Economists: Income Inequality Hurts U.S. Economy

December 24th, 2013
in econ_news, syndication

Econintersect:  An Associated Press survey of more than three dozen economists finds that a majority think that growing income inequality in the U.S. is bad for the economy.  The reasoning of the respondents is that the more money flowing to the very top results in less money being spent for consumption because after a certain point the "man who has everything" doesn''t need anything more.  The consumer drive about 70% of the U.S. economy and 80% or more of consumers are contributing less and less because of continuing divergence of lower incomes from the increases going to very highest.

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Follow up:

The survey also reported the following assessments:

  • The economy doesn't need the continuing QE.
  • Yellen will be dovish and focus more on employment that inflation.
  • Obamacare will have little impact on the job market (60%).  About 40% said it would cost jobs.
  • The U.S. stock market is not in a bubble.
  • Europe will keep growing at a tepid rate and avoid recession in 2014.
  • European inflation will reach 2% by 2016 at the earliest.
  • U.S. Inflation will remain low, below 2% for at least two years.

Note: The survey was taken before the Fed announce the taper last week and 3/4 of the respondents indicated they did not expect a taper.  Does this reduce the credibility of the other opinions expressed?  Are economists as a group cursed with respect to making predictions?

Before you answer the questions above, most of the respondents picked January or February rather than December for the first taper.  In the grand scheme of things the difference of taper starting in any of those three months rather than the other two is negligible.

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