of taxes from the rich to the poor—had unfairly redistributed the wealth in the nation. Along with the great prosperity came the equal suffering on the part of the lower class who felt the pains of Reagan’s policies. The wealthiest ⅕ of Americans’ income soared by a rate of 14%, while the poorest ⅕ of Americans’ income declined by 24%, widening the gap between the social classes.

During this time period, homeownership typically required a 20 percent down payment (Melicher & Norton, 2014, 168). Lending institutions were very careful about whom they lent money to, and credit standards were high (Melicher & Norton, 2014, 168). Melicher & Norton (2014) called this the “save now, spend later” philosophy, and it would change in the coming years (p. 168).

In Robert Reich documentary “Inequality for All” he makes a compelling discussion about the serious crises that the United States faces due the widening economic gap. He looks to raise awareness of the U.S. economic gap between the rich and poor. According to Reich the widening divide in America is real and growing. Income levels at the middle and labor class is stagnant and are at it’s lowest levels compared to upper class incomes since the beginning of WWII and is growing wider each year. Reich suggests that the economy runs more smoothly when the middle class has jobs with fair wages, when unions are strong, and when middle class workers have some extra money to spend if possible when the government uses the tax policy properly and when it raises the minimum wage regularly to control the income gap between labor and management. In other words Reich argues that economically healthy middle and labor class equality is the foundation of a thriving economy and is necessary to maintaining a sound national infrastructure and educational system within

The highest earning fifth of U.S. families earned 59.1% of all income, while the richest earned 88.9% of all wealth. A big gap between the rich and poor is often associated with low social mobility, which contradicts the American ideal of equal opportunity. Levels of income inequality are higher than they have been in almost a century, the top one percent has a share of the national income of over 20 percent (Wilhelm). There are a variety of factors that influence income inequality, a few of which will be discussed in this paper. Rising income inequality is caused by differences in life expectancy, rapidly increases in the incomes of the top 5 percent, social trends, and shifts in the global economy.

Over the past few decades, the “American Dream” vision has been quickly vanishing as a result of the increasing troubles and weakening of the middle class. It has lost the view of being the most successful and wealthy middle class in the world, while the middle classes in other countries are excelling in earning higher middle and lower class incomes. The issue of the declining wealth of the middle class explains a huge problem in the United States’ future prosperity and well being for the citizens and the country. There are many issues that affect the success of the middle and lower classes, such as structural differences in the economy, culture, and government. The gap between the middle and high classes is increasing specifically. The United States has the image of giving people life and prosperity, but inequality is increasing significantly due to issues in education, decrease in taxation among the upper class, and decrease of middle class power in the democracy, while other ideas and mechanisms can be take from other nations.

As has been stated in Fitoussi and Saraceno, there was “an increase in inequalities which depressed aggregate demand and prompted monetary policy to react by maintaining a low level of interest rate which itself allowed private debt to increase beyond sustainable levels. On the other hand the search for high-return investment by those who benefited from the increase in inequalities led to the emergence of bubbles. Net wealth became overvalued, and high asset prices gave the false impression that high levels of debt were sustainable. The crisis revealed itself when the bubbles exploded, and net wealth returned to normal level. So although the crisis may have emerged in the financial sector, its roots are much deeper and lie in a structural change in income distribution that had been going on for twenty-five years” (2009, page 4). There is a heated debate among economists about whether or not inequality really was a contributing

Our research has revealed in 1940 the U.S. Census Bureau recorded the median price of a single family home in the U.S. was approximately $2,938. The median yearly income was $1,730. The Housing Cost to Income ratio (HCTI) was just over 2:1. Most borrowers during this period kept their mortgages for 30-years. During the 1970s borrowers began to exhibit major behavioral changes by ceasing to keep their mortgages until full term (the average being 10 years) while their HCTI ratios ballooned to over 5:1.