Opinion

The Great Debate

The middle class’s missing $1.6 trillion

By Charles R. Morris
February 13, 2014

The United States was the world’s first middle-class nation, which was a big factor in its rapid growth.  Mid-19th-century British travelers marveled at American workers’ “ductility of mind and the readiness…for a new thing” and admired how hard and willingly they labored. Abraham Lincoln attributed it the knowledge that “humblest man [had] an equal chance to get rich with everyone else.”

Most Americans still think of themselves as middle class.  But the marketing experts at the big consumer goods companies are giving their bosses the unsentimental advice that the middle class is an endangered species. Restaurants, appliance makers, grocery chains, hotels are learning that they either have to go completely up-scale, or focus on bargains for the struggling and budget-conscious.

Current income surveys, for statistical reasons, usually segment families by broad categories, which obscure the recent radical shift of income to a thin stratum of the super-rich. Well-to-do people may buy $100 coffee pots, but the lion’s share of the income growth has been going to folks with five houses and staff to make the coffee.

For the last 15 years, an international consortium of economists has been building data bases on the income shares of the richest people in the developed countries, based on pre-tax market income including capital gains and tax-exempt income, and excluding government transfers. The American data reveals the greatest inequality by far, followed by Great Britain.

The stunning income distribution has a remarkable symmetry.  In 2012, the top 10 percent captured half of all reported income. But the top 1 percent got almost half of that — 22.5 percent — while the top 10th of 1 percent (0.1 percent) captured half of that. All three are within a few decimal places of the previous highs — which occurred in 1928, just before the market crash that ushered in the Great Depression.

The percentages don’t quite capture the violence of the skew.  The stock market implosion of the 1930s followed by World War II’s strict price controls and high marginal taxes brought the top 1 percent’s income share down to about 9 percent by the end of the war.  Executive and financial sector pay was quite restrained, even through the good times of the 1950s and 1960s, and the 1 percent’s income share did not start to rise until the late 1970s. It took off for the stratosphere then — amid the oceans of cash sloshing around Wall Street during the 1980s leveraged buyout boom.

The sums involved are enormous. The difference between the 1 percent’s income share in 1975 (8.9 percent) and today’s 22.5 percent is 13.6 percent.  That additional share of personal income is worth $1.6 trillion.  Each year.

What can you buy with $1.6 trillion?  Well, it’s more than the annual outlays for Social Security payments, and about twice as large as Defense Department appropriations.  It’s enough to pay off the federal debt held by the public in about seven years.

To amass that incremental $1.6 trillion, the 1 percent took 68 percent of all personal income growth between 1993 and 2012. To be fair, those same folks lost a great deal of income during the 2008 financial collapse, because much of their income comes from financial assets. But during the recovery of 2009-2012, they took a whopping 95 percent of the income growth — so their relative income and wealth positions are nearly all the way back to their pre-2008 high.

The canonical retort to such musings is that all segments of society benefit from a well-fed and contented super-rich. They are the ones, the argument goes, who supply the high-octane financial fuel to maintain America’s advantage in high technology, keep its job-creation machinery humming, and lay the foundation for solid long-term growth.

Unfortunately, that is not proved true in recent experience. Since financial markets were liberalized in the 1980s, the finance sector’s income and debt has soared, income inequality has skyrocketed, and the world economy has flopped from crisis to crisis – the Savings and Loan fiasco, the petrodollar debacle, and the leveraged buyout  circuses of the 1980s; the “hot-money” driven currency crises and hedge-fund collapses of the 1990s, and the hallucinatory mortgage games of the 2000s.

The dangers of runaway finance have been getting some academic attention of late, as scholars have begun connecting the dots between the super-rich and financial instability.

The very rich do invest productively, of course, and are also interested in capital preservation — so large segments of their portfolios are invested in safe, AAA-rated assets. As their income soared, however, their appetite for safe assets greatly outstripped the available supply. so the financial industry dutifully set about creating allegedly top-quality assets out of whatever lower-quality paper was at hand.

Adair Turner, the former head of the British financial regulatory authority, has outlined the “complexification” of finance that gave rise to the insane derivative structures and synthetic portfolios that unraveled so dramatically in 2008.

Stephen Cecchetti and Enisse Kharroubi, two senior economists at the Bank for International Settlements, have documented the “inverse U-shaped curve” of finance’s contribution to the economy. The history of all developed countries shows that as finance employment rises, economic growth and productivity increases. But only up to a point. After that, continued growth of the finance sector often triggers falling growth and declining productivity.

The two authors also worked out a model of why this happens. As the financial sector grows more sophisticated, it competes with technology and manufacturing industries for the smartest and most ingenious engineers and mathematicians. At the same time, however, broad-gaged finance needs highly “pledgeable” assets that can be readily leveraged, like residential and commercial mortgages. (High-technology investing has a very high risk of failure, and so is the preserve of specialist venture-capital firms.)

The best and the brightest, they found, instead of creating new technology breakthroughs, become the servants of the super-rich — because they pay the most.  The  engineers devote themselves to increasing low-productivity, easily understandable assets in order to transmute them into new, highly complex, instruments that look super-safe, but often aren’t. How to wreck an economy in three easy steps.

Reversing these realities, unfortunately, will take at least as much time as it did to create them. But we have to start somewhere and keep at it for a couple of decades.

The first step should be to continue to rein in the financial sector. Turner of the British financial authority, points out that a key founder of the “University of Chicago School” of free-market economists, Henry Simon, opposed almost all government regulation, except for the financial sector. Simon understood that very smart people applying high leverage to other people’s money is an invitation to disaster, and so required tight regulation. The most important step today might be breaking up the mega-banks that emerged from the crash. Then they would be easier to police — and easier to indict.

Second should be to start rolling back the income shares of the very richest people by targeted taxation and other strategies, including radical tax simplification to reduce the legal cubbyholes for sheltering income. The economist Brad DeLong wonders why the middle classes haven’t risen up and demanded fairer income distribution.

Reducing the top 1 percent’s income share to, say, 14 or 15 percent, still much higher than the pre-1980 norm, would free up about $1 trillion for middle-class tax relief; higher minimum wages; pension, healthcare, and educational subsidies, or job-creating infrastructure construction.

That wouldn’t solve all of our problems. But it would help put America back on course to realizing its original promise.

 

ILLUSTRATION (TOP): Matt Mahurin

PHOTO (INSERT 1): At least 20 private jet aircraft sit parked at the Friedman Memorial Airport during the Allen & Co Media Conference in Sun Valley, Idaho July 13, 2012. REUTERS/Jim Urquhart

PHOTO (INSERT 2): A model presents a creation from the Oscar De La Renta Autumn/Winter 2013 collection during New York Fashion Week, February 12, 2013.

PHOTO (INSERT 3): A couple walk with Hermes shopping bags as they leave an Hermes store in Paris March 21, 2013. REUTERS/Philippe Wojazer

Comments
49 comments so far | RSS Comments RSS

This is from 2010 but I think if the same data was used this would still the case.

Middle Class–Not the Rich or the Poor–Pay Majority of Federal Taxes, Says CBO Data

http://www.cnsnews.com/node/68094#sthash .PiptoIt8.dpuf

Posted by UselessEater | Report as abusive
 

Moving forward a generation, the children of the weathy 1% inherit ‘their share’ of parental wealth and they stay at the top of the heap having added nothing but weight to the monetary mountaintop. They live off the interest of the invested capital at little or no tax and add no value beyond shopping sprees at LVMH in Capri or wherever their jet is parked.

At the same time the engineers have now spent what little commercial capital was invested in the top 1% businesses and they’ve managed to automate the work that was previously done by the working class and managed by the middle class…. and all of these lower on the totem pole are now unemployed. The engineers retire on bonuses earned for improving productiviety.

Now the “population growth”: the next generation, the children of the 99%, are also unemployed, or competing with their parents for the few human contact service sector jobs still available.

So as the ‘takers’ increase proportionally, who is left to pay to keep them alive? Or is this where darwinian evolution comes in?

It really depends on what type of society you want. But the future isn’t that far off and somebody had better come up with a proper plan or we are all doomed to be disappointed.

Posted by euro-yank | Report as abusive
 

… I was just informed that I failed to acknowledge the real place that all the previously middle class and now un- or under-employed in the US need to go to be kept alive: churches and charity.

So, assuming the rich kids religiously tithe 10% – or give generously to the charity of their choice …. well, that takes care of some of the problem and brownie bonus points are earned for life ever after……

*Reality shows that Americans only give less than 1.5% of their income on non-church charity and including church, the Mormons in Utah give the most 10.6% , Christians in the Bible belt around 6% and Yankees around 5%. (Not surprisingly state tax rates show an inverse trend proving a balance in the end).

Posted by euro-yank | Report as abusive
 

I think the following should be done:

1. The super rich can accumulate as much as they want during their lifetime.
2. However, on death, any inheritance over 1 million USD per child/spouse (to a max of 5 million)should go as taxation.
3. They are subject to exchange control – they cannot transfer their wealth outside of the borders.

Posted by BidnisMan | Report as abusive
 

The economic climate of the 20th century was quite unusual, especially in the United States. All we’re seeing now is a reversion to the norm (economic climate change, if you will). The oligarchs have always been in control, and the masses of the “enlightened” modern era are no less gullible than the peasants and serfs of the past. Deal with it.

Posted by e73bd9jdsg36nbd | Report as abusive
 

The middle class and the poor are beginning to rise up.

The seed of revolution is being planted with continual stolen inflation and productivity gains by executives, business, and the wealthy.

People are talking and writing about the minimum wage, living wage, inequalities in wealth and income, and tax loop holes and subsidies for business and the wealthy.

The excessive greed of seeking even lower effective tax rates and more subsidies for business and the wealthy.

The placement of fear in no jobs or lost jobs by republicans and conservatives if business and the wealthy do not get lower taxes and deregulation.

Resulting in no investment in infrastructure, education and job training, and lower quality of life for Americans.

Our disasters, natural and man made are now leaving our citizens with poor drinking water and air quality, and bankrupting municipalities and families.

Businesses socializing their cost of doing business by dumping carbon into our air and chemicals into our waters is creating ailments and deaths.

This continuation, there is no doubt the seed for revolution is being planted.

Posted by Flash1022 | Report as abusive
 

Middle class is the golden goose.

Businesses over the past two decades, mastered the art of reaping the goose eggs while starving it through WTO’s free-trade with unimpeded duty-free imports.

This led to current day’s polarized society with business expecting more goose eggs (growth) out of a starved goose that the goose is incapable of delivering any longer.

Posted by Mott | Report as abusive
 

Millions of mddle income families have become upper income families….check the USCensus’ household income data from 1967 to 2012 (table H17).

Posted by jambrytay | Report as abusive
 

That’s what is happening when instead of hiring software engineers (whose jobs went to China and India), you begin hiring financial engineers. As simple as greed.

Posted by UauS | Report as abusive
 

@jambrytay

I have reviewed Table H17, & 690, & 691 that showed both current & constant dollars of The US Census household income data from 1967 to 2008. I was unable to locate data through 2012 if it is available at all.

Upon analysis, other for those over $100K income for all in current dollars rose, but in constant dollars they fell. Those making under 100K, the percent share of income fell.

For those making over a 100K the percent share of income rose, and income in constant dollars rose dramatically too.

These tables do not include executive compensation from stock bonuses, particularly those boosted with stock buy backs.

In other words, with deeper analysis, the wealthy have taken a larger percentage of income and wealth

Hourly workers have not received inflationary or productivity increases since the 70′s.

For those over 100K

Posted by Flash1022 | Report as abusive
 

The question becomes, what are we going to do about it? As Mr. Morris’s excellent op-ed points out, things have become extreme and it’s doing serious detriment to the once great American Middle Class.

Americans have become politically lazy and seem to have an endless grab bag of excuses to do nothing and just let things take their course. One thing is certain: Things will only get worse until we take responsibility for OUR government and OUR economy. We tend to forget that they are ours. That’s why democracy (yes, I know, a representative democracy, not a pure democracy) is the best form of government. There’s a disturbing trend on the right to buy into the absurd myth that government doesn’t exist to serve the people, but that’s all government exists for. That should not be interpreted to mean it’s government’s job to take care of us, and the American people aren’t making that argument, despite what Mitt Romney said about the 47%. We want to work. We want affordable healthcare. We want a bigger piece of the profits. CEO earnings used to be 40 times that of the average worker. Now it’s about 350 times higher. Their earnings have skyrocketed and everyone else’s have remained stagnant, at best. And it’s not because Americans aren’t working as hard. Our productivity still ranks among the top in the world. If a company doesn’t like having to pay a better wage, let them move their corporate headquarters to some less secure country, like China. I say, good luck with that.

It’s time for the American people to become the priority again, not the maximization of profits for .1% of the people. We need to raise taxes on the rich and invest in our country’s future. I support a tax on all stock trades and to raise taxes on capital gains. And we need serious campaign finance reform so that our politicians answer to us and not just the wealthy.

Posted by carnivalchaos | Report as abusive
 

No mention to gentrification…

Posted by Maruzik | Report as abusive
 

This article adds to the current and popular commentary on income distribution in the U.S. As with the great majority of such writings, there is little interest in detailing ways in which public policy can be changed so as to promote economic growth. The author joins many others in neglecting to point out that it was the private sector that made the U.S. the first middle class country. Like usual (and as with President Obama) he has no prescriptions for engaging the private sector, so that it can promote employment and wealth-building among the many, as it has done so successfully, throughout U.S. history.

Posted by ExDemocrat | Report as abusive
 

How can public policy be changed? Perhaps organizations like Better Markets (who are suing the US Justice Department over the recent “settlement” with JP Morgan/Chase) can gain some traction is raising public awareness of the all to cozy relationship between the wealthy, the financial sector and the executive and legislative branches of government. I’m sending a donation to Better Markets in the hope that they can make some headway in eventually changing some of the rules of finance. You have to start somewhere.

Look at http://www.bettermarkets.com

Posted by Missinginaction | Report as abusive
 

Excellent article. I hope some people learn something from this!

Posted by KyleDexter | Report as abusive
 

Flash1022-

I’m not making an argument one way or another on GINI indexes or other income inquality measures. The data does show more higher income households, fewer middle income househoulds, and a slight drop in lower income households over the long haul.

I’ve graphed the data at the link below as well as explored some possible explanations for this increase in middle income prosperity:
Check http://unrepentantcapitalist.blogspot.co m/

Posted by jambrytay | Report as abusive
 

It was World War II that made the American middle class. Shall we have another? Though I doubt that modern warfare would produce the same affect.

Posted by tmc | Report as abusive
 

jambrytay

Evidently we are corresponding past each other.

You are using current figures only and disregarding extraneous items such as lost employer benefits such as health care, pensions, etc.

You are also disregarding non monetary executive compensations, and tax advantages of high income earners such as stock payments and bonuses.

You are also not including the affect of flattening of the progressive tax that has had the greatest impact on income and wealth inequality.

If you would recalculate using constant figures and allow for all the extraneous measures you may have a different conclusion.

But simply Table 691 in constant dollars tells it all. No calculation needed.

I believe you may be playing the figures for you own conclusion.

Posted by Flash1022 | Report as abusive
 

my friend used to be “middle class”…he used to afford health Insurance….he can’t anymore…!

Posted by rikfre | Report as abusive
 

Flash1022,

Lots of ways to measure financial well being, I’m using income. While income probably can’t tell 100% of the story, it can tell a lot of the story. I’m not getting your ‘recalculate using constant figures’ comment. Table H17 is in contant, current day dollars that allows for year to year comparisons.

Posted by jambrytay | Report as abusive
 

jambrytay

You can not have both current and constant dollars. they are two different measurements.

Table H17 is in CPI adjusted dollars which could be the same depending on how one means constant. Constant just means indexed to some time value. What is important in viewing Table 17 is that the percent of income obtained decreases for those income groups under 100K, and the percent income obtained increases for those over 100k. There is no calculation necessary, it is in the table.

What bothers me is that these tables only indicate >100K. I believe if there were higher income groups the tables would show greater percent income obtained and constant dollar increases, greater income inequality.

Posted by Flash1022 | Report as abusive
 

They are not different measures. They use current day dollars to keep the dollar amounts over time expressed in a constant value which allows for year to year comparisons. If they wanted, they could adjust everything to 1967 dollars (multiply 2013 dollars by .14, 2012 dollars by .15, and so on – bls.gov has a year to year CPI conversion calculator) and we’d have constant old dollars. That would look goofy and would be hard for people to relate to in 2013, so they adjust everything to today’s dollars.

The larger point is, today we have more high income families and fewer middle and lower income families than we did in 1967.

BTW, table H17 does show the breakdowns for incomes over 100k.

Posted by jambrytay | Report as abusive
 

The author tries to create an image of the best and brightest, who deserve to be successful by nature.
Maybe he don’t know, he don’t want to know or he simply ignores the fact, that the 1% recruits its human resources by itself.
He should focus on networking. You dont need to be very intelligent to regulate markets and the economy within closed networks.

Posted by seafloor | Report as abusive
 

“Why are only illiterates talking who receive money from certain circles meanwhile our best and brightest remain silent?”, is the Iranian president Rohani questioning.
Transfered to the US I’ve to agree by experience. President Obama doesn’t has Rohani’s courage for change. He prefers to play gulf.

Posted by seafloor | Report as abusive
 

To prevent from misunderstandings Rohani was not blaming the US in the quotation above. He’s refering to the Iran.
Nonetheless he demonstrates, that some countries with the same problems try to solve them and other not.

Posted by seafloor | Report as abusive
 

jambrytay

The charts I can only find are 1967-2008, and the H17 states over 100k with no other break down.

Please use a link so I may access those brakes downs over 100K, and stats beyond 2008.

Also, we cannot communicate when their is not an agreement on the meaning of constant and/or current dollars.

You also have not responded that Table 691 in median income in constant dollars shows a nominal decline in income for the middle class, and Table H17 CPI adjusted showing a greater proportion of income going to those over 100K while the proportion of income under 100K declines. There are no mathematics necessary unless your looking to game the figures to your opinion.

Maybe we can continue this correspondence at my e-mail flashwrk22@att.net

Posted by Flash1022 | Report as abusive
 

@Useless Eater
Rather than getting your information second hand from CNSNews, you can go straight to the Congressional Budget Office itself for much more up to date ‘CBO Data’ here:

http://www.cbo.gov/publication/44604

Quote: “In 2010, the federal tax rate for the bottom quintile of the income distribution was 1.5 percent and that for the top quintile was 24.0 percent (see the figure below). The top 1 percent of all households in the United States had an average federal tax rate of 29.4 percent in 2010.”
“Higher-income households pay much more in federal taxes than do their lower-income counterparts: They have a much greater share of the nation’s before-tax income, and they pay a much larger proportion of that income in taxes. Households in the top quintile (including the top percentile) paid 68.8 percent of all federal taxes, households in the middle quintile paid 9.1 percent, and those in the bottom quintile paid 0.4 percent of federal taxes.”

Posted by walstir | Report as abusive
 

There isn’t some sort of national income pie that gets distributed. There is limited or negligible interdependence between many sectors of the economy. If London were still the world financial center instead of New York; then much of the economic activity that takes place in the US would be taking place in the UK. The presence or absence of wealthy people may make you relatively richer or poorer; but not necessarily absolutely any richer or poorer. If Warren Buffet built himself a retirement home in your community; then the relative wealth inequality in your hometown would jump when he came to stay and drop when he left – this isn’t necessarily going to make you personally any richer or poorer.
Here is a well know Bill Gates story that illustrate­s the distinction:

Bill walks into the bar at a hotel that is hosting a convention of statisticians. Suddenly, they all start giving each other high fives and ordering free rounds for everyone from the bar. Bill asks one of the statisticians what all the excitement is about and gets the reply: “Bill, the moment that you walked through that door, the average net worth of each person in this room immediately went up by tens of millions of dollars”.

Posted by walstir | Report as abusive
 

Data from ’67 -’12 is here:

http://www.census.gov/hhes/www/income/da ta/historical/household/2012/H17_2012.xl s

I downloaded into excel, created 3 groupings (less than 25k, 25 to 100k, and over 100k) and then plotted those three groups from ’67 to ’12. That simple, no statistical sleight of hand.

Posted by jambrytay | Report as abusive
 

walstir

I believe you are quoting nominal tax rates.

You may find the effective tax rates are more unequal. Particularly business taxes when GE pays no taxes and is given subsidies.

However, since the Eisenhower Administration when the nominal tax rates for high income were over 90%, we have had tax reductions in the name of job creation. You would think by now we would have 0% unemployment.

What we have done is destroyed our tax base.

If we had not taken those tax reductions and paid for our wars we would have a surplus today.

We have a revenue problem, not a debt problem.

Posted by Flash1022 | Report as abusive
 

jambrytay

Thanks for Table H17, CPI adjusted

100K=substantial increase in percent income distribution from the 70′s.

Do you see this?

Posted by Flash1022 | Report as abusive
 
Posted by Flash1022 | Report as abusive
 

I guess we’re saying the same thing. In 1967, 7.4% of households were high income and in 2012, 22% were high income. Lots of former middle income families are now high income families.

Posted by jambrytay | Report as abusive
 

No we are not saying the same thing.

Table 17 has to do percent income distribution only, not people moving from one level of income to another.

This is why Table 691 is important. Table 691 shows income decreasing in constant dollars.

We keep corresponding past each other, again.

My education is in math & science, and am an energy auditor working with charts and figures.

Who are you?

Posted by Flash1022 | Report as abusive
 

My basic assertion is that we are a more prosperous society over the long haul and the census data in table H17 supports that notion as we have fewer lower and middle income families and more upper income families over the 46 year timeframe of their data. The popular narrative today is that the middle class is and has been going downhill. If that we’re true, we’d have more lower and middle income families and fewer upper income families over time (we don’t.)

The University of Michigan has a study called the Panel Survey of Income Dynamics. They’ve followed a large number of families and have tracked income data on these families over many years. Their data suggests that, for the most part, the lower income families are young and their modest income is a temporary stop on the income ladder. Over time, younger, poorer families become middle income, and with time, many middle income families move to upper income. Many families earn their way into higher income groups over time.

I’m not sure I would base my arguments solely on table 691 as it shows less history vs. table H17 and also shows only median income. As this data is not terribly Gaussian (it has a large standard error) I don’t believe median is as meaningful in terms of telling the story.

I would say our educational backgrounds are similar. I am a consultant and also spend a lot of my time working with data.

Posted by jambrytay | Report as abusive
 

Polarization of the income spectrum is a sign of an unhealthy economy, bad news for everyone, although for the 0.1 % er’s a decaying society is an excellent short term source of carion, however even for them once the corpse is gone the vultures starve.
Two solutions really, one it gets to the stage where society completely collapses, peons revolt, revolution ensues. Not very likely really, people really need to be starving literally en mass for that to happen.
Two, you stop the Mitt Romney types getting away with 8% tax rates.
Tax reform should be the number one priority for the US, good luck with that though. Glad i don’t live there.

Posted by thinker72 | Report as abusive
 

You do understand that folks like Mitt Romney make most of their income via capital gains (money that has already been taxed at least once) and very little by comparison in the form of a salary. Capital gains rates are lower than the top marginal rates which Obama himself has said he favors.

Posted by jambrytay | Report as abusive
 

jambrytay: What exactly is it that you’re trying to say? I’m sure you are aware that middle income wages have remained stagnant for the last 30 years or so and that the earnings of the top 1% have increased exponentially. Whereas in the 1960s the average CEO made about 40 times more than the average worker, now it’s somewhere around 350 times more, and yet US productivity has remain among the top internationally during that same period. Also during that same period taxes on the wealthiest have been significantly cut. They’re paying a much smaller percentage of their income in taxes. As you allude to, capital gains tax rates are low. In fact, they’re lower than they’ve ever been since the era that led to the Great Depression.

Where do you get the notion that a person’s capital gains have been taxed already at least once? Your initial investment has been taxed already (presumably), but not your capital gains. If you invest $1000 in 100 shares of Company XYZ’s stock, for example, then sell those shares for $1500, you only have to pay taxes on the earned $500. Just once.

Shamefully, the US has the worst income inequality among all developed nations. At the same time, we also rank at the bottom for upward mobility, as well as the worst for overall wealth disparity. Healthcare has become unaffordable for millions of Americans as is a college education, an imperative for upward mobility. It’s easier for companies to declare bankruptcy, but it’s been made harder for individuals. Labor unions have been rendered nearly powerless and corporate control of our government is to the point where most Americans, 99.9%, don’t have representation in our government. Government officials spend at least half of their time raising money for their next campaigns, mostly from the wealthiest .1%. The conservative Supreme Court has declared that money equals free speech, which means those who have it get heard and everyone else gets ignored. This Supreme Court has effectively outlawed any serious campaign finance reform. Lobbyists literally write the laws that we are to live under.

It’s an abysmal time for the American Middle Class and unless we, the people, force serious change (because it won’t come for our politicians), it’s only going to get worse. I’m sure you’ve seen the Oxfam report on wealth inequality. (In case you haven’t: http://www.oxfam.org/sites/www.oxfam.org  /files/bp-working-for-few-political-cap ture-economic-inequality-200114-summ-en. pdf) This report points out that 85 of the richest individuals in the world have as much wealth as the lower 50%. The richest 1% have about $110 trillion, 65 times that of the poorest 50%. Yes, this is referring to the entire international community, but no where has the rich gained a greater percentage of income than here in the US. Since the recent economic collapse here in the States, the top 1% took 95% of the growth in income and the bottom 90% lost ground.

These are stunning developments and threaten world stability. It’s the stuff revolutions are made of. If capitalism is only rewarding a tiny minority, as all of these statistics verify, then what good is it? I’m not anti-capitalist, but I do accept the premise that an economic system is only as good as the percentage of people it benefits. Capitalism has been shown to benefit societies throughout the world, the reason I’m a capitalist, but let’s never forget that it’s not some kind of organic system that automatically defines itself. It’s a man-made system defined by man and currently the plutocrats are fine-tuning our free market system to steer the wealth of the world to them at the expense of everyone else. Here in America we’ve allowed these plutocrats to convince enough of us that regulations are bad, that we don’t deserve affordable healthcare, and that government does not exist to serve its people. It’s why America is at the top of the wealth inequality charts. Regulations are necessary in making sure all people willing to work benefit from a free market economic system.

Posted by carnivalchaos | Report as abusive
 

jambrytay

I’ll show you in more detail Table H17.

In the category 35-49,999K a person, which is approximate median income, in 1972 received 16.4 percent of total CPI adjusted income dollars and in 2012 that individual’s total CPI adjusted income dollars fell to 13.6 percent

Now if that same person would be making over 200K his share in 1972 of total CPI adjusted income dollars is 0.9 percent, in 2012 his CPI adjusted income dollars has risen to 4.5 percent.

This is the clearest example I can give that Table 17 indicates income inequality has grown.

And then again do not forget less benefits and/or higher costs of benefits forced on employees.

The tax advantages of high income earners, and non wage compensation for high earners.

Welfare for the wealthy.

If this does not make the point of income inequality, there would need to be discussion outside this format.

Posted by Flash1022 | Report as abusive
 

carnivalchaos-

My contention is that US families have become more prosperous over time including many former middle income families that are now high income. There is a widely held belief that the middle class was doing great 50 years ago, and has fared poorly since. I’m not buying it.

When I say the money has already been taxed once, I’m saying you made the original investment using some of your wages, and that money was subject to income taxes. If the capital gains in question were from dividends, those dividends were paid net of corporate income taxes (the 2nd tax dip). There are scenarios for 3rd dips and beyond, but those explanations get long.

Flash1022-

In my posts here on Reuters or in my personal blog, I have never denied that income inequality exists. Income inequality tells you how different groups are faring relative to one another, but does not tell you how the lower income group is doing in absolute terms. Income inequality exists, I’m just not as worked up about it as others seem to be. If you want to see my feelings on the topic, I would point you to my blog. I’m sure we differ on topics, but you might discover we have things in common too. http://unrepentantcapitalist.blogspot.co m/2012/11/the-business-of-america-is-bus iness.html

Posted by jambrytay | Report as abusive
 

Flash1022,

Something just occurred to me. I think you’re reading H17 incorrectly. The %’s shown are not %’s of the total income each group earns, but shows how many households are in that income bucket.

Posted by jambrytay | Report as abusive
 

Mr. Morris – awesome. This can be fixed overnight, as you pointed out – they can crash the system over night, so they can fix it over night, and the 20 year mark will not work. The greed accumulators can stop their own behaviors, NOW. Why don’t they all get together and pay off the US Debt they crated. I saw some of their handiworks with the cute little fines. Or, provide Universal Health Care with a healthy system. This fragmentation of care is beyond inefficient and incompetent.

Posted by 2Borknot2B | Report as abusive
 

Bravo, Mr. Morris. Those rumblings you hear from America’s previous middle-class will play out at the ballot box in the 2014 and 2016 elections. Now that we realize OUR government and democratic systems have been hijacked and nearly destroyed by the insatiably greedy and power-hungry top 1% global financial elite we will replace their handmaidens and stop the forced march to 3rd world status they envision for us.

Posted by njglea | Report as abusive
 

There is income and there is wealth. Accumulated wealth – and power it gives the top 1% financial elite over the planet – is the real evil in the world today and must be taxed around the world to a reasonable level.

Posted by njglea | Report as abusive
 

jambrytay: You’re certainly entitled to your opinion, but every indication suggests that you will be standing on the wrong side of history when this all comes to a head, and it will come to a head. That’s okay. You’re filling a necessary historic role because there are always people arguing that everything is fine, that the Titanic is unsinkable and the fears are unfounded. You play your role well, though I must admit I’m a bit disappointed that you simply sidestepped all the evidence I confronted you with, choosing instead to base your argument on one chart that is open to at least two interpretations.

I’m just glad we’re finally beginning to have this discussion, because most people sense that the economy has become skewed disproportionately favoring the rich. Not only do most people believe that and feel that, but there’s plenty of evidence supporting it. So if you want to think that the American Middle Class is doing fine when, coming out of the worst recession since the Great Depression, the top 1% has made 95% of all the gains and the lower 90% have actually lost ground, then you go right ahead. Enjoy your bottle of Dom Perignon on your way the the ocean floor.

Posted by carnivalchaos | Report as abusive
 

I’ve never said everything is okay. Pretty broad brush you’re painting with there.

Posted by jambrytay | Report as abusive
 

Jambrytay is just a paid troll, ignore!

Posted by thinker72 | Report as abusive
 

@walstir: Thank you for CBO link, very informative.
But I guess it’s not the numbers that counts, but the way to interpret them. Here is one interpretation that I personally inclined to trust:
http://money.cnn.com/2013/03/04/news/eco nomy/buffett-secretary-taxes/

Posted by UauS | Report as abusive
 

“The ultra-rich are what drives the economy because they re-invest the money in America.”

They do? Show us.

Posted by AlkalineState | Report as abusive
 

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