"The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life, and what we stand for around the globe. It is not simply a moral claim that I'm making here. There are practical consequences to rising inequality and reduced mobility," Obama said. (Agencies)
"For one thing, these trends are bad for our economy. One study finds that growth is more fragile and recessions are more frequent in countries with greater inequality," Obama said in his major policy speech on economy at an event organised by Centre for American Progress, an eminent think-tank wherein he was introduced by its president Indian-American Neera Tandon.
Obama said when families have less to spend, that means businesses have fewer customers and households rack up greater mortgage and credit card debt.
Concentrated wealth at the top is less likely to result in the kind of broadly based consumer spending that drives the US economy, and together with lax regulation may contribute to risky, speculative bubbles, he said.
"And rising inequality and declining mobility are also bad for our families and social cohesion, not just because we tend to trust our institutions less, but studies show we actually tend to trust each other less when there's greater inequality," he said.
"And greater inequality is associated with less mobility between generations. That means it's not just temporary. The effects last. It creates a vicious cycle," he said adding that rising inequality and falling mobility are bad for democracy.
"The opportunity gap in America is now as much about class as it is about race. And that gap is growing. So if we're going to take on growing inequality, and try to improve upward mobility for all people, we've got to move beyond the false notion that this is an issue exclusively of minority concern," Obama said in his speech.
The US also needs to dispel the myth that the goals of growing the economy and reducing inequality are necessarily in conflict, when they should actually work in concert, he said.
"We've got to grow the economy even faster, and we've gotta keep working to make America a magnet for good, middle class jobs to replace the ones that we've lost in recent decades -- jobs in manufacturing and energy and infrastructure and technology."
Obama said the next step is to empower more Americans with the skills and education they need to compete in a highly competitive global economy.
"But while higher education may be the surest path to the middle class, it's not the only one. So we should offer our people the best technical education in the world. That's why we've worked to connect local businesses with community colleges so that workers, young and old, can learn the new skills that earn them more money," he said.
"The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life, and what we stand for around the globe. It is not simply a moral claim that I'm making here. There are practical consequences to rising inequality and reduced mobility," Obama said.