The trouble with blaming economic inequality for many of our economic ills is that the theory doesn¡¯t fit the facts. One theory is that growing inequality caused many low- and middle-income Americans to over-borrow so they could keep up with wealthier Americans.
This borrowing allegedly led to the credit bubble and the Great Recession. The recovery has been plodding ¡ª the theory continues ¡ª because so many strapped households don¡¯t earn enough to dig their way out of debt. A skewed income distribution is at the core of our problems.
It¡¯s a seductive argument because hardly anyone champions today¡¯s extreme inequality. But that doesn¡¯t settle the issue. As I pointed out in a recent column, blaming inequality for the credit bubble fails a rudimentary test of logic.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.