Greenspan: Income Inequality 'Most Dangerous' Trend in US

Tuesday, 25 Feb 2014 03:18 PM

By Dan Weil

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"I consider income inequality the most dangerous part of what’s going on in the United States," former Federal Reserve Chairman Alan Greenspan said at the National Association of Business Economists conference.

"You can see the deteriorating impact of that on our current political system, and you cannot talk about politics without talking about its impact on the economy."

Greenspan also calls for immigration reform, where he sees a connection to the income inequality issue, according to The Fiscal Times. The economy needs a boost in immigration, especially among high-skilled workers, he says.

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

"We cannot manage to staff our very complex, highly sophisticated capital structure with what’s coming out of our high schools," Greenspan said Monday. "If we’re not going to educate our kids, bring in other people who want to become Americans. Let them in here, and let them use their skills."

The current restraints on immigration for skilled workers act in essence as a wage subsidy for the economy's big money makers, exacerbating the unequal income distribution, Greenspan says.

Others agree with Greenspan on income inequality.

The head of the International Monetary Fund also warned that rising inequality can damage economic growth and social ties, and may also cause political instability, Reuters reported.

"Rising inequality and economic exclusion can have pernicious effects,"said IMF Managing Director Christine Lagarde, according to prepared remarks, pointing to IMF research that shows income gaps can lead to slower and less sustainable growth.

"In the years ahead, it will no longer be enough to look simply at economic growth," she said. "We will need to ask if this growth is inclusive."

Meanwhile, a new study from the Brookings Institution shows that income inequality is much greater in cities like San Francisco with high-flying economies than in more sluggish ones like Wichita, Kan.

"These more equal cities—they’re not home to the sectors driving economic growth, like technology and finance," Alan Berube, the report's author, told The New York Times. "These are places that are home to sectors like transportation, logistics, warehousing."

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

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