Its Randall Wray. He just posted again. I still cannot get over that he actually chimed in on comments.

Thanks, DD. I thought that if it seemed so obvious but wasn't a generally accepted idea, then it must have been shown to be wrong. From what you say, maybe not. I'll check out Wray soon.

You raise a really interesting issue. I'm going to check out SSRN/JSTOR and see if anybody has published anything recently..

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Something of interest . . .

Hey Hey Tom . . .

Nearly 50 years ago, a famous American gave a speech that advocated spreading the wealth.

In some countries, this notable stated, “a few families are fabulously wealthy, contribute far less than they should in taxes, and are indifferent to the poverty of the great masses of the people.” “A country in this situation,” he went on, “is fraught with continual instability.”

Just who made this spread-the-wealth declaration against the dangers societies invite when they let wealth concentrate?

Read the rest at: Inequality and the Common Good November 3, 2008

That's found at the Institute for Policy Studies, the parent organization of the Working Group on Extreme Inequality.

~OGD~

I do not think that income inequality per se is a cause of instability. The prime cause was a stagnant or declining real income for a large percentage of the population and the attempt by the powers that be ( Rep. and Dem. ) to prop up the economy with debt. Real and perceived declines in personal standards of living can be very painful, so when offered an easy way out with easy credit, many people took it.
The nation has followed a failed trade policy, a failed energy policy, a failed immigration policy and has supported a bureaucracy that considers it's mandate the destruction of privet enterprise. Is it any surprise that the economy is in shambles?

I've been saying this since i got to TPM. go back and check my comments.

Absoutely. I don't understand $700 billion to free up credit when people can't buy things and pay bills without jobs and we have been leaking good, quality jobs since NAFTA, and GATT put the american worker and manufacturers in direct competition with those around the world with workers working for next to nothing. It was inevitable that it would lower the standard of living for americans some say justifiably as america was a wealthier nation but the overall planning of these free trade moves was abysmal. Add to that the banking deregulation and the abuse of that and we have this terrible economic state. We need leaders with much broader vision to create a plan for a sustainable american economy and quality of life for americans.

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General note...

Although this doesn't deal with inequality in relationship to the chronically unemployed, Wray just dropped the following two wished for policy points out of seven for the short term over in:

Policy Advice for President Obama (Part One)
December 18, 2008, 11:35PM

4. Immediate tax relief: I advocate an immediate payroll tax holiday--stop collecting the OASDI portion of the payroll tax from employers and employees. Both the employer and employee pay 6.2% (the self-employed pay 12.4%) up to a current maximum taxable base of $102,000. Approximately 163 million people paid Social Security taxes on earnings in 2007. Total tax revenue raised was $656 billion, which amounts to an average of $4025 per taxpayer. A tax holiday would provide immediate tax relief to workers and their employers, injecting $12.62 billion each week into the economy. Take-home pay would rise by an average of $77 per week for each taxpayer, with an equivalent saving per worker for each employer. A worker who earned $40,000 a year would get a tax cut of $2480 per year. Just as important, that worker's employer would also benefit from $2480 of tax relief, which may help keep workers on the job. If desired, we can phase the tax back in when the stimulus is no longer needed--although payroll tax reform is included in my longer-run policy proposal.

5. Fiscal stimulus: Many argue that government spending is more stimulative than is a tax cut, since part of the tax cut is saved. So what? Households have been spending more than their incomes for a dozen years, and the geniuses on Wall Street have just wiped out about half of their retirement savings. The answer is that we need both: a payroll tax holiday to strengthen household balance sheets, and more government spending to restore the economy. To do immediate good, we need spending that can get underway quickly. Increased unemployment compensation and other forms of social spending are needed. It is also important to help state and local governments, which are reeling from the double whammy of higher expenses and plummeting tax revenues. I suggest at least $400 billion of "block grants"--perhaps based on population--to be spread among these governments. Maybe some of the money would be targeted (public infrastructure projects that were already underway, or are on the shelf and ready to go), some would go to Medicaid, and some would come with no strings attached.

Note: My bold highlight above.

Just for a general heads-up . . .

~OGD~