Inequality - Maybe not so bad?

[jz92wjaz]

If I were evaluating the health of the economy, I'd want to know consumption, productivity, income, and debt.

Despite tax rates falling for the rich, I think most people would agree that tax policy in most of the developed world is quite progressive...

http://taxfoundation.org/article/summary-latest-federal-income-tax-data

In the US, it's fairly progressive. Here's the breakdown for 2011 (federal income taxes as a percentage of income):
Top .1%: 22.82%
Top 1%: 23.5%
1-5%: 17.7%
5-10%: 12.8%
10-25%: 9.7%
25-50%: 7.0%
Bottom 50%: 3.13%

I believe this only includes income tax, and doesn't include social security, medicare, or tax credits. Above .1% it's been regressive in the past due to capital gains, with the effective rate of the most wealthy being about 16%.

Edit: Here's another link of an analysis someone put together this year.
http://pgpf.org/budget-explainer/taxes

 

[Vanadium 50]

and cuts in public services for the majority. Since the late 1970s, tax rates for the richest have fallen in 29 out of 30 countries for which data are available, said the report.

I'd be interested in what cuts in public services since the 1970's that this report is talking about. Comparing the per-capita inflation-adjusted budget for HEW in 1970 and HHS+Education in 2014, it looks like spending is up by a factor of 3.

 

[wigglywoogly]

I have doubts about the abilities of a metric like GDP, wealth or income to portray how well people are living (keeping in mind we are trying to evaluate what's 'good' and 'bad' here.)

Amartya Sen has something of an objective-list theory approach to measuring this, incorporating literacy rates, life expectancy, infant mortality rate, and so on. But also recognising that in a practical sense, things that determine a person's happiness (like 'dignity' and 'social standing') are a) highly abstract and b) relative to when and where they are.

So we have an over-mathematised theory of utility and preferences, markets and currencies, and we try to 'engineer' the economy, by altering variables with monetary policies and so on, to some point where consumption is maximised, or the optimal consumption path or whatever. Is that the 'best' thing to do? Well of course if you describe the world in terms of that model then it's the best thing to do.

But engineering it 'aint. Very fluffy stuff indeed.

 

[russ_watters]

I have doubts about the abilities of a metric like GDP, wealth or income to portray how well people are living (keeping in mind we are trying to evaluate what's 'good' and 'bad' here.)

Amartya Sen has something of an objective-list theory approach to measuring this, incorporating literacy rates, life expectancy, infant mortality rate, and so on. But also recognising that in a practical sense, things that determine a person's happiness (like 'dignity' and 'social standing') are a) highly abstract and b) relative to when and where they are.

So we have an over-mathematised theory of utility and preferences, markets and currencies, and we try to 'engineer' the economy, by altering variables with monetary policies and so on, to some point where consumption is maximised, or the optimal consumption path or whatever. Is that the 'best' thing to do? Well of course if you describe the world in terms of that model then it's the best thing to do.

But engineering it 'aint. Very fluffy stuff indeed.

Seems to me like you are contradicting yourself. You seem to be saying you don't like using complicated statistics to measure standard of living, then propose even more complicated ways of measuring standard of living (without giving us the data!). But if you have some statistics, I'll be more than happy to have a look at them.

 

[wigglywoogly]

Seems to me like you are contradicting yourself. You seem to be saying you don't like using complicated statistics to measure standard of living, then propose even more complicated ways of measuring standard of living (without giving us the data!). But if you have some statistics, I'll be more than happy to have a look at them.

No. Here's why:

I don't think there's anything 'complicated' about GDP. I just think it's a dull measure of well-being. That said, I don't think there's anything very complicated about the Human Development Index, but it's probably a better measure of well-being than GDP.

On the other hand when economists posit some kind relationship between, say, GDP and consumption, that's what I'm saying is overly complicated and damn near impossible to verify.

 

[my2cts]

MIT's Technology Review ran an article on inequality, where they argue that a) it is bad, and b) it is technologically driven, in that it raises some people's income and wealth more than others.

I see a tension in these. Suppose I could wave a magic wand, and double the income of everyone in the bottom half, and triple it for everyone in the top half. This would benefit everybody, at the cost of increasing inequality. Would this not be a good thing?

Unless real wealth is created in the process, the "top half" incurs a disadvantage after correction for inflation.

 

[Czcibor]

Good that you (Russ) posted data, so let's look at them a bit deeper:

Gains for the selected percentiles: 0,19; 0,13; 0,21; 0,38; 0,70; 0,88.
In the analysed period people in the bottom 20% got +19%, while those among top 5% +88%. During boom no one would mind (tide raising all boats worked), however, you know when those data show stagnation from around year 2000, then it starts being an issue. (not necessary a problem, but at least a perceived injustice)

Is it a problem?

It might become a problem if it leads to high level of dissatisfaction at the bottom. Not necessary a communist revolution, surge in nationalist (anti immigrant) groups can happen if people at the bottom are unhappy.
Another problem is growth opportunities. Can person at the bottom get education / start a business? (in practice) If not then their talents are going to be lost.

Also I would say, that some of inequalities are not "a problem", but "a symptom of underlying problem". For example salaries and stock options of top management. Poor corporate governance which leads to... shareholders being ripped off. Luckily shareholders do not in such bad situation because international companies are masters in international tax planning, so pay little tax, and tackling that problem would require a huge international cooperation. My point: tackling such pathologies would a bit reduce inequalities and reduce the perceived unfairness of the system which would be useful for social stability.

 

[ChiralWaltz]

I have never found giving money away to be the solution to a problem. It may make us feel good in the short run but does not work in the long run. In the US, programs are available for low income households. One has to make a certain amount to be eligible for them. The problem is that once they make more money, the programs that are available to them diminish. If I were in their shoes and I saw I was working more and getting less, I would stop working as much. It would seem by giving away benefits, in some cases, it does more harm than good and generates an appeal to be part of a lower economic group.

The issue is not even income inequality but rather some people are just really poor. Finding a way let those people bring themselves out of poverty and become self sufficient should be the focus. What happens if the wealthy class stops being able to support lower economic class after it has been ingrained in society for generations?

Education seems to be one of the key contributors in the determination of poverty. If we choose to redistribute wealth, it should be done so in the form of getting people in poverty educated. Requiring that people have a minimum level of education before being eligible for benefits could help. I do not think there should be a free benefits program without proof that the recipients are bettering themselves and striving to not be dependent.

 

[jz92wjaz]

It's unfortunate. I'm aware of a few programs that cause a person to lose thousands of dollars in assistance if they make a dollar over the limit. If people at least keep more when they make more money, you can help people get back on their feet, even if the gain is small. When their yearly income has to go up $5,000 to $10,000 just to break even in disposable income, your program has a problem. Unfortunately, with virtually every government assistance program in the US, this sort of problem exists somewhere.

This seems like it would be a bi-partisan issue to fix, and yet the problem remains and is still present in new programs.

 

[billy_joule]

USA is painted in poor light compared to other OECD nations here:

http://www.nytimes.com/2014/11/17/o...evably-gets-worse.html?ref=international&_r=0

 

[russ_watters]

USA is painted in poor light compared to other OECD nations here:

http://www.nytimes.com/2014/11/17/o...evably-gets-worse.html?ref=international&_r=0

Indeed, that article is premsied in the idea that inequality is in and of itself a bad thing. Debunking that is the entire point of this thread.

Worse, the article deceptively uses one graph that addresses the question raised in this thread (the usually false claim "the rich get richer while the poor get poorer"), but the timeframe is cherry-picked. There is one year in the past few when it happened in any significant amount and that's the year they picked as a starting point of a data snippet. Pick a year later or a year (or 2 or 3, etc.) earlier and the effect goes away mostly or completely. For example, if we start with the start of the recession in 2007, all brackets in 2013 were still below their 2007 incomes, including the richest.

 

[Czcibor]

USA is painted in poor light compared to other OECD nations here:

http://www.nytimes.com/2014/11/17/o...evably-gets-worse.html?ref=international&_r=0

If you want true, but very properly cherry picked study to show how the US has very anti-business, pro-equality policies I have one:
http://taxfoundation.org/blog/us-has-highest-corporate-income-tax-rate-oecd

;)

 

[jz92wjaz]

Food for thought. Do the poor get richer as a result of the rich getting a lot richer, or do the rich get a lot richer because they are seeing disproportionate benefits of the increased productivity of society as a whole?

The answer to this obviously has to be answered on a case by case basis, and depends on how equal you are to begin with. So, in our current economy, which is it? Is rising inequality a cause of growth or a side effect of it? Would our economy be better, the same, or worse if the lower classes received a higher rate of income growth than the wealthy did as our productivity increased?

 

[TheBiologist]

Inequality is no longer a problem, so we needn't worry about it too much. What we SHOULD be focusing on is medical science and resolving/ending wars, poverty and hunger.

 

[billy_joule]

Inequality is no longer a problem, so we needn't worry about it too much. What we SHOULD be focusing on is medical science and resolving/ending wars, poverty and hunger.

Poverty and inequality most often go hand in hand.

Inequality has been rising in many countries. The poor achieve lower education, have poorer health, higher crime & incarceration rates, lower productivity etc etc. All of which have massive long term costs on society as a whole.
http://en.wikipedia.org/wiki/Economic_inequality#Effects

 

[Vanadium 50]

Billy Joule, suppose we had a society where one day the rich doubled their wealth, and the poor did not - it stayed constant. Inequality has clearly gone up. Do you believe the problems like "poorer health, higher crime & incarceration rates, lower productivity etc etc" will suddenly become much worse?

 

[jz92wjaz]

If you double the spending money of any significantly large group of people overnight it seems to me that you risk destabilizing the economy with their new investments/purchases. Instability tends to disproportionately hurt the poor.

 

[billy_joule]

Billy Joule, suppose we had a society where one day the rich doubled their wealth, and the poor did not - it stayed constant. Inequality has clearly gone up. Do you believe the problems like "poorer health, higher crime & incarceration rates, lower productivity etc etc" will suddenly become much worse?

No.
But I'm sceptical that that situation could exist, and for reasons like the following it's becoming less likely to be possible:

The view that income inequality harms growth—or that improved equality can help sustain growth—has become more widely held in recent years (see “Equality and Efficiency” in this issue of F&D). Historically, the reverse position—that inequality is good for growth—held sway among economists.

The main reason for this shift is the increasing importance of human capital in development. When physical capital mattered most, savings and investments were key. Then it was important to have a large contingent of rich people who could save a greater proportion of their income than the poor and invest it in physical capital. But now that human capital is scarcer than machines, widespread education has become the secret to growth

http://www.imf.org/external/pubs/ft/fandd/2011/09/milanovic.htm

Put simply, I don't think the rich could double their wealth without those that provide the human capital losing out in some way. The rich do not exist in a vacuum, they cannot create wealth independently* of the wealth of the poor as the poor either produce the goods & services or consume them. Either the poor are producing more goods and their wealth is not increasing proportionally or the poor are paying more for goods with the same wealth, both result in a decline in wealth of the poor.

As an anecdote; On a professional engineers wage I won't be able to provide my future children with the same quality of life my grandfather provided his seven children and wife. He was a day labourer. Most young people of my generation will be poorer than their parents. This isn't solely due to inequality but it is partly.

 

[Pythagorean]

Billy Joule, suppose we had a society where one day the rich doubled their wealth, and the poor did not - it stayed constant. Inequality has clearly gone up. Do you believe the problems like "poorer health, higher crime & incarceration rates, lower productivity etc etc" will suddenly become much worse?

My understanding is that it's not a "sudden" thing, but that it will result in physical segregation due to home price differences, which will result in neighborhoods with a homogenous population of peoples with low socioeconomic status. And that these neighborhoods, fueled by the crime-education-poverty triangle, will make the neighborhood a smaller priority for budgeting and administrative attention. We will call them ghettos.

 

[russ_watters]

Poverty and inequality most often go hand in hand.

No they don't. Inequality and prosperity most often go hand in hand. That's what this thread is about!

Put simply, I don't think the rich could double their wealth without those that provide the human capital losing out in some way.

But that's the way it has worked for many decades.

As an anecdote; On a professional engineers wage I won't be able to provide my future children with the same quality of life my grandfather provided his seven children and wife. He was a day labourer.

That's shocking. The median PE salary in the US is $100,000. He must have been quite a day laborer!

Most young people of my generation will be poorer than their parents.

That's false. Incomes are rising over time. Most young people are/will be richer than their parents. I provided the data that proves this.

 

[jz92wjaz]

I've seen multiple reports that suggest that Millenials are less financially secure than their parents. The reports show that they have higher student debt, lower employment, and lower inflation adjusted wages. It may be partially because we spend more time in college, but a college degree has become more necessary, so jumping into the workforce out of high school is much less of an option than it was for the previous generation. People are reluctant to hire new graduates due to limited resources and their inexperience. It's not impossible, but I do believe this job market is tougher for us than it was for our parents, and we have to work harder and smarter because of the world we live in.

http://www.washingtonpost.com/busin...659b1e-aa17-11e3-9e82-8064fcd31b5b_story.html

 

[billy_joule]

No they don't. Inequality and prosperity most often go hand in hand. That's what this thread is about!

Which of these lists has more prosperous nations?

The ten most unequal nations:
Namibia
Zimbabwe
Denmark
Switzerland
United States
Gabon
Brazil
Central African Republic
Swaziland
Guatemala

The ten most equal nations:
Japan
China
Spain
South Korea
Macau
Ireland
Italy
Yemen
Finland
Australia

http://www.nber.org/papers/w15508

All tabulated here: http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth

I've never heard the word 'prosperous' used to describe many of the nations in the first list. I wouldn't conclude inequality and prosperity go hand in hand.

That's shocking. The median PE salary in the US is $100,000. He must have been quite a day laborer!

He had a 6 bedroom house in a nice neighbourhood. A comparable house would cost me over 1mil, let alone supporting 7 kids on one income! The cost of living and housing prices has outstripped incomes year on year where I live.

That's false. Incomes are rising over time. Most young people are/will be richer than their parents. I provided the data that proves this.

Yes, incomes are rising but by poorer I mean less wealth.
http://money.cnn.com/2014/09/22/news/economy/gen-x-poorer-than-parents-pew-study/

 

[Vanadium 50]

I've never heard the word 'prosperous' used to describe many of the nations in the first list. I wouldn't conclude inequality and prosperity go hand in hand.

Switzerland? Denmark?

Let's look at historical data. In 1982, China had a Gini coefficient of 0.29 and India one of 0.32. Today Japan has the lowest in the world at 0.574. By your argument, in 1982 these should have been the most prosperous countries in the world. Instead, they had poverty rates of 96% and 86% respectively. Today their poverty rates are lower - much lower in the case of China - and their inequality rates are much higher: their Gini coefficients are twice what they used to be. If you look at the global trends over the last 30 years or so, there has been a trend towards decreasing poverty and increasing inequality.

The argument that reducing inequality will reduce poverty is simply not supported by the data. The argument could be made (and has been made) that reducing inequality is a good in and of itself, but again, the evidence is that this will increase poverty. How much worse are we willing to make the lives of the poor, in order to punish the rich?

A very interesting word was used earlier - "disruption". Henry Ford disrupted the world, and by the way, made a fortune doing it. This was not good for buggy-whip makers.

 

[russ_watters]

I've seen multiple reports that suggest that Millenials are less financially secure than their parents. The reports show that they have higher student debt, lower employment, and lower inflation adjusted wages. It may be partially because we spend more time in college, but a college degree has become more necessary, so jumping into the workforce out of high school is much less of an option than it was for the previous generation. People are reluctant to hire new graduates due to limited resources and their inexperience. It's not impossible, but I do believe this job market is tougher for us than it was for our parents, and we have to work harder and smarter because of the world we live in.

http://www.washingtonpost.com/busin...659b1e-aa17-11e3-9e82-8064fcd31b5b_story.html

Second sentence in the article:

They may be the first cohort to end up worse off than their parents.

"May". It hasn't happened yet. Most of the issue for millenials is that many came of age at the start of the Great Recession. So they are off to a bad start. Only time will tell if their situation is to remain bad, but lately the economy has been growing quickly and job numbers improving.

And, as the quote says: if it does happen, it would be the first time ever. So my point is not impacted but you would have to make an argument for what/why the change. Student debt is a potentially viable answer and I do think it is a problem that needs to be fixed, but a large part of that problem is due to the slow start millenials got due to the recession.

 

[russ_watters]

Which of these lists has more prosperous nations?

I've never heard the word 'prosperous' used to describe many of the nations in the first list. I wouldn't conclude inequality and prosperity go hand in hand.

That's an invalid way to do the analysis. Different nations with vastly different structures may have vastly different inequalities regardless of if they are rich or poor. What we're talking about is an all else being equal situation: tracking one country (usually, the US) through time. So again, the way it has worked is that when the economy rises, inequality rises and when the economy falls inequality falls.

"Inequality" has been an issue over the last year or two in the US because it is rising in the US. That's why we're having this discussion. It is rising because the economy is growing. Prior to that, during the Great Recession, few people talked about inequality because it dropped when the economy dropped.

He had a 6 bedroom house in a nice neighbourhood. A comparable house would cost me over 1mil, let alone supporting 7 kids on one income!

Well again, good for him -- but that situation was not typical.

The cost of living and housing prices has outstripped incomes year on year where I live.

That situation is not typical for the US. The statistics I provided are adjusted for inflation -- cost of living. Housing prices had a wild bubble 10 years ago, but that bubble burst and housing prices are no longer out of whack with their historical trend.
http://www.jparsons.net/housingbubble/

Also, 7 kids? That's not typical either. Family sizes have decreased over time. So given that you should be making a ton more money and have a smaller family than your father, I see no reason why you shouldn't have a substantially better standard of living. Again, individuals can vary, but that is the norm in the US.

Yes, incomes are rising but by poorer I mean less wealth.
http://money.cnn.com/2014/09/22/news/economy/gen-x-poorer-than-parents-pew-study/

No you don't. We've been talking about incomes throughout this entire conversation. You were correct to be talking about gini coefficient (though you didn't do it right) -- which is a measure of income equality. Standard of living is not well tied to wealth because wealth isn't what you use to make your house and car payments and buy groceries -- income is.

 

[russ_watters]

The argument that reducing inequality will reduce poverty is simply not supported by the data. The argument could be made (and has been made) that reducing inequality is a good in and of itself, but again, the evidence is that this will increase poverty. How much worse are we willing to make the lives of the poor, in order to punish the rich?

Well, there is another school of thought and it may explain some of the differences between Western countries. The thought goes like this:

The US has become a very rich country and our prosperity continues to increase. But there are some people who remain poor/left behind. What if we chose to reduce the overall prosperity of the country by taking some of the money from the upper half and giving it to those who are still in poverty? That's part of the thought process behind Greg's "guaranteed national income" thread. The questions are whether that is an acceptable trade-off and whether there will be any unintended consequences.

But other western countries are already doing this in part: socialized medicine has the same effect as a guaranteed national income. Let's say the value of the government provided insurance is $500 a month. That's $500 a month given to every citizen and paid for via the taxes of those in the upper level. It works exactly the same, it is just smaller.

 

[Czcibor]

Put simply, I don't think the rich could double their wealth without those that provide the human capital losing out in some way. The rich do not exist in a vacuum, they cannot create wealth independently* of the wealth of the poor as the poor either produce the goods & services or consume them. Either the poor are producing more goods and their wealth is not increasing proportionally or the poor are paying more for goods with the same wealth, both result in a decline in wealth of the poor.

I think that what you just describe is called in economics d zero sum fallacy:
http://books.google.pl/books?id=c0m...ir_esc=y#v=onepage&q=zero sum fallacy&f=false

I mean economics is not a zero sum game.

 

[enorbet]

Unless I'm mistaken I have not seen Income figures adjusted here vs/ cost of living. Also little attention has been paid to the fact that nowhere does Laissez Faire Capitalism exist. Studies from Princeton and Northwestern have declared the US officially an Oligarchy and with good reason. Example - The Koch family has huge influence to create laws that benefit their bottom line which is rather understandable. All of us would likely do the same. However they also create laws that reduce the wealth and power of anyone under them and stop others that would be advantageous to lower classes, even if that short term gain may create a less good future for everyone, including themselves, in the long run. That is the nature of unbridled greed. It is not logical. It is whimsical.

Regarding cost of living and "the American Dream" - One of the most profound bits of information to which I have ever been exposed was contained in a Historical News Documentary Series in which documented history was accompanied by interviews with people who had first hand accounts as they were involved in the events. I thought the show's name was "The 20th Century" but I'm not certain that is accurate. It was a few years ago that I saw the episode which I will quote and which I remember exceedingly clearly because it impacted me so strongly.

The particular episode to which I refer was about the Market Crash of 1929. One lady they interviewed was introduced and her story was told by the commentator and by direct interview. She was born in a rural community in Upstate New York and attended a one room schoolhouse (all grades taught simultaneously) from which she did not graduate. Recruiters from Bell offered many jobs for telephone operators and she and a friend responded. They both subsequently moved to New York City and became operators at the switchboard, and for a woman aged 18 years in the late 1920s without a high school diploma they were paid on a scale commensurate with the economy as it was.

The reason such a low level job holder was interviewed is that she did have sufficient discretionary income to buy stock on margin, one of the major factors cited for causing the crash. The level of her discretionary income (and remember her social/educational status) should blow your mind. By the middle of the 4th day of the 1st week of each month, ALL her monthly bills were paid ! 0_0

Calculate your own discretionary proportion in whichever way you prefer - how much you would have to be making for all your bills to be paid leaving you with over 80% discretionary dollars, or how low your bills would have to be for them all to be paid each month by the middle of the 4th day, roughly 100 years later.

Frankly I care little what numbers and graphs are shown here if such a loss in personal power is not addressed. The way I see this is that in the most elementary and meaningful ways this supports that the rich indeed do get richer and the poor get poorer. Never mind that it is also true that the poor don't have potential access to the political power that so affects their lives, income and personal power. This is an actual documented event even sometimes quoted by those in favor of inequality "because the poor don't know how to manage wealth".

FWIW I am decidedly not a bleeding heart liberal and I don't mistake "equal under the law" for "equal in all things". I do think society as a whole is diminished in uncountable ways by forces that create and maintain a horizontal society. I further maintain that we are coasting on the vertical society that originally made this country great, and drifting way off course.

 

[jz92wjaz]

I consider myself to be fairly fiscally conservative. High and rising income inequality is a change in our economy that I find concerning, and at very least worth looking at critically to be sure that it's not negatively affecting our country.

 

[russ_watters]

Unless I'm mistaken I have not seen Income figures adjusted here vs/ cost of living.

You are quite mistaken. We are only dealing in cost of living adjusted income. That question has been asked and answered many times in this thread, which makes it curious that you could be wrong about it.

Also little attention has been paid to the fact that nowhere does Laissez Faire Capitalism exist.

No one has claimed it has, so I don't know why we would be discussing that.

Example - The Koch family has huge influence...

Regardless of how true or not that statement is, it isn't relevant: the increases in bottem-end incomes that we are discussing are happening despite that supposed influence.

She was born in a rural community in Upstate New York and attended a one room schoolhouse (all grades taught simultaneously) from which she did not graduate... The level of her discretionary income (and remember her social/educational status) should blow your mind. By the middle of the 4th day of the 1st week of each month, ALL her monthly bills were paid !

Having no idea what her expenses were, I have no idea if that should blow my mind. At age 18, I was still living with my parents and all my bills were "paid" on the first day of the month, leaving the rest of the money I earned as "discretionary" income!

The way I see this is that in the most elementary and meaningful ways this supports that the rich indeed do get richer and the poor get poorer.

Unless they told you exactly how she was living, all you are doing here is guessing. That's completely meaningless.

 

[russ_watters]

I consider myself to be fairly fiscally conservative. High and rising income inequality is a change in our economy that I find concerning, and at very least worth looking at critically to be sure that it's not negatively affecting our country.

When has income inequality done anything but rise?
[that's a loaded question because it has, at times, fallen...]

 

[jz92wjaz]

When I was still single, I never footed the full monthly rent or utility bill because I lived at home or with roommates. Over half of my income went to savings, and the rest went to necessities and fun.

When has income inequality done anything but rise?
[that's a loaded question because it has, at times, fallen...]

Not sure what you're getting at. In my lifetime it's been a fairly constant upward trend. There was a downward trend after the great depression. It moved out of the high region in the early 1940s and remained low through the 1970s, when it started going up again. It was in the mid-range in the 90s, and now it's back to being high.

 

[russ_watters]

Not sure what you're getting at. In my lifetime it's been a fairly constant upward trend.

That was my point: it has been fairly consistently rising as the economy grows, so the rise in and of itself is not necessarily a bad thing.

 

[jz92wjaz]

The economy has also grown when it's gone down, so rising inequality isn't necessarily a good thing either. As the US recovered from the great depression, income inequality went down.

 

[russ_watters]

The economy has also grown when it's gone down...

That is not typically true. It went down during the Great Recession, for example.

As the US recovered from the great depression, income inequality went down.

Typically, the Great Depression is defined as the years 1929 - 1939, though it could also be defined with a couple of years of Depression in the beginningn followed by a couple of years of recession in 1938. Most of the drop in the Gini happened during the downturn years (most actually during the 1938-1939 period):

In any case, following the stock market crash and depression, a lot of laws got changed to try to prevent the bubble and crash from happening again. Major changes in laws can change the structure of an economy and the level of inequality independent of short term GDP. And that is also part of why different countries have different ginis, independent of growth.

The point of all of this, still, is that by and large, rising inequality goes hand-in-hand with rising incomes across the board.