Inequality Would Widen if U.S. Policies Spur Sustained Inflation
By Jon Hilsenrath
Federal Reserve and Biden administration officials say economic inequality is bad and they aim their policies in part at helping to reduce it. In the short run, at least, those policies might be widening inequality, not shrinking it….A fall in inflation-adjusted wages hits low- and moderate-income households especially hard, because they dedicate a larger share of their paychecks to covering daily living costs. The numbers might be temporarily skewed, but if inflation persists and is fueled by the Fed or the Biden administration’s policies, it could raise questions about the costs and benefits of those policies for working Americans. Economists describe inflation as a regressive tax—meaning it hits low-income workers hardest. “I don’t see anything good happening from an economic inequality perspective,” said Karen Petrou, a financial analyst and author of “Engine of Inequality,” a critique of Fed policy. “Most American households are living hand to mouth.” Ms. Petrou said a decade of the Fed’s low-interest-rate policies have mostly helped the wealthy by pushing stocks higher. That effect has accelerated recently. While inflation-adjusted wages fell in April from a year earlier, the Dow Jones Industrial Average was up more than 40% over the same period. The wealthiest 10% of U.S. households own 88.5% of stocks, according to Fed data.