There are two types of excessive economic inequality: the inequality of income, a flow measurement of current doings, and the inequality of wealth, a stock measurement, including of hoarding. They are analogous to an income statement and balance sheet for an individual.

Excessive income inequality damages the economy in two ways. It reduces aggregate demand and income, and it injures the welfare of consumers in the economy who must go without much income and purchases for the rich to hoard their excess income to drive up stock and bond prices with it..

Excessive wealth inequality, in turn, injures competition and corrupts the national body politic of the country. I will explain more, but first consider how excessive our income and wealth inequality are.

As to income inequality, the top 1 percent receives 22.5% of all income, while the share of the bottom 90 percent is now below 50% for the first time ever. The top 10 percent receive just over 50% of all national income.

This is a radical change for the post war era and now there is clearly excessive income inequality. But this was not always so.

From about 1944 until the early 1970’s, the share of the top 1 percent was about 11.3% and the share of income of the bottom 90 percent was about 67.5%, levels that would remained more or less constant for three decades and posed no particularly serious problem. The top 10 percent received 32.5% of all income before the early 1970’s
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This rise in income inequality from the early 1970’s has occurred at the same time unions have essentially collapsed, as a countervailing power to corporate monopsony, and the marginal productivity pricing of labor has been abandoned by corporate America in favor of political appropriation of all of labor’s future productivity gains since about 1973 to profits and increased management compensation.

The problem of excessive and growing income inequality is it injures the economy and the welfare of the overall population. Many have less income than they need and would spend, and very few others have most of the income and cannot spend it all, hoarding it in cash and very inflated secondary financial markets. The circular flow of expenditure and income is atrophied by the amount hoarded which translates into reduced aggregate demand.

A more equal distribution of income would increase expenditure and income, augment aggregate demand, improve the economy and benefit the welfare of the overall population. These effects are well established but most economists dare not write about these matters because doing so will result in the loss of personal and general research funds and therefore income. The funding oligarchy disapproves.

Now, the distribution of wealth in the US is even worse. The wealthiest 10 percent own 76% of all wealth in the country. The next 40 percent own 23% of the wealth so that only 1% of all wealth is left for the bottom 50 percent of the population

The drastic rise in wealth inequality has occurred for the similar reasons as income inequality; namely, the trend of making all taxes less progressive since the 1970s, and a changing labor market where real wages have become stagnant due to the reallocated productivity gains of labor to profit and management. Stagnant wage growth makes it difficult for middle and lower class workers to save and accrue wealth particularly in a low interest rate environment.

The problem of excessive wealth inequality, which is hugely greater than most Americans realize, is it destroys competition and corrupts the body politic, injuring the political economy. Mergers funded by and for the wealthy have eliminated much competition in most industries and destroyed innovation which is at an all time ebb now. along with labor mobility up the ranks. Wealth is also used to create barriers to entry and reduce competition. Regulators are captured by industry wealth. They are wined, dined and taken care of on the side.. The antitrust laws were retired at the behest of great wealth and mega campaign contributions.

As Robert Solow, an MIT Nobel Laureate economist, explains ‘Piketty has identified the mechanism by which wealth inequality accelerates over time. But the consequences of that distribution are not merely economic but political: A concentration of wealth leads to a concentration of power, which in turn protects that concentration of power, both economic and political. That our political system is incapable of tempering Piketty's dynamic is not a bizarre coincidence but a direct result of that.'

Solow adds, "We are politically unable to preserve even an estate tax with real bite. If we could, that would be a reasonable place to start, not to mention a more steeply progressive income tax that did not favor income from capital as the current system does. But the built-in tendency for the top to outpace everyone else will not yield to minor patches."

Excessive income and wealth inequality are increasingly injuring our economy and our nation. And we are unable to do anything about it for the reasons Solow describes. Money prevails to block reform.