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McCarty, Nolan M.; Poole, Keith T.; Rosenthal, Howard, Polarized America : The Dance of Ideology and Unequal Riches, MIT Press (2006: Cambridge, Mass,), pp 13.
We use chapter 6 to study the impact of polarization on public policy.
We show that changes in such policies as taxes and minimum
wages have mirrored the historical trends we found in polarization.
As polarization has increased in the past thirty years, real minimum
wages have fallen; top marginal tax rates and estate tax rates have
been reduced. In addition, we discuss how, in the American system of
‘‘checks and balances,’’ polarization reduces the possibilities for policy
changes that would reduce inequality.
This is just an excerpt from their conclusion to the first chapter, which overviews the impacts of polarization on inequality in America. The research is incredibly solid and backed up by a variety of sources. Essentially, the argument is that...
Page 13-14:
"Because legislation in the United States cannot be produced by a
simple parliamentary majority, a minority of liberals or a minority of
conservatives is frequently able to block policy change.11 The veto
powers of political minorities are particularly important when status
quo policies are not indexed for inflation. Federal minimum wages are fixed in nominal dollars. A conservative minority has been able to
block substantial increases in the minimum wage, even when the Democrats
had unified control of Congress under Jimmy Carter and in the
early Clinton administration. Therefore, the real minimum wage has
fallen. David Lee (1999), an economist at the University of California
at Berkeley, has argued that failures to increase the minimum wage
are responsible for about half the increase in the disparity between the
wages of the median worker (50th percentile) and those of the worker
in the 10th percentile of the wage distribution. Lee’s work ties the absence
of policy change to increased inequality. We, in turn, argue that
polarization favors the policy status quo."
The book is pretty in-depth, but the basic claim is that polarization leads to economic inequality. Primarily because of Republicans blocking the Democrats from implementing social programs, or indexing them to inflation.