USA Inequality Update

from Peter Radford

In case you missed it: the US is a wildly unequal society, and it’s getting worse by the hour.

No surprise at all, but nonetheless some of the data can be quite eye-opening. Allow me to point you to David Cay Johnston and some of his analysis.

• Incomes have grown between 2009 and 2011. Great. But 149% of that growth has gone to the top ten percent of all income earners. Yes. More than all the increase has gone to a small minority. You knew that right?
• How? Because income for the rest actually went down.
• According to the Internal Revenue Service data you needed an income of above $110,651 to achieve top ten percent status. $366,623 gets you into the top one percent.
• And it’s worth getting into that top one percent: 81% of all the extra income earned since 2009 has gone to that lucky group.
• Even better if you can squeeze into the top of the top. The top ten percent of the top ten percent – bear with me here – managed to make off with 39% of all the income gains nationwide. That’s 15,837 households if you’re counting. Out of 158,400,000 households.

Now Johnston gets cruel: 

USA 1966 to 2011: One inch (for the bottom 90 percent) versus 4.9 miles (for the top .01 percent).

from David Ruccio

In the United States as David Cay Johnston explains,

In 2011 the average AGI [adjusted gross income] of the vast majority fell to $30,437 per taxpayer, its lowest level since 1966 when measured in 2011 dollars. The vast majority averaged a mere $59 more in 2011 than in 1966. For the top 10 percent, by the same measures, average income rose by $116,071 to $254,864, an increase of 84 percent over 1966.

Plot those numbers on a chart, with one inch for $59, and the top 10 percent’s line would extend more than 163 feet. 

The kids will be rich, unless Peter Peterson’s kids take their money

from Dean Baker

The Wall Street crew has been in high gear trying to convince the public that our children’s well-being is going to be threatened by their parents’ and grandparents’ Social Security. This story would be laughable except that it is endlessly repeated by people in positions of power and responsibility. For this reason it is worth going over the basic numbers yet again so that everyone knows that the people making these assertions are either ignorant or dishonest.

The basic point is that the economy gets more productive through time. This has been true for hundreds of years and no one has any good stories as to why it should not continue to be true long into the future.

Our measures of productivity growth are not very good for the years prior to World War II, but according to the Bureau of Labor Statistics in the 65 years since 1947 productivity growth has averaged 2.2 percent annually. There have been periods of more and less rapid growth.

Tax games and redistributing income upward

from Dean Baker

The corporate profit share of national income is near a post-World War II high. The share of income of going to the richest one percent is almost at its pre-Depression peak.

These would seem like impressive accomplishments but the process of upward redistribution, from Joe Sixpack to Joe Six Houses, is a never-ending struggle. Toward this end, Louisiana Governor and Republican wunderkind Bobby Jindal has just proposed replacing the state’s income tax with a sales tax.

Sales taxes will generally be more regressive than income taxes for the simple reason that low- and moderate-income people will spend a larger share of their income than upper-income people. That means that the portion of income that wealthy Louisianans save will escape taxation, imposing a larger burden on low- and middle-income families in any revenue neutral shift.

Parem delinquentis et suasoris culpam esse

from David Ruccio

The downward trend of labor’s share is not a recent phenomenon. It has been taking place (albeit not evenly or without disruption) since the mid-1970s.

Be that as it may, Paul Krugman now recognizes that the old storyline (of skills and education) no longer works to explain the obscene levels of inequality in the United States. 

Adam Smith, F. Zaman’s RWER paper and the 99% Movement

Social movements unsupported by strong intellectual storylines rarely prove successful.  For example, despite the everyday obviousness of their subjection, a century of brave women struggling for liberation never got beyond step one, the vote, until Beauvoir’s The Second Sex and its subsequent popularizations made both the injustice and the possibility of victory intellectually comprehensible.

The 99% Movement has emerged out of the street-level fallout from the stark reversal of the primary societal trends that for generations characterised the US, Canada and other countries: the now rapid and accelerating movement of wealth, income, opportunity and power away from the middle classes and into the hands of the wealthiest 1%, especially the 0.1%.  It is as if when no one was looking the socio-economics hourglass has been turned upside down.  And why was no one looking?  Because there was no theory or social narrative through which to view it.  It is not just science that needs theories to be able to see empirical reality.[1]  They are just as crucial, if not more so to societies.  That is why, for example, Thomas Paine was so important to the success of the American Revolution.  If there is no story that explains what is and how it came to be and moreover one that offers a possible victorious ending (“I have a dream.”), movements die a slow death under the weight of their grievances and the cost of their tactics.

Without the Beauvoirs major social movements become marooned at the tactical level.  Festering soon follows. The 99% Movement has not yet begun to fester, but it will if it does not begin now to integrate its gritty street-level narrative with a strategic intellectual one.  Until a few weeks ago no such possibility existed.  But now it does thanks to L. Frederick Zaman’s paper in the current issue of the Real-World Economic Review.

Nash dynamics of the wealthy, powerful, and privileged:
America’s two-player, Darwin metaeconomy
http://www.paecon.net/PAEReview/issue61/LFZaman61.pdf

Zaman’s primary inspiration, contrary to what his paper’s title suggests and also to what almost anyone might guess, is Adam Smith.  

Who are the 1 percent in the USA and how much do they make? (2 charts)

World map comparing income inequality in the USA to other countries

Source : http://www.theatlantic.com/international/archive/2011/09/map-us-ranks-near-bottom-on-income-inequality/245315/

Comparisons of income distribution in the USA in 2007 and England in the 17th century (2 charts)

from Edward Fullbrook

The following two charts from http://www.the-crises.com/  compre the distribution of income in the United States in 2007 and England in the seventeenth century.   

It is the worst of times, it is the best of times (USA)

from David Ruccio

Percent of income earned by top 0.1 percent of taxpayers – 6 countries – chart

from David Ruccio

Percent of Income Earned by Top 0.1 Percent of Taxpayers

source (missing years reflect lack of current data)

Lies, damned lies, and the right-wing use of income statistics

from David Ruccio

source

The right-wing wants desperately to show—against all the evidence—that the rich are being taxed to death and that income inequality has dramatically decreased. 

Expiration of Bush tax cuts for the 1 percent are a step forward, but not enough

from Mark Weisbrot

President Obama is currently confronting mostly Republican opponents over whether to extend the Bush tax cuts to the richest 1 percent of taxpayers. Between 1979 and 2007, the richest 1 percent received three-fifths of all the income gains in the country. Most of this went to the richest 10th of that 1 percent, people with an average income of $5.6 million (including capital gains).

So this is a no-brainer in terms of fairness: Allowing the Bush tax cuts to expire for the richest 1 percent of Americans would reverse some of the vast upward redistribution of income that has taken place since the late 1970s. However a couple of caveats are in order.

Where has all the surplus gone?

from David Ruccio

Where has all the surplus gone? 

Inequality—missing the story twice over

from David Ruccio

According to David Rosnick and Dean Baker, the OECD misses the story about inequality. But so do Rosnick and Baker.

The OECD misses the story because of (a) how they measure inequality—they focus on the gap between the top and bottom deciles (the richest 10 percent of the population versus the bottom 10 percent) and forget about the growing inequality within the top 10 percent, especially the share of income going to the top 1 percent—and (b) how they determine the causes of inequality—focusing too much attention on the effects of technology and not enough on changing labor market institutions and the growth of finance. 

Inequality and American exceptionalism

from David Ruccio

American exceptionalism has long been a contested notion.

But there is one area in which the United States has been exceptional from the very declaration of independence: the relative inequality of the distribution of income.

In 1774, the United States was much more equal than England and Wales (and more equal, it seems, than other western societies, such as the Netherlands). Today, more than 200 hundred years later, the United States is more unequal than any of the other advanced capitalist nations.

Thanks to recent research by Peter H. Lindert and Jeffrey G. Williamson, we know that in 1774 the top 1 percent of households had about 9 percent of income—compared to 17.5 percent in England and Wales, and 17 percent in the Netherlands. 

And the rich get richer

from Susan Feiner

A camel and a rich man walked into a fun house. Reflections bend. Turning to each other they asked, “Mirror, mirror on the wall, who’s unfairest of them all?” 

Camel said: “Dude. Unfairest? That’s easy. It’s this country’s economy.”

Rich man: “Say what? This is the fairest place in the world. America is the land of opportunity.”

Camel said: “Not now. Things have changed. In America if you’re born poor, you’ll probably stay poor. Sixty-five percent of Americans born into the bottom fifth of the population stay there, and only 8 percent of the men born at the bottom make it to the top. But 12 percent of British men, and 14 percent of Danish men climb to the highest strata of their societies. Don’t believe me? International comparisons ‘shocked’ John Ridgeland, former aide to President George W. Bush. He said Republicans should talk about the ‘lack of access to the American Dream.’ “

Rich man: “Pshaw. Put your shoulder to the boulder. Work harder.”

Fed survey shows middle class took a big hit

from Dean Baker

The Federal Reserve Board’s newly released triennial Survey of Consumer Finance (SCF) confirmed what most of us already knew: The middle class has taken a really big hit. It showed that between the 2007 survey and the 2010 survey, the typical family had lost 38.8 percent of their wealth. In fact, the wealth of the typical family was down 27.1 percent from where it had been a decade ago in 2001. This is in spite of the fact that the economy was more than 15 percent larger than in 2010 than it had been 2001.

It wasn’t just wealth that had dropped; the survey showed that income had fallen as well. Median family income in 2010 was down by 7.7 percent from its 2007 level and 6.3 percent from its level a decade ago.

The average American household is becoming increasingly worse off.

from David Ruccio

The average American household is becoming increasingly worse off.

According to the Fed’s latest Survey of Consumer Finances, both average income and average wealth in the United States fell during the 2007-10 period: real before-tax median income by 7.7 percent (to $45,800 in 2010 from $49,600 in 2007) and real net worth by 38.8 percent (to $77,300 in 2010, compared with $126,400 in 2007).

Where has all the surplus gone?

from David Ruccio

Where has all the surplus gone? As in 2010, a good chunk of it has gone to pay Chief Executive Officers of major U.S. companies.

According to a new Associated Press study, the head of a typical public company in United States made $9.6 million in 2011. This figure was up more than 6 percent from the previous year, is the second year in a row of increases, and is the highest since the AP began tracking executive compensation in 2006.

According to my calculations, using Bureau of Labor Statistics data, the typical CEO therefore made 254 times the typical U.S. worker (whose annual pay in 2011 was $37,813).

Here’s the list of the 20 highest-paid CEOs: