I like the tough questions Mickey Kaus is asking about income inequality -- "1) What, exactly, is it about greater economic inequality that's so bad? and 2) What you gonna do about it?" His answer, not so much.
Here's Kaus on why illegal immigration is the enemy of income equality:
If you're worried about incomes at the bottom, though, one solution leaps out at you. It's a solution that worked, at least in the late 1990s under Bill Clinton, when wages at the low end of the income ladder rose fairly dramatically. The solution is tight labor markets. Get employers bidding for scarce workers and you'll see incomes rise across the board without the need for government aid programs or tax redistribution. A major enemy of tight labor markets at the bottom is also fairly clear: unchecked immigration by undocumented low-skilled workers. It's hard for a day laborer to command $18 an hour in the market if there are illegals hanging out on the corner willing to work for $7. Even experts who claim illlegal immigration is good for Americans overall admit that it's not good for Americans at the bottom. In other words, it's not good for income equality.
Fewer people + given amount of money = more money/person. I've been through why I think this is not a great idea. First, there's the fiscal argument. With fewer working age Americans, we'll have fewer tax dollars to support that growing retired population that consumes most government spending. The easiest way to follow in, say, Japan's footsteps, is to pursue a policy of low population growth while preserving our policy of high retiree spending.
Second, there's the dynamism argument. If the United States wants to replace manufacturing and other middle-class jobs that are most susceptible to off-shoring, we need to find new jobs for these millions of endangered workers. One great way to develop new industries is to be open to educated immigrants who want to start their bioscience/green tech/medical manufacturing/whatever company in the United States, by reforming our post-graduation immigration laws -- by being more open to educated foreigners, not less.
To be fair, Kaus isn't talking about Indian Yale graduates in his post. His concern is low-skilled, undocumented workers flooding job markets around the border, depressing wages and exacerbating the income gap. This might be happening, for sure. But it's worth pointing out that Americans are flocking en masse to the border. California, Texas, Arizona, Nevada, Georgia, Florida -- Americans are moving to these states more than any others. Why? Maybe the sun. Maybe it's the tax codes. Or maybe it's often the cheaper housing and lower cost-of-living made possible by a steady influx of labor from the south. There are reasons to think immigration is bad for low-skilled Americans, and there are also reasons to think it is good for the overall economy.
You can break down America's income inequality picture into three parts: the bottom is in poverty; the middle is in stasis; and the top is in the stratosphere. The most direct solution to push the accordion together is to literally push from both ends -- tax the rich and spend it on better public services or more generous tax credits for the poor. The less direct, more long-term, but ultimately necessary step is to get the middle class more money: by continuing to invest in our globally competitive industries; by developing new globally competitive industries; and by reforming health care premiums, which notoriously scrape thousands off most Americans' paychecks.