I was thinking about this topic even before Obama showcased it in his SOTU (which I haven't listened to yet). But, here goes:
I don't want to get into a huge ideological argument about redistribution of wealth or job creation. But I am curious about the widening wealth gap, particularly in this country, though this applies over most of the world.
I have no problem with a free labor market, but I am forced to wonder why rich and poor are further apart than they've been since before the Great Depression. What about the market has driven this gap? I have a couple of theories, but none ring true:
Wealth sliding up the scale is an inevitable emergent property of any free market. Money has its own gravity, and it seeks to pool. Artificial interference (income taxes, a culture of philanthropic giving, etc) is required to reverse the trend. I hope we can all agree that uncontrolled upwardly sliding wealth isn't healthy for the economy. Bill Gates needs someone to sell Windows to.
Problem with this theory: It's not an answer. It's an appeal to a mysterious force. I want to understand that mysterious force.
The emergence of India, China, Brazil, et.al. is devaluing most every job that can hop overseas, and company officers are about the only jobs that can't. (Yet.)
Problem with this theory: This would imply that people like plumbers, mechanics, doctors and nurses, people who can't be outsourced, aren't being impacted. I find that unlikely.
It's just temporary, because of the recession. Jobs at the top (and people who are independently wealthy) are disproportionately buffered from the effects.
Problem with this theory: It's got to be a factor, but I don't believe it's the whole story.
Some shift in the culture of compensation at most organizations has driven dollars upward, and the rank-and-file don't have the leverage (job-hopability) to reverse it.
Problem with this theory: I'm not sure how so many organizations all over the country could be impacted similarly, unless this is an unintended consequence of some federal regulation or tax code.
I do think it's ridiculous that a secretary can pay a higher total tax rate than her boss… that's just dumb policy. But I also don't think we need to return to 90% top marginal rate. (Even though that's what it was in the US's crazy-boom-50s.) I'm not interested in taking money away from people. I'm interested in the tweaks that need to be made to the overall system to encourage money, via the market, to find it's way to more people. Maybe that's a pipe dream. But it does seem that something is needed to keep everything sustainable. Another couple of decades like we've just been through, and the US is going to start looking like a third world country.