Wealth and Poverty

What's the Government's Role?

The U.S. government is already working to address income inequality and poverty. Some people believe that the government should be doing more, some believe it should be doing less, and some feel that the current role is about right.

Here are some of the policies that the government has in place to address income inequality and assist poor households:

EconoTalk

A progressive income tax levies higher taxes on higher incomes. Typically, marginal income is taxed at marginally higher rates. For example, income up to $20,000 may be taxed at 15 percent, income between $20,000 and $35,000 at 20 percent, and so on. (If only the tax code were that simple.) In other words, the higher rate does not apply to all income, but rather to the marginal income.

All of that said, the United States generally provides its citizens with a lower level of government support for health and human services than most developed European nations. This is true for services that benefit the middle class as well as those for the poor. Most European nations provide, insure, or mandate higher levels of health care, childcare, employee benefits, and job security. They also generally levy higher taxes on their citizens, particularly on the wealthiest, to finance these programs.

In Hey, Big Spender! The Federal Budget and Fiscal Policy and Economic Growth, we will examine the role of the federal government in managing the economy. The government's role in addressing income inequality falls into the political realm, and this is not about political economics. Very few people, regardless of their political persuasion, want to see their fellow human beings in poverty. However, there is no political consensus on further addressing the effects of poverty in the United States.

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Excerpted from The Complete Idiot's Guide to Economics © 2003 by Tom Gorman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book direct from the publisher, visit the Penguin USA website or call 1-800-253-6476. You can also purchase this book at Amazon.com and Barnes & Noble.

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