While U.S. academics are incisively pointing to growing income inequality in America, The Economist, Britain’s Neoliberal news magazine, is actually getting it and writing about the situation boldly. In “The Rich, the Poor, and the Growing Gap Between Them”, The Economist points out that the rich have been the real beneficiaries of the G. W. Bush years. Drawing on a flurry of academic articles published by the National Bureau of Economic Research, the magazine points out that while the productivity growth of the early 1990s appeared to benefit the population as a whole in terms of rising wages, the pattern changed sometime after 1995. Productivity increases since the late 1990s have failed to affect overall wages, benefiting instead only the highest skilled in the economy. As The Economist points out:

“After you adjust for inflation, the wages of the typical American worker—the one at the very middle of the income distribution—have risen less than 1% since 2000. In the previous five years, they rose over 6%. If you take into account the value of employee benefits, such as health care, the contrast is a little less stark. But, whatever the measure, it seems clear that only the most skilled workers have seen their pay packets swell much in the current economic expansion. The fruits of productivity gains have been skewed towards the highest earners, and towards companies, whose profits have reached record levels as a share of GDP.” (061506)

Economists point out that the lack of a wage increase has been blunted by the increase in housing values, which have led home-owning Americans to believe that their relative economic position is improving or at least staying the same. Real estate analysts now suggest that the housing bubble is beginning to show signs of fatigue as rising interest rates make refinancing and “buying up” more expensive and more uncertain. Even housing markets like Boston are beginning to soften, house sales prices are falling, and houses are simply staying on the market longer.

Since the late 1990s, rising house values lulled Americans into a real estate buying binge funded in part with cheap money drawn from home equity loans, many purchased with variable interest rates. Now that interest rates are rising, borrowers are scrambling to pay off these debts to escape costly interest charges on loans that were spent to fuel consumption. Observers worry that the great American consumption machine may begin to lose some of its voracious appetite for foreign-made goods as people worry more about rising inflation, the costly war in Iraq, the huge and rising current account deficit and the accompanying trade-related deficits with China.

A focus on homeowners’ travails ignores the far more serious problem in America: rising income inequality. The U.S. income distribution now ranks second in level of inequality behind Brazil and substantially above other OECD countries. Income inequality is at its highest level since 1929. Again, The Economist bluntly states:

“If all Americans were set on a ladder with ten rungs, the gap between the wages of those on the ninth rung and those on the first has risen by a third since 1980. Put another way, the typical worker earns only 10% more in real terms than his counterpart 25 years ago, even though overall productivity has risen much faster. Economists have long debated why America’s income disparities suddenly widened after 1980. The consensus is that the main cause was technology, which increased the demand for skilled workers relative to their supply, with freer trade reinforcing the effect. Some evidence suggests that institutional changes, particularly the weakening of unions, made the going harder for people at the bottom.”

In reading all of these articles, it is difficult to understand why the American press and the Democratic Party are at a loss for issues to write about. There is plenty of fodder for articles about the life and times of Americans. This is particularly true of the Democrats, who seem to lurch from day to day, topic to topic, without opening their eyes to the real difficulties facing at least half of all Americans. This list includes rising gasoline prices, increasing interest rates, mediocre to non-existent health care, rising costs of public education and stagnant wages for all but those workers with high skills. These problems affect a huge share of America’s citizens. Who needs to look further than the local Wal-Mart to see who is hurting and just barely getting by? Maybe it’s true that the Democratic leadership contains too many “haves” to really understand the plight of the “have nots”.

Or is it that the Democrats simply lack the ability to really feel empathy? Understanding empathy, according to the Wellesley Centers for Women, can be tricky. Citing noted psychologist Robert W. Levenson, director of the Institute of Personality and Social Research at the University of California, Berkeley, guest Columnist Judy Foreman says empathy comes in three forms. “Cognitive empathy: “knowing what someone is feeling.” This does not automatically imply kindness. “Emotional empathy,” is what most of us mean by the term, “feeling what someone is feeling.” And compassionate empathy is doing something about it – offering a teddy bear or a kiss.”

In the first case, cognitive empathy is simply awareness––it does not presume altruism, changes in behavior, or gestures of kindness. Thus, people can understand poverty and rising income inequality and do nothing about it. Emotional empathy means that you can feel sad about the presence of poverty in the world, but give up nothing to change it. Only compassionate empathy, notes Levenson, results in actions like the formulation of policies that reduce inequality, the explicit reduction of income inequality, and giving up something to help others.

The article on the Wellesley Centers for Women web site notes that empathy can be “learned” through imitation. Here’s what this means for the Democrats: Don’t just read “think tank” publications that highlight growing inequality; don’t just walk among Americans, experiencing economic insecurity when you shop at Wal-Mart (because both rich and poor shop at Wal-Mart); and don’t give only at your local place of worship or to your favorite charity. Instead, come up with powerful arguments and formulate meaningful policies that stop rewarding the rich minority through the likes of tax breaks, and stop congratulating corporate America for its ridiculous corporate CEO salaries. They don’t need your help; the rest of the nation needs you to understand their situation and act on their behalf.