what has happened to economic inequality in the united states in the past 40 years?

We asked ten scholars from the Brookings Economic Studies programme to share what they thought was the well-nigh important story in economics over the last 10 years. Here'southward what they told the states:

Low involvement rates have left the Fed backed into a corner

David Wessel

One of the biggest economical stories of the 2010s is involvement rates and how depression they are.  At the beginning of the decade, the Congressional Budget Office forecast that the yield on 10-yr Treasury bonds would average around five% during the 2010s. Today, those rates are well below two%, and CBO projects they'll hover around 3% for the next decade. This reflects a far-reaching change in the U.South. economy and, indeed, the world economic system: There has been a steady, sustained pass up in what'south sometimes called "the natural rate of involvement," the 1 expected to prevail when the economy is healthy and inflation depression and stable.  This makes it possible for the U.S. government to shoulder a larger federal debt and reduces cost of borrowing for everything from home mortgages to public investments that could raise living standards in the future. But it besides makes the Federal Reserve's job tougher: With interest rates so much closer to zero than has been the case in the past, the Fed has less room to cut rates to fight the next recession.

Aaron Klein

Robbing the poor to give to the rich

Income inequality's connected growth in the post fiscal crises American economy is the about significant economic development of the 2010s. Not too appreciated is the growing role America'due south payment system has played as a silent, reverse Robin Hood. What I mean is: The payment system has transferred hundreds of billions of dollars over this decade from the poor to the rich. How? From the explosion of tax free credit card rewards bachelor but to the well healed, to the incredible costs of a slow payment organization born by those working paycheck to paycheck in overdraft fees, to the ascent of payday loans.

Isabel Sawhill

The cost of the gratis market was high for some

The flow from 2010 to 2020 saw the longest economical recovery on tape. The bad news is that we haven't used this good economic news to make needed public investments, reduce the national debt, or address the needs of those left backside—the group that President Trump called "the forgotten Americans." One result is that a number of economists are now challenging the intellectual foundations of the kind of free market philosophy that has permeated our political soapbox, led to unaffordable and poorly designed tax cuts, and ever-growing inequality.

Christen Linke Young

Matthew Fiedler

The Affordable Care Deed sharply reduced the uninsured charge per unit

Since the Affordable Care Human activity (ACA) was enacted in 2010, the uninsured rate has fallen past more than 40 percent, by far the largest decline since the years after the cosmos of Medicare and Medicaid. That refuse is nigh entirely due to provisions in the ACA that created subsidies for people buying coverage on their own, expanded Medicaid, and immune young adults to remain on a parent's plan through age 26, too as the law's now-repealed individual mandate.

Despite these successes, the law has been the subject of unceasing partisan conflict and legal challenges, which continue every bit the decade comes to a close. Repealing the ACA – either legislatively or through the courts – would contrary the police force's gains. And virtually xxx million people (9% of Americans) remain uninsured, so there is more work to practise to achieve truly universal coverage. But, for at present at least, the constabulary has accomplished a cracking deal.

Matthew Fiedler

Christen Linke Young

Growth in health care spending was unusually low

One underappreciated story of this decade has been the unusually slow growth in wellness care spending. From 2010 through 2018, wellness intendance spending rose but modestly every bit a share of the economy, from 17.3 percent to 17.7 percent. For comparing, the typical eight-twelvemonth period during over the preceding half-century saw an increase 5 times larger. This consequence is particularly striking in calorie-free of the fact that the large expansion in health insurance coverage during this period.

Why has health care spending growth been low? Policy changes—particularly the Affordable Care Act's reductions in Medicare provider payment rates—played a role, merely are not the whole story. Notably, information technology looks increasingly plausible that the underlying pace of wellness care spending growth has—in fits and starts—been drifting lower over the past few decades, though the reasons for that are unclear.

Slower health care cost growth has eased pressure on regime and household budgets. But the drinking glass is merely half full. Even with a decade of slower growth, there is considerable evidence that the prices Americans pay for health care services are higher than they need to be and that we receive large amounts of depression-value intendance. Then while this decade has been a welcome break from the past, policymakers accept a long road alee of them.

William Gale

Taxing the rich has taken center stage

Over the by x years, concerns about long-term increases in income and wealth inequality accept get political catalysts. Both trends accept been striking for some time, notwithstanding, if you look beyond the immediate past decade: The 400 richest Americans owned 0.93 per centum of wealth in 1982, rise to 3.26 percent in 2018; and the top 1 percent received 7.4 percentage of afterwards-taxation, after-transfer income in 1979 versus 12.5 percent of income in 2018. Policy is i of many factors that affected these trends. For instance, despite the massive heave in resource at the top, the share of income that the rich paid in taxes did not ascent. The top 1 percentage paid 35% pct of their income in taxes in 1979 compared to 34% percentage in 2013.  Yet in a progressive tax system, taxes as a share of income should rise when income rises. Increasing inequality reduces opportunity, mobility, and economic performance, and attacks autonomous principles. Over the past decade, proposals to raise taxes on the well-to-exercise have received increasingly more attention. These proposals—including taxing wealth directly, closing income revenue enhancement loopholes, and taxing capital gains as they accumulate—take gained traction fifty-fifty in the policy mainstream merely would have been too radical to seriously discuss 10 years ago. The question for the side by side decade is whether the urgency and energy backside taxing the wealthy brings almost any meaningful policy changes.

Louise Sheiner

Dismal news on life expectancy

After increasing steadily for decades, life expectancy began falling in 2014, fueled by increases in drug overdoses, alcoholism, and suicides amongst working-historic period Americans.  The surge in drug overdoses is at to the lowest degree partly attributable to the introduction and widespread adoption of prescription opioid pain relievers in the late 1990s, only many believe that these "deaths of despair" too reflect increasing stress and lack of opportunity for many Americans. Testify as well suggests that the gap in life expectancy across income levels has been widening sharply—with those with at the top of the income distribution gaining many more years of life than those at the bottom.  These grim statistics should be a telephone call to action—both to further understand the underlying causes of the rising mortality, and to take action to accost them.

Lauren Bauer

All school and no work becoming the norm for American teens

1 of the biggest economic stories from the past (two) decades is how teens and young adults are spending their time. From 2000 to 2018, the labor forcefulness participation rate of sixteen- to 24-year-olds declined 10.ii percentage points during the bookish twelvemonth. Our research shows that the reasons for this turn down include increasing school enrollment, a decreasing propensity to juggle work and school, and spending more fourth dimension on teaching-related activities. If enhanced time spent on didactics contributes to lower loftier school dropout rates and increasing degree completion rates, and then this investment in homo uppercase volition likely contribute to higher labor strength participation and wages for these youth for decades to come, offsetting temporary losses in aggregate labor force participation that comes from fewer youth working today.

Martin Neil Baily

The promised productivity surge has not materialized

Productivity growth is an of import driver of economic growth and it has been very slow in recent years. In that location was optimism that tax cuts and business-friendly policies would issue in a surge in growth, but that has not happened. Labor productivity in the non-farm business sector grew at just a 1.4 per centum annual rate from the kickoff quarter of 2017 through the third quarter of 2019. Moreover, business investment, an important contributor to productivity, has also been weak. With a business cycle boom and the promise of breakthrough technologies, like robots and bogus intelligence, it is disappointing that productivity performance remains weak. Unless things modify, soaring federal upkeep deficits and weakness in worker earnings will continue. The side by side president will face daunting economic challenges.

Stephanie Aaronson

Demographics became a headwind for US economical activity

The oldest members of the baby boom accomplice, the large accomplice that was born between 1946 and 1964, reached full social security retirement age at the showtime of this decade. The aging of the babe boomers has put downward pressure on labor force participation, which now stands at about 63 percent, downward from just under 65 per centum at the start of 2010, a significant reduction in the productive capacity of the economy. In add-on, the crumbling of the population could be contributing to the well-documented reduction in dynamism in the US economy as measured, for instance, by lower productivity growth and reduced labor marketplace fluidity. Slower population growth can reduce the rate of concern formation and an older workforce tends to be a less mobile workforce.

But the demographic headwinds facing the U.s. go across the crumbling of the baby boomers. Fertility rates have fallen dramatically over the by decade, from almost 1.9 births per woman in 2010 to less than 1.eight in 2017. To some extent, this decline in fertility is practiced news, because information technology partly reflects a steep decline in births to teenage mothers, a public policy priority. Simply the lower fertility charge per unit has important long-run macroeconomic consequences. Looking forrard 20 to thirty years, lower fertility now means slower labor force growth and fewer workers per retiree, both of which will make it more than difficult for the US to meet its fiscal responsibilities, including providing Social Security and Medicare for the elderly and investing in education and health for the young, even if the cohort is relatively small.

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Source: https://www.brookings.edu/blog/up-front/2019/12/16/what-was-the-big-story-in-economics-over-the-last-decade/