Inequality Is Really Hurting The Economy, S&P Warns

The rising concentration of income among the top 1 percent of earners has contributed to S&P's cutting its growth estimates for the economy. In part because of the disparity, it estimates that the economy will grow at a 2.5 percent annual pace in the next decade, down from a forecast five years ago of a 2.8 percent rate.

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The report builds on data from the Congressional Budget Office, the International Monetary Fund and academic economists to explain how income disparities can hurt growth. Many consumers tend to become more dependent on debt to continue spending, thereby worsening the boom-bust cycle. Or they curb their spending, and growth improves only modestly, as it has during the current recovery.