The growing gap
from David Ruccio
The growing gap between those at the top and everyone else has been both a condition and consequence of the pattern of capitalist growth in the United States since the mid-1970s.
Uwe Reinhardt shows this with the chart at the beginning of this post.
Reinhardt bases his analysis on a recent study by Anthony Atkinson, Thomas Piketty, and Emmanuel Saez [pdf]. They show that most of the income growth in the United States from 1976 to 2007 has been captured by the top 1 percent.
The ability of those at the top to capture most of the income growth since the mid-1970s explains a large part of the inequality that emerged during that period—and, of course, the crisis that erupted in 2008.
It also means, when it comes to the deficit and debt debate, we have witnessed an explosion of “tax capacity” at the top, which can be tapped to restore and expand social programs for the rest. Atkinson et al. are clear about this:
we can ask whether increased taxes on the top income group would yield appreciable revenue that could be deployed to fund public goods or redistribution? This question is of particular interest in the current U.S. policy debate where large government deficits will require raising tax revenue in coming years. The standard response by many economists in the past has been that “the game is not worth the candle.” Indeed, net of all federal taxes, in the United States in 1976 the top percentile received only 5.8 percent of total pretax income, an amount equal to 24 percent of all federal taxes (individual, corporate, estate taxes, and social security and health contributions) in that year. However, by 2007, net of all federal taxes, the top percentile received 17.3 percent of total pretax income, or about 74 percent of all federal taxes raised in 2007. Therefore, it is clear that the surge in the top percentile share has greatly increased the “tax capacity” at the top of the income distribution. In budgetary terms, this cannot be ignored.
But it is being ignored, to the benefit of those at the top and to the detriment of everyone else, who are at the bottom of the growing gap.*
* A few members of the French and German elite have called for higher taxes on themselves and other rich citizens.