Is Income Inequality a problem?

Tyler Cowen argues in the NY Times today that income inequality in the US is not as much of a problem as is commonly thought.

The gist of the argument is this: Despite the fact the inequality is increasing, other measus of inequality--consumption, happiness--are not. Relate this to your own common experience. Bill Gates has earned billions over the past 2 decades. But has this prevented you from buying your new up to date cars, TV's, clothes and other goods? No. Granted, on a relative basis income inequality has increased, but on an absolute basis a vast majority of Americans are better off.

A counter response would grant this but say that relative inequality can dissolve social cohesion and foster jealosy. Cowen argues that this has been overstated as a concern for the US.