Trump's economic agenda would deepen an already pressing social crisis

Massive US income disparities and the anger associated with it helped propel Donald Trump into office.

Trump’s campaign speeches were littered with attacks on Wall Street bankers and hedge fund managers, who the candidate accused of robbing workers of the American dream.

Yet rather than kicking off his economic agenda with worker-friendly policies that bolster poor- and middle-class Americans, like a fiscal stimulus or infrastructure spending, Trump is pushing for policies that, if implemented, would deepen an already destabilizing gap between the rich and poor that have polarised American politics to the point of paralysis.

Set aside the president’s budget which, while draconian in its attacks on medical care and other social services for the neediest Americans is downright cruel. His tax proposals could have even longer-lasting implications.

“Trump tax policies, by giving large tax cuts to the wealthy would further exacerbate inequality,” Emanuel Saez, professor economics at the University of California, Berkeley and a leading expert on inequality told Business Insider.

“Historically, progressive income and inheritance taxation have been the more powerful tools to curb income and wealth concentration. The US economy grew fast from the 1933 to 1979 when top income tax rates were above 70%.”

So is there a link between inequality and financial crises, given that the US rich-poor gap hit depression-era levels just before the Great Recession hit?

“There is a connection in the sense that deregulated finance tends to generate large bubbles and when these bubbles crash, they take down the economy with it,” Saez said. “Hence, it is critical to keep strong financial regulations such as Dodd-Frank. Trump and the Republicans want to do the reverse unfortunately.

“Wealth concentration has kept increasing into 2014, the latest year available. Stock market gains typically increase wealth concentration while housing gains lower it as housing is more equally distributed but the stock market effect seems to dominate,” Saez said.

Here are two startling charts from the Washington Center for Equitable Growth, of which Saez is a member, that really capture the magnitude of the inequality trend, and just how much it has accelerated over time.

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