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Income inequality hounds U.S.

The U.S. hundred-dollar bill

The U.S. hundred-dollar bill Photo Credit: Getty Images

Daniel Akst is a member of the Newsday editorial board.

Whatever you think of the agreement between President Barack Obama and congressional Republicans to extend the Bush-era tax cuts, it's important not to overlook what the deal says about inequality in America.

What it says is that the gap between the rich and the rest of us will continue to grow, and that the government isn't going to do much about it. Americans may disagree about whether this is so bad, but it's hard to deny the message.

Consider what just happened. To gain benefits for the jobless and tax cuts for the middle-class, Obama in essence had to buy off the rich with tax cuts for the highest-earning Americans and for large inheritances - cuts we can ill-afford given mounting federal deficits and the paltry stimulus we can expect from money left in the hands of those who already have plenty.

Do people support tax cuts for the rich when deficits are rising and millions can't afford health insurance? No. A recent Bloomberg poll found that just 35 percent of respondents favored extending income-tax cuts for the highest earners.

The ability of a determined Republican minority to push them through nonetheless says a lot about the growing power of the richest Americans. Remember too that recent Supreme Court decisions have struck down some limits on political spending. Whether you see this as a free speech issue or not, the rulings will amplify the power of money in politics, likely enhancing the electoral prospects of corporate-backed candidates who oppose government action to ameliorate the inequality problem.

And it is a problem. For complex reasons, income inequality in this country has been growing since the late 1970s. New technologies have eliminated many well-paid blue-collar jobs while producing fabulous rewards for the well-educated. Those well-educated people tend to marry one another, too, and both spouses often keep working, amplifying their income advantages even if they are only solidly bourgeois rather than super-rich.

Also playing a role is the advent of low-cost manufacturing in countries such as China. And unions have all but vanished from the private sector, perhaps in part because they inadvertently helped stifle the industries (such as automaking and steel) in which they were most prevalent. The cost of health care and college has skyrocketed, the former soaking up middle-class income gains and the latter dampening class mobility.

The recession and its aftermath have made things worse. Unemployment among college graduates is around 5 percent. For high school graduates, it's 10 percent. And for high school dropouts, it's 15 percent.

The middle-class has gained a bit in the past 30 years--but the richest Americans have seen their income and assets soar. Almost 25 percent of total income went to the top 1 percent of earners in 2007 - up from just 9 percent in 1976.

Does this matter? Won't this trend reverse itself soon? The answers are yes and no.

It matters because extremely unequal societies are unhealthy societies. They are less stable. There is less sense of shared burdens and rewards. Jealousy grows, along with economic stress. In a study of America's 100 biggest counties, the ones where inequality grew fastest also had the biggest increase in bankruptcies and the fastest-growing divorce rate.

The inequality trend won't soon reverse. One reason is that the forces propelling it are so powerful. Another is that the growing political influence of wealth, along with the government's mounting debts, will make it hard to adopt policies that could make society more equal, at least after taxes.

If you doubt that, just look at what's going on in Washington.

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