Friday, 23 September 2011

Income Distribution in the USA

Some people are commenting on the rising disparity in wealth in the USA - in particular the fact that 23% of the country's wealth is held by 1% of it's people. It hasn't escaped notice that this statistic has occurred three times the America's history (1856, 1928 and 2007) and each time the country subsequently experienced a financial crash. This site discusses the issue. While there's some merit in what the site has to say I think the author is probably exhibiting his own bias.

It's interesting to compare the stimulus packages in Australia and the USA. In Australia the stimulus package seems to have had several components:

  • Cash payments targeted at families on low to middle incomes. The idea seems to have been that lower income earners are more likely to spend the money and so spread the stimulus. This especially assists the retail sector - a major employer.
  • Small community construction projects. The idea here seems to have been to assist the construction industry - and industry normally badly hit in an economic downturn. Small projects (e.g. children's playgrounds in parks) were selected as they could be quickly implemented.
  • A free home roof insulation program. Again this could be quickly implemented and would stimulate the construction industry. An additional benefit would be the increase in energy efficiency of the upgraded households. Unfortunately, this program became mired in controversy after the death of several workers and several fires.
  • The "Building the Education Revolution" (BER) that provided funds to schools for the construction of a new buildings (e.g. libraries, gyms, new classrooms). Again this stimulated the construction industry, although the time frames were longer.
So basically, Australia's stimulus package was directed at lower to middle income households and the construction industry. These measures, together with continuing economic growth in China due to its own stimulus packages, meant that Australia never went into recession.

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