Rising income inequality has had deleterious effects upon household debt and saving. The overhang of debt and revived saving by households post 2007 will be a drag on economic expansion for some years. The adverse aftereffects of the Great Recession will be much longer than those of the recent past. One thing is clear: the cause of the Great Recession is mostly not economic—it is mostly political. So the solution, if ever devised, will be mostly political. Another financial and economic crash just as bad or worse than the last might focus Congress on correcting causes of income inequality. I present a plea for a more fact-based economics than an authority-based economics. Why have today’s economists failed to jettison the mainstream theory of consumption in the face of so much evidence to the contrary?
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