Income Inequality : Clarifying the Real Problem

This is an excellent summary article, which does a thorough job of articulating both the conservative and liberal arguments surrounding the issue of increasing income inequality.  Of course, the NYTimes is hardly non-partisan, but the author of this article clearly takes the stance that 'to knock down a strong enemy is more conclusive than to knock down a weak one,' and does a fair job of representing the conservative view point.  The main points are:

1) Liberals maintain that increasing income inequality is undermining the principle of opportunity equality which is the foundation of American society.

2) Conservatives counter with the argument of 'hidden wealth,' meaning that, although income inequality may be increasing, the percentage of disposable income remains the same, because the cost of living is remaining steady or decreasing.  Also, regardless of income, the American populace is better off economically than they were 50 years ago.  It is particularly hard to dispute this last point, especially in light of the vast extension of the welfare system.

3) David Autor, economist at MIT, replies for the Times:  Even IF disposable income percentages remain the same, the ultimate problem is not with income inequality itself, but with opportunity inequality.   In effect, politics sort of misses the point.  Middle to high income supports strong households and the ability to educate your children well.  Good education and strong capitalistic values, such as hard work and ambition, lead to success.  As top universities draw increasingly from upper-middle class families who have the resources and high parental caliber to produce promising students, low income children, who have neither, fall behind.  In essence, income inequality is not the real problem; its just the first step leading to the problem.

Such distinctions are paramount, and the real meat of the argument is often lost in polarized policy debates.

Note: The original link is no longer available.  See a longer explanation by David Autor here.