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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: 

  • If you are in the bottom 90% the average adjusted gross income – AGI to tax geeks – was $30,437. That’s going in the wrong direction, and is the lowest, when adjusted for inflation, since 1966. Read that again. Now weep.
  • To put this in context: allowing for inflation the AGI of the bottom 90% of tax paying Americans had risen precisely $59 since 1966. $59. Now weep again.
  • Let’s give this even more context: the increase in average AGI for the top 10% rose by $138,793, or 84%, over the same period. Do I need to say it again? Weep!

One last trick: if we make that $59 gain the majority managed to eke out equivalent to a one inch line, the gain the lucky 10% received is a line extending 163 feet. And the line the even luckier top 1%? Well, their line goes on and on. For nearly five whole miles.

OK enough weeping.

Clearly something is amiss in the land of opportunity.

The game is rigged.

Is that a problem?

You bet it is.

  1. March 28, 2013 at 4:27 pm

    Reform Money,Take MONEY POWER Back For The People. Have a Goal Of Equality: 50% of the people have 50% of the Wealth.
    How’s this for a win-win. Working toward equality while at the same time preventing deflation?
    Ben Bernanke could deserve the Noble in Economic Sciences.He has proven that QE can purchase massive amounts of assets without any increase in deficit spending. He has proven QE can produce a stream of revenue income. He needs only to do it FOR THE BENEFIT of the PEOPLE, rather than for the benefit of the private for profit banks(PFPB).Then Ben Bernanke would deserve the Noble in Economic Sciences.
    “QE 4 The People” and even “QE 4 Disaster Relief” No change is needed for the feds TO PURCHASE assets, assets like a state issue ” STATE 36 Year Bonds ” for as much as $50 trillion with a rate of 0.25%. If $1 trillion per state were available that would be a stimulus of $50 trillion with NO DEFICIT SPENDING and the money being returned at a profit to the US Treasury at @ $1.5 trillion a year.
    MAY GOD CONTINUE TO BLESS UNINTENDED CONSEQUENCES,SURELY THEY MUST REALLY BE MANKINDS INNOVATIONS.
    *WHAT IF THE …The Fed Reserve were to become the CENTRAL BANK WORKING FOR THE PEOPLE (CBWFTP) instead of working for the Private For Profit Banks (PFPB) ?
    The government can not win against ‘compound interest’ on debt ,simply because the accumulation of interest over time is an infinite amount, one that never ends unless paid in full. Compound interest is the most powerful force in the universe and it is being used by the PFPB. We must take back that most powerful force in the universe and use it FOR THE BETTERMENT OF MANKIND.

    Let’s try this game:
    Substitute the words “Central Bank Working For The People” (CBWFTP) whereever” Private For Profit Banks” (PFPB) appears.
    ****PFPB have $100 trillion in assets as mortgages on residential and commercial real property (RE) loans. The average compound interest rate is 4% for a term of 36 years. The PFPB would have created that $100 trillion ‘out of thin air’ (Horizontal Money)(Fictitious Money) which would have an attachment that would require $400 trillion to be paid back to the PFPB in order for the loan to be paid in full.. YES, take away the smoke and mirrors, this is a fact-the Rule of 72.Any sum compound at 4%/yr. over 36 years will quadruple. Now we must replace (reduce to zero ) the Horizontal Money(created out of thin air) by subtracting $100 trillion leaving a profit,income,taxation from ‘somewhere else’ of $300 trillion. This amount goes as profits to the PFPB. Revenue they may use for their own selfish purposes. That’s not the bad news-what the bad news is :That $300 trillion is real money, real currency, sucked up by the PFPB,yes Vertical Money !!
    Did our government forget to mention that “Mortgage interest should be tax exempt simply because it is already being taxed by their friends the PFPB ?
    READ IT AGAIN,
    BUT THIS TIME REPLACE “PFPB” WITH “CBWFTP”.
    Why would you not want prosperity for yourselves and your children? Why would you not want $300 trillion (really $ 400 trillion since real money is used by CBWFTP and need not be subtracted (replaced).
    REAL MONEY THAT MUST BE REPLACED BACK INTO THE ECONOMY IN ORDER TO PREVENT DEFLATION !
    REAL MONEY THAT CAN BE USED TO BRING
    LOWER GAPS TO INEQUALITY, SIMPLY BY A RAISED LIVING STANDARD!

  2. Cristi C
    March 29, 2013 at 1:12 pm

    Many thanks for an excellent material. Mr. Johnston certainly does a great work on looking at the wage from a pure mathematical perspective. And for that, most certainly he adjusted the wages by the official CPI. And his conclusion was that 90% of people had no real income gain (apart from those 59$) from 1966 to today.

    How can he explain that, back in those days, a father could decently support a household from a single income? The cost-of-living relative to the ever changing society standards rose more than CPI.

    If we try to look at the poverty stats to understand the impact in the society of this wage stagnation, we hit a limitation of the definition of poverty threshold. The official one is updated with CPI every year. Case closed. An article such as the one below show that despite GDP growth, the poverty rate remains at about 15%.
    http://www.csub.edu/kej/documents/economic_rsch/2011-10-03.pdf

    But I found another comparison of poverty definitions which I like a lot:
    http://www.irp.wisc.edu/newsevents/other/lampman/HavemanLampmanLect2.pdf
    There is a slide 13 / 31 which presents the poverty thresholds for different methodologies. In 1960, the poverty line was an income of 15000 for a four-person household (see the relative poverty case). In 2000, a 25000 income was needed, with dollars being adjusted to CPI.

    Anyway we would look to those poverty measures, the CPI adjustment to the wages is a fallacy. The standard of living relative to the 1960 society requires between 1.5 and 2 income sources in a household to be relative to today’s standard of living. So, to me, that is an actual decrease of purchasing parity of the wage of 90% employees.

  3. ezra abrams
    March 29, 2013 at 3:28 pm

    this is an analysis and commentary (with no ref to original source) on an analysis and commentary on the original source, work by saez
    Neither commentator bothers to give a link to the saez data (or if they do, the link is hard to see)
    Not seein the scholarlyness, but maybe I’m old fashioned

    The graph sucks – but if you think I’m a snarky now itall assho**, why don’t you poll your readers ?

  4. March 29, 2013 at 6:00 pm

    error : “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.”

    “The top ten percent of the top ten percent” means 0.1*0.1 = 0.01 = 1 %. You just saif the 1 % gained 81 % of the increase, not 39 %. My bet is you mistaken the 1 % with the 0.1 % gaining half of that 80 % increase. I “bear it with you” indeed ;).

    • Peter Radford
      March 29, 2013 at 7:18 pm

      Thanks, I changed the original, but not this version. Sloppy me!

      • March 30, 2013 at 5:55 pm

        Mmmh. The mistake is still online. What happens ?

      • March 30, 2013 at 6:19 pm

        My column, just to be clear, did not use the phrase “the top ten percent of the top ten percent…”

        I wrote about those almost 16,000 households as the top1% of the top1% — one in 10,000, a group whose share of the income pie has more than tripled since 1966 despite their average and threshold incomes, like that of everyone, being smaller in 2011 in real terms than in 2000….

  5. Nell
    March 29, 2013 at 11:48 pm

    This you tube graphic of income distribution in the US tells a similar story.

    What I find particularly interesting is the difference between what the 9 out of 10 americans think should be the ideal distribution, what they think the distribution is, and what the actual distribution is.

    • March 31, 2013 at 5:32 pm

      Why not….50% of the people of any sovereignty sharing 50% of the wealth?
      As for this article, please share with anyone you can reach anywhere in the world. Post and share. ***** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha

  6. March 30, 2013 at 12:54 pm

    @ezra

    Good point on link to Saez, who is cited in my TaxAnalysts column, but unlike many past columns I did not link to his work.

    @merijnknibbb, thanks for that link. As a journalist I created my first length for change graphic with a pencil and slide rule (checked with long division) in 1967 (when I was 18) trying to overcome the tedium of a school board meeting, but could not get the weekly paper I worked for to make it into a graphic because no one had the time or skill to make my sketch and numbers into one. So I suspect the idea is older than 1971 and 1967.

    The questions about how to define poverty posted above are important. This fall an anthology that I am editing will be published and many of these issues will be examined from various perspectives. It will be light on math, unlike my Tax Analysts column referenced here, heavy on insight and perspective. DIVIDED: The Perils of Our Growing Inequality is being published by The New Press. And include contributions by Joe Stiglitz, Adam Smith, Elizabeth Warren and Chuck Collins.

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