Introduction

The United States political system can primarily be characterized as a polarized two-party system. More specifically, we characterize them as Democrats and Republicans. Since the 1970s, there has been a greater increase in political polarization. A positive causal relationship can be observed between increased political polarization and income inequality in the United States (McCarty, Poole, Rosenthal, 1A). The United States has observed an increase in political polarization which has been linked to legislators’ disagreement on many pressing economic issues pertaining to income inequality. In addition to greater political polarization, there has been a greater number of those in lower income levels and few in higher income levels. The inability for legislators to address policy matters can come with serious economic implications that often affect the lower income levels more so than those with a higher income level. Policy matters such as tax rates and the size of government can be decided by consumer preferences. Consumers often decide to vote toward their preference on tax rates and the size of government given their level of income. Individuals with a higher level of income tend to prefer higher tax rates which often goes towards better public education and more public goods. However, individuals with lower income levels prefer lower tax rates because higher tax rates make it more difficult to make ends meet. Preferences represented by Democrats are described as liberal while Republican preferences are more conservative. Looking at these preferences, the Democratic Party is generally made up of the middle and lower income levels, while the Republican Party is generally made of of those with higher income levels. As discussed below, factors such as shifts in generational attitudes or increased partisanship among society could potentially describe growing polarization. (Duca and Saving, 393). The Arrow Impossibility Theorem critiques the assumption that generational attitudes contribute to growing political polarization because the electoral process does not allow account for the majority’s preference.

Political Polarization in the American Public

The American public has seen shifts in generational attitudes and increased partisanship which has been attributed to increasing political polarization. Using data from the 1979 European election project, a sample of parties was selected from those competing in the election. Individual candidates were chosen to be interviewed in late spring of 1979 (Dalton, 981). Dalton explains that using European data “…would provide a unique opportunity to compare the beliefs of the top-level party elites in cross-national terms” (Dalton, 981). Ultimately, this suggests that the data collected from European elections provides a valid basis for generalizing European party elites. His research led to the conclusion that older generations who witnessed “widespread economic need or insecurity during their formative years” would have high preferences for material goals (Dalton, 983). Material issues or goals would include economic growth and stability, inflation, adequate national defense, etc. However, individuals who grew up through a post war economic boom would feel as if their economic needs were satisfied and shift their priorities elsewhere. Their priorities may reside in free speech, a humane society, beautiful cities and political participation.

Generational change is limited since Dalton uses a specific age range and social-status. The expectation is that there would be a stronger correlation if given a larger range of ages over different income levels. “….the greatest value change appears among the youngest generations that are still underrepresented among elites” (Dalton, 984).

However, some have critiques about whether there are actually any meaningful preferences established through a closer look at voting patterns. Kenneth Arrow developed the Arrow Impossibility Theorem in which increased skepticism about whether the product of any decision making process can represent the true ordering of preferences “untainted by the constraints of the selection process” (Issacharoff, 1881). The theory explains that it is difficult to see an election that reflects the majorities preferences because the manner of choice presentation to the voters influences the outcome and consumer preferences and therefore could be considered unstable over time (Issacharoff, 1882). This argument can be applied to the fact that shifts generational attitudes contribute to increasing political polarization. If consumer preferences are not accurately measured through the electoral process, then it is difficult to measure how generational attitudes affect political polarization.

Political Party Sorting

As it pertains to economics and political views, we generally observed that Americans’ opinions and views are most commonly shaped based on political backgrounds and cultural exposure.  When picking their political parties, people regularly form their views and political philosophy based on limited media sources. An individual may have the ability to learn from different media sources such as The New York Times, Fox News, CNN News, or The Wall Street Journal. However, it is often seen that individuals may choose a singular media source which tends to polarize their views towards a major political party. Alan S. Gerber, Dean Karlan, and Daniel Bergan find that the choice of media affects political viewpoints, people tend to deviate and make changes in their views when they more freely receive paper media.  As the authors found, “…media slant mattered less in this case than exposure to media” and receiving this media led to more support for the Democratic candidate (34). As it is indicated in these findings, people who have greater exposure to media sources, regardless of their expressed views, tend to align their views slightly more with the Democratic candidates. In other words, a person’s political views are most often polarized depending on their exposure to news and other relating articles. One example is Fox News, this news television show usually has more Republicans than Democrats on its news and discussions, if a person decides to solely watch Fox News they may tend to primarily be influenced by and agree with conservative views. This is because individuals are commonly affected by the situations and views they are exposed to on an everyday basis. Let’s suppose an individual’s family is composed of a Republican father and a mother with Democratic views. If this person spends most of their time with their father due to custody, there is a high probability he or she will be influenced by the parent’s viewpoints. However, if this individual lives with her father but constantly meets with his or her mother, they may still be conservative but with a more diversified political view making him  slightly more Democrat.

“One of the major contributions of the public choice literature is the realization that the interests of voters and their agents may deviate substantially” (Lott, Reed 1). As noted, people often become part of a political party that genuinely shares their views due to cultural, political, and environmental exposure. However,  if a candidate is chosen without sharing the overall views of the party, it could lead to the placement of politicians in office who do not share the overall views of the majority of the American public. In correlation to this, more often we see policies go through Congress that may harm the middle and lower classes more than the top 1% of the population. The same holds true for states and regions. If an individual is raised in an area that is fairly Democrat, they will potentially end up sharing the Democratic views of their peers (2). Hence, exposure in social media and other online sources polarize political views in a similar manner. People could follow certain hashtags and have their views polarized by a certain group’s views. Relating to this argument and to the one previously presented, people also tend to derived their views based on their overall cultural exposure. Someone from a city might be more Democrat them someone from a rural area due to the grader cultural exposure (Fiorina, Abrams, Pope 5).

As discussed by social media and political researchers, “a user is exposed to ideologically opposed content in this way, she will be unlikely to rebroadcast it, but may choose to respond directly to the originator in the form of a mention” (Ratkiewicz, Francisco, Goncalves, Flammini, Menczer 94). Depending on their peers’ political views, people may follow hashtags that share their common views. Right-leaning individuals are more likely to use and follow the #teaparty while left-leaning may choose to follow #p2. When people tend to use a certain hashtag as promotion and follow social media pages that are most commonly aligned with their views, the general views of the public are more intensely polarized to the extent that the political division becomes a central issue when seeking bipartisan consensus on general issues.

Geographical Party Sorting

As it pertains to geographical polarization in terms of economic status, there is widespread evidence indicating that the greatest polarization comes from this geographical choosing based on personal preferences for public goods and one’s ability to afford these goods. Charles M. Tiebout provided a model of the provision of local public goods and the market types that would possibly maximize expenditures in these goods. In this research, Tiebout found that “if consumer-voters are fully mobile, the appropriate local governments, whose revenue-expenditure patterns are set, are adopted by the consumer-voters” (Tiebout 424). In developing his arguments about public goods, Tiebout also asserts that consumers would base their preferences of states to live in depending on their demand and the available choices on baskets of public goods. Hence, since the largest basket of public goods is provided by states and regions with the highest taxation, wealthy people will decide to live in highly-taxed states. Relating to geographical and political polarization, states and regions in the United States are most often divided based on personal incomes and political views. The states that desire corporations to be based and founded in their jurisdictions in order to maximize revenues will be more largely conservative. This leads to a minimization of taxes on pollution and other ecological harming regulations in these states, for example, subsidies on corporations that provide negative externalities. However, states that value more the environment, vastly sharing Democratic views, will attract wealthy people who value their health and fewer corporations that wish to pollute their environment due to high taxes on these practices.

American political parties have increasingly become organized around cultural and religious fissures (Glaeser, Ward 126). This fact implies that people who attend religious and other cultural organizations with specific political views can easily adopt these views. This has implications of potentially shifting their votes to the corresponding political party. For instance, let’s briefly take into account overall religious views; specifically religious organizations and their views on same-sex relationships among others. The attendees of these organizations might be more inclined to align their views with a political party or candidate that promises laws that agree with their view on same sex relationships. In addition, we see a deeper connection is we evaluate the study conducted and presented in Glaeser and Ward’s article, focuses on the question of “Should schools have the right to fire homosexual teachers?” The study results show that a clear majority in conservative states agrees with this question while 30% of the population in liberal states agree with it. Correlating this back to religious accounts, it is clear that there is a direct relationship between inequality and polarization coming from these states with different views.  If we view the results and the level of religious practice and attendance, the states were the majority agreed with firing homosexual teachers had the respondents with the highest level of attendance of religious organizations (Glaeser, Ward 129).

In contrast an article studying the cultural war in the United States found that “there is no truth to the “culture war” metaphor or that the red state/blue state division is just plain false” (Glaeser, Ward 126) This directly implies that the current division, as it is publicly discussed in political forums, is partly false in its totality. People normally consider some states as blue or red states, implying that the majority of its citizens may have similar political views when in reality this may not be entirely true. There are many other factors that are not taken into account in this equation. For instance, many states may be considered blue or red because one of these parties may share a common goal with the majority of its citizens. As it is the case of the 2016 election, many individuals who are part of these Republican states, chose to vote for Donald Trump because he was the only one who touched upon their wants and needs. Trump ran on the idea of deregulation among other views which fairly aligned with the views of some people in the south. Since a fair majority of workers lost their jobs due to outsourcing, technological advances, and regulation on mines and oil industries, most people felt more inclined to vote for him when he ran against the institutions and laws that made these people lose their jobs in the manufacturing sector.

Even though the authors state that there is “no cultural war,” they show that there is a blue and red state division (Fiorina, Abrams, Pope 1). People who are from red states tend to vote Republican while people from blue states tend to vote for candidates with Democratic views. Due to political inclinations, there is a wide divide in preferences due to one’s party. Even if there is a suitable candidate, at times people will choose to vote for candidates from their party even if they do not share the views of the whole party or one’s personal views.

Political and Social Effects

National Election Study data from 1952 to 2000 was used to analyze the relationship between income and voter partisan self-identification….(McCarty, 1). McCarty finds partisanship has become more stratified with income. He argues that this trend is largely the consequence of increased polarization of political parties on economic issues and the development of a two-party system in the South. (McCarty, 1A). During this time, Americans witnessed changes in both the political and economic structure of the United States.

The American society and economic structure were largely transformed by the 1970s. The early 1970s ended the postwar boom. The postwar boom brought an increase to production resulting in low unemployment. A boom of economic prosperity through the 50s and 60s eventually led to slower growth, higher unemployment and high inflation into the early 70s. The Fed’s policy became increasingly more important as they battled the high inflation with a tight monetary policy. But when Nixon’s reelection subsided, he knew that a lack of economic prosperity would led to losing the election. The Fed began easing monetary policy but was unable to allow growth to be restored back to the prosperity of the 50s and 60s and left many with a lack of faith for the future (Levinson, 10). This structural economic transformation led to greater economic inequality.

The family income Gini Coefficient (a standard of inequality) has increased more than 20% since its lowest point in 1968 (US Census Bureau, 2002).  Approximately in 1974, inequality and polarization begin increasing at the same time. Over the past half century, income inequality and political polarization has moved together with a positive relationship. As mentioned above, the large increase in the GINI Index beginning in the 1970s is due to a change in the political and economic structure of the US.

Green, Palmquist, and Schickler explain, in terms of liberal-conservative views, there is similar evidence that partisan affiliation in the public is increasingly polarized. The evidence explains a larger separation between those with conservative view (Republicans) and those with liberal views (Democrats). Partisanship is measured by the National Election Study with those in the top quintiles making the highest incomes and those in the bottom quintiles making the lowest incomes. During the election years of 1956 and 1960, respondents from the highest quintile were more likely to identify as Republican than were respondents from the lowest quintile. This is compared to the election years of the 1990s in which the “…respondents in the highest quintile were more than twice as likely to identify as a Republican than were those in the lowest” (McCarty, 3). McCarty’s empirical analysis begins with a prediction of political-economic models of voter preferences over tax rates and the size of government. From these models, we can draw a prediction that a voter’s preferred tax rate is a function of both their own income and the aggregate income of society. Therefore, the connection is made that those with higher incomes prefer lower tax rates given the tax schedules are either proportional or progressive. As a result individuals pay a large share of taxes but receive an equal share of public expenditure. “Thus, ceteris paribus individuals prefer higher tax rates as aggregate income increases” (McCarty, 7). A prediction can be made of voter-preferences over tax rate and the size of the government because Republican and Democratic parties support different tax rates and different sizes of government

Additionally, technological changes in the 1970s have in general increased wages for skilled laborers as opposed to less-skilled workers. Duca and Saving find that this contributes to income inequality and media fragmentation linked to the rise of cable TV. The rise in cable TV was able to contribute to increasing polarization “… either through the effect of less news viewership because of more non-news entertainment alternatives or through a “silo” effect of TV viewers self-sorting into watching news from biased sources that reinforce viewers.” A more recent explosion of news outlets increased media choices which enabled households to self-select into watching channels that reinforce their preexisting biases (Duca and Saving, 376). As mentioned previously, people have the ability to consume information from sources such as the Wall Street Journal, CNN, New York Times or even FOX news which can produce biased material and make it difficult to the consumer to make an unbiased opinion. Watching news outlets that reinforce their preexisting biases does not challenge their preconceptions. Using figure 2, there is a positive relationship with the introduction of cable TV and increasing political polarization.

Global level analysis of Income Inequality

Akdede explores the relationship between income inequality, political polarization and fractionalization through an empirical investigation of European countries. It’s ”… helpful for seeing how the relationship operates on the global level in other highly developed democratic nations” (Chaker, 22). Akdede measures political polarization and political factualization between 1980 and 2008 across 17 different countries in parliament elections. Using a random effects regression test, the test looks at the time panel data against the log of the Gini index and control variables of net migration, GDP, unemployment, and ethnic and religious diversity (Chaker, 22). To calculate political polarization, the paper uses methodology previously used for ethnic, religious, and linguistic polarization and fractionalization (Akdede, 20).  Political Polarization is assumed to be affected by economic inequality as measured by the Gini index, but also independent variables such as net migration rates, unemployment rates, GDP per capita, and ethnic/religious polarization. The study suggests that there is a significant effect of income inequality and political polarization, therefore, they observe a connection despite the different political systems and geographic regions (Chaker, 22). As income inequality increases among people, the division between the left and right becomes more distinct. Therefore, an increase in GDP per capita (decrease in income inequality) would cause political polarization to decrease.

Does income inequality lead to increased political polarization? or Does political polarization lead to income inequality?

As discussed in earlier parts of the chapter, we do see a correlation between income and inequality and political polarization or vice versa. To delve deeper into this question we will look into a recent study evaluating both political polarization and its effect on income and inequality. We will take a closer look at research were we will examine both sides. First, a study administered by Torben Iversen and David Soskice. A major contribution of the study is a proposition of a comparative political economy model of mass polarization in which the same institutional factors that generate income inequality also undermine political information. They explain why more voters then place themselves in the ideological center on a left–right scale, hence generating a negative correlation between mass polarization and inequality (Iverson and Soskice, 1781).

“Imagine further that there are three parties, left (L), center (C), and right (R), and that the left–right ranking of these parties is common knowledge (Iverson and Soskice, 1786). Individuals tend to place themselves somewhere along this line when thinking about their preferred political party that shares their political views and aspirations. This polarization comes for an understanding that different policies benefit individuals in many different ways. We can see conflicts when one party decide which policies made to maximize his or her welfare to the fullest extent without consideration of the other. Different levels of income require different adjustments respectively in the bounds of political society.

Conclusion

The United States has observed a division in political ideologies stemming from differences in the demands and wishes from a polarized two-party system. A review of literature on income inequality and political polarizations leads us to a few conclusions. The first conclusion is that generational attitudes may or may not have contributed to growing political polarization because Arrow’s Impossibility Theorem shows skepticism about the results of decision making and consumer preference. Arrow’s theory explains that we are unable to correctly account for consumer preferences through our voting system that leads to implications on the accuracy of generational attitudes and its effect on political polarization. However, others explain how economic cycles have ways of influencing an individual’s’ economic needs and ideologies within a society and certain preferences shift with materialistic and political priorities. However, by taking a look at the split in attitudes we can see the embodiments of the views and beliefs of individuals at different levels showing polarity.

Interestingly, if we take a look at cultural exposure it has a way of shaping the divide influencing the viewpoints of people who choose to participate. Indeed, over time we have seen changes in the structure of politics in the United States and income inequality and political polarization have moved together with a positive relationship. Technological changes have also attributed and the increase in higher skilled labor have left some individuals with a smaller share of public expenditures.

By discussing and sharing views individuals promote ideas that align with their outlook extending political and social views creating division. We can see this in terms of economic status we see that a considerable amount of polarization comes from geographical preference based on affordability and benefits. Individuals tend to reside in areas that represent their preferred basket of public goods influencing the separation between higher taxed individuals and those who are not in the same bracket. This leads to an increase in separation with like-minded individuals clustering into one space leaving very limited space for differences in ideas.

The results of this information, however, are not entirely conclusive. There are still many areas for further improvement and research. We open up the question for discussion viewing income inequality and growing political polarization through different levels of analysis and political and economic effects. Ultimately, this review contributes to a gap in literature as one of the many of its kind and also invites researchers to further develop studies evaluating the question of interest.

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