"High levels of inequality can lead to negative social, economic and political consequences that have a destabilising effect on societies. They create social and political fractures that can develop into social unrest and insecurity." United Nations Report on Urban Poverty, 2008

Unequal societies have throughout history been prone not just to social upheaval but also to economic turmoil. Beginning in the 1970s and accelerating after 1980, the US began undoing a series of policies that dated to FDR led to what historians call the "Great Compression" a flattening of income so that by 1964 the ratio of CEO pay to average worker pay was 24:1, the narrowest in the nation's history. Before the financial meltdown the ratio was around 400:1, or back to levels last seen in the late 1920s. And this is actually down from a high of 525:1 in 2000 (the reason is that executive compensation is largely paid in stock). In 1970, the top 1% of Americans controlled 8% of the nation's wealth, by 2000 they controlled 15%. In 1973, the income of the top 20 percent of American families was 7.5 times that of the bottom 20 percent. By 1996, it was 13 times. By 2006, it was 18 times.

In regard to inequality, over the past few decades it has risen more in the US than in most other advanced industrial countries in the Organization for Economic Cooperation and Development, or OECD, a group compromising the world's wealthiest countries. Indeed, by most measures, the US ranks near the top (some might say the bottom depending on your perspective) in terms of household income inequality. The inequality gap in the United States is associated with higher levels of overall and child poverty relative to a majority of OECD countries and even some developing countries.

This high and growing level of relative inequality in the US reflects, in part, differences in the "social safety net," which is an array of "social insurance" programmes. Among the 30 OECD countries, the US ranks above only Mexico, Korea, and Ireland in gross public social expenditures as a share of GDP spending, and it does the least to target government taxes and transfers towards moving families out of poverty. Not surprisingly, social measures such as infant mortality and life expectancy are worse in the US than in most advanced industrial countries and in fact worse than in some developing countries. Infant mortality for African-Americans ranks higher (that is worse) than in Cuba, Colombia or Brazil. The poverty rate among America's single mothers is also the highest in the industrialized world, with 59 per cent raising children on incomes which are less than half the typical national income.

On almost every measure, Americans grew apart over the past 30 years. The chasm between rich and poor is not just wider but also deeper. As Paul Krugman noted at height of the market turbulence this past month "we are a banana republic with nukes." These results aren't by accident. In 2009, the US is far poorer as a collective society than we were in 1964 despite our many technological comforts. The Reagan economic model gave us cheap imported electronics but at a cost of being able to send our kids to college. The harsh reality is that the United States is a cleft nation as a result of the Friedmanistic economic policies pursued by Republican and Democrat alike since 1968 and cleft nations have a propensity to fail. It is not, I think, a coincidence that 2008 saw an economic meltdown when income inequality in the United States reached the same levels in 2008 that we last saw in 1928.

The history of the United States economy over the last 70 years can be roughly divided into two periods: the decades immediately after World War II, when inequality plummeted, and the past three decades, when global economic forces and government policies caused it to soar. Mr. Obama is setting out to begin a third period that looks more like the first than the second.

That agenda starts with taxes. Over the last three decades, the pretax incomes of the wealthiest households have risen far more than they have for other households, while the tax rates for top earners have fallen more than they have for others, according to the Congressional Budget Office.

As a result, the average post-tax income of the top 1 percent of households has jumped by roughly $1 million since 1979, adjusted for inflation, to $1.4 million. Pay for most families has risen only slightly faster than inflation.

Before becoming Mr. Obama's top economic adviser, Lawrence H. Summers liked to tell a hypothetical story to distill the trend. The increase in inequality, Mr. Summers would say, meant that each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners.

Mr. Obama's budget reflects that sensibility. Budget experts were still sorting through the details on Thursday, but it appeared that various tax cuts and credits aimed at the middle class and the poor would increase the take-home pay of the median household by roughly $800.

The tax increases on the top 1 percent, meanwhile, will most likely cost them $100,000 a year.

"The tax code will become more progressive, with relatively higher rates on the rich and relatively lower rates on the middle class and poor," said Roberton Williams, a senior fellow at the Tax Policy Center in Washington. "This is reversing the effects of the Bush policies," he added, and then going even further.

It is a moral imperative to reverse Reaganism. As John Edwards noted back in 2007, there are two Americas. And the differences between them are startling in very surprising but totally predicable ways. Let's look at the impact on one measure of health, life expectancy. The US ranked 38th in life expectancy in 2008. In 1964, the US ranked 10th. In 1964, the ratio of CEO to average worker pay stood at 24:1. That was the zenith of fairness in America. And our decline in broad measures of health and well-being is tied to rise of income inequality. But let's dig a little deeper.

On average, US life expectancy rose by three years (from 73.7 to 76.7) between 1980 and 2000, but the largest gains were made by the most affluent layers of the population, leading to a growing gap in life expectancy between the lower and higher income groups.

In a study for US Department of Health and Human Services (HHS), Dr. Gopal Singh and Professor Mohammed Siahpush measured social and economic conditions in every US county by examining 2000 census data on education, income, poverty, housing and other factors.

The report said in 1980-1982, people in the most affluent group could expect to live 2.8 years longer than those in the poorest (75.8 versus 73 years). By 1998-2000, the difference in life expectancy had increased to 4.5 years (79.2 versus 74.7), and it continues to widen.

"Life expectancy was higher for the most affluent in 1980 than for the most deprived group in 2000," he said. "If you look at the extremes in 2000," Dr. Singh added, "men in the most deprived counties had 10 years' shorter life expectancy than women in the most affluent counties (71.5 versus 81.3 years)."

Nancy Krieger, a professor at the Harvard School of Public Health, has found that trends in life expectancy have paralleled the decrease or increase in social inequality over the past 40 years. Kreiger found that the rate of premature mortality--dying before the age of 65--and infant death from 1960 to 2002, shrank between 1966 and 1980, but then widened over the next 20 years.

"The recent trend of growing disparities in health status is not inevitable," she said. "From 1966 to 1980, socio-economic disparities declined in tandem with a decline in mortality rates." She said the creation of Medicaid and Medicare--the two major federal programs for the poor and elderly--along with health centers, the social programs of LBJ's "war on poverty" had contributed to a narrowing the earlier inequalities in health.

And so it is a matter of extreme historical importance tonight that we stand to ready bridge the chasm between exceedingly wealthy and exceedingly poor. To be one nation again, a nation that boasts a large and prosperous middle class. A nation that can afford health care for all and that can afford to send its kids to college. These are American values. This is what the journey of America is all about. It is a journey we take together as a people. As long as one American is left behind then we have not lived up to the vision of the Founding Fathers of a country where there is equality of opportunity for all. I want to thank the President and his team for living up to his comments of October 13th 2008 when he promised to "spread the wealth around."