When the government provides you with a safety net that affords a comfortable living in the event of misfortune, you are less likely to save money. Before Social Security, if you wanted a comfortable retirement, you had to save. Before unemployment insurance, if you lost your job you had to save. If you had a health issue you hoped you had saved enough.

These circumstances force people to save money as a personal insurance policy. But now that we have social safety nets Americans are not required to save in order to maintain their economic status in the event of a change in life circumstances. Therefore government safety-net programs, such as Social Security, unemployment benefits and national healthcare, result in a much lower savings rate among working Americans. It is not surprising that as the American welfare state increases its reach, the wealthy become relatively more wealthy. The increased reach of welfare programs is bad; it is an indicator that working Americans are saving less and are unable to reap the benefits of having savings working for them in the form of investments.
If America wants to reduce its income and wealth disparity, it needs to shrink the social safety network by enabling Americans to wean themselves off the welfare system through intelligent saving and educated investment.