cloudy
Thursday July 30th, 2015 5:52PM

S&P: Wealth gap is slowing US economic growth

By The Associated Press
WASHINGTON (AP) -- Economists have long argued that a rising wealth gap has complicated the U.S. rebound from the Great Recession.<br /> <br /> Now, an analysis by the rating agency Standard & Poor's lends its weight to the argument: The widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and slowed the 5-year-old recovery from the recession.<br /> <br /> Economic disparities appear to be reaching extremes that "need to be watched because they're damaging to growth," said Beth Ann Bovino, chief U.S. economist at S&P.<br /> <br /> The rising concentration of income among the top 1 percent of earners has contributed to S&P's cutting its growth estimates for the economy. In part because of the disparity, it estimates that the economy will grow at a 2.5 percent annual pace in the next decade, down from a forecast five years ago of a 2.8 percent rate.<br /> <br /> The S&P report advises against using the tax code to try to narrow the gap. Instead, it suggests that greater access to education would help ease wealth disparities.<br /> <br /> Part of the problem is that educational achievement has stalled in recent decades. More schooling usually translates into higher wages. S&P estimates that the U.S. economy would grow annually by an additional half a percentage point -or $105 billion - over the next five years, if the average the American worker had completed just one more year of school.<br /> <br /> By contrast, S&P concludes, heavy taxes that would be meant to reduce inequality could remove incentives for people to work and cause businesses to hire fewer employees because of the costs involved.<br /> <br /> The report builds on data from the Congressional Budget Office, the International Monetary Fund and academic economists to explain how income disparities can hurt growth. Many consumers tend to become more dependent on debt to continue spending, thereby worsening the boom-bust cycle. Or they curb their spending, and growth improves only modestly, as it has during the current recovery.<br /> <br /> Tax data tracked as part of the World Top Incomes Database project reveal just how much the economic chasm has expanded.<br /> <br /> An American in the top 1 percent of earners had an average income of $1.3 million in 2012, the most recent year for which data are available. Average income jumps to $30.8 million for the top 0.01 percent.<br /> <br /> Adjusted for inflation, the top 0.01 percent's average earnings have jumped by a factor of seven since 1913. For the bottom 90 percent of Americans, average incomes after inflation have grown by a factor of just three since 1917 and have declined for the past 13 years.<br /> <br /> Yet not all economists agree on how much, or even whether, the wealth gap slows growth.<br /> <br /> Harvard University economist Greg Mankiw wrote in a 2013 paper that "the evidence is that most of the very wealthy get that way by making substantial economic contributions, not by gaming the system."<br /> <br /> But S&P challenges the notion that a rising tide automatically will lift all boats:<br /> <br /> "A lifeboat carrying a few, surrounded by many treading water, risks capsizing," it argues.
© Copyright 2015 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Judge denies motions to move, delay Tsarnaev trial
Lawyers for Boston Marathon bombing suspect Dzhokhar Tsarnaev asked a federal appeals court Wednesday to overturn a judge's decision to not move his upcoming trial out of state.
10:02PM ( 6 months ago )
High court to adopt electronic filing of cases
The Supreme Court is belatedly developing an electronic filing system similar to those used in courts around the country, Chief Justice John Roberts said Wednesday in his annual end-of-year report.
7:57PM ( 6 months ago )
Storm brings snow, cold to West for New Year's
A blustery winter storm dumped snow and ice across the West on Wednesday, making driving treacherous in the mountains from California to the Rockies and forcing residents and party-goers in some usually sun-soaked cities to bundle up for a frosty New Year's.
5:19PM ( 6 months ago )
U.S. News
State DOT awards $48M contract for NE Ga. road project
The state Department of Transportation has awarded a $47.8 million contract for nine miles of work on a northeast Georgia road.
9:37AM ( 6 months ago )
Business News
Grass fire impacts rush hour traffic on 985
Rush hour traffic on I-985 was slowed by a grass fire Wednesay afternoon with one lane closed while firefighters fought the blaze.
10:19PM ( 6 months ago )
Hall County conviction, sentencing to be reviewed by SCOGA
The State Supreme Court has agreed to hear the appeal of a Hall County man when they reconvene in January.
2:37PM ( 6 months ago )
Maysville man dies from Banks County wreck
The Georgia State Patrol reports that alcohol and/or drugs were factors a single-vehicle wreck that claimed the life of a Maysville man in Banks County Tuesday night.
11:07AM ( 6 months ago )
Local/State News
Democrats consider distance from Jefferson, Jackson
CONCORD, N.H. (AP) — Democratic parties in the three states that start the presidential nominating process are exploring ending their association with two former White House occupants: Thomas Jefferso...
4:41PM ( 1 hour ago )
Congress heads off on vacation, putting off messy decisions
WASHINGTON (AP) — Congress is heading out for a five-week summer recess in anything but a cheerful vacation mood, leaving behind a pile of unfinished business that all but guarantees a painful fall.No...
4:38PM ( 1 hour ago )
Afghan Taliban confirm Mullah Omar's death, choose successor
KABUL, Afghanistan (AP) — The Taliban confirmed the death of longtime leader Mullah Mohammad Omar and appointed his successor Thursday, as a new round of peace talks was indefinitely postponed amid co...
4:19PM ( 1 hour ago )
Rescuers hope for 'best-case scenario' for boys lost at sea
WEST PALM BEACH, Fla. (AP) — Mustering hope for a "best-case scenario" in the face of countless unknowns, search crews braced for a seventh day and night at sea Thursday in the hunt for two teenagers...
3:46PM ( 2 hours ago )
3.3 million dry erase boards recalled after due to cut risk
NEW YORK (AP) — Acco Brands Corp. is recalling about 3.3 million wall-mounted dry erase boards after customers said they cut their hands, fingers and feet while removing the board from a wall.The U.S....
12:33PM ( 5 hours ago )