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Showing posts with label income inequality. Show all posts
Showing posts with label income inequality. Show all posts
UNICEF: U.S. kids worse off than many of their Western counterparts
Posted by Caitlin Dewey and Max Fisher on April 18, 2013 at 11:48 am
Data source: UNICEF
American children are on average worse off than children in Western
Europe and barely better off than their counterparts in the Baltic
states and the former Yugoslavia, according to a recent report from United Nation’s Children’s Fund (UNICEF) on the welfare of children in developed countries.
The report, which compares kids in 29 Western countries, measures
well-being across five metrics: material well-being, health and safety,
behaviors and risks, housing and environment, as well as education. It
ranks the United States in the bottom third on all five measures of
well-being and particularly low on education and poverty. The United
States is joined at the bottom by “emerging” European economies, while
the Scandinavian countries and the Netherlands come out on top. The
report notes that this latter group of countries tends to spend far more
per capita on social welfare programs.
The countries with the best reported child well-being tend to invest
in strong social safety nets. Norway, Iceland and Sweden sink nearly 7 percent of their GDP, according to an OECD report, into education. Countries such as Estonia, Latvia and Lithuania, which until the ‘90s had GDPs per capita
of less than $5,000, have been able to put less money into such
services. Though U.S. GDP per capita was more than $48,000 in 2012, that
money is not spread evenly cross the unusually large U.S. population.
As we noted earlier,
one of the report’s more alarming findings for the United States is the
degree to which income inequality has increased the population of
children who grow up in relative poverty, meaning that America’s
famously abundant wealth does not equally benefit all children.
Economists rate the U.S. economy as one of the most unequal in the
Western world.
The low U.S. rating, then, does not mean that all American children
are worse educated, less healthy and less well-off than all children in,
for example, Greece and Slovakia. After all, many American kids are
doing great. But the report, just as worryingly, means that significant
numbers of American children are so much worse off than the average
Greek or Slovakian child as to bring the overall U.S. average beneath
those other, relatively less wealthy and developed countries.
Here’s a chart showing the rankings, overall and across the five key metrics, for all 29 countries:
Data: UNICEF
Still, the United States did do well on some comparative metrics.
American kids get more exercise than almost any others studied in the
report, but they’re still, by far, the most overweight. (Chalk that up
to American calorie consumption,
which is also one of the world’s highest.) American kids also are the
least likely to drink alcohol — a finding that matches long-standing alcohol consumption patterns
of American adults. According to the World Health Organization,
Americans ages 15 and up have consumed far less alcohol than their
counterparts abroad for decades.
Meanwhile, Canadian children smoke the most marijuana, with more than
one in four reporting they’d lit up in the past year — a period when
Canada continued its national debate on the country’s cannabis laws.
Here’s something that might surprise you: kids in high-achieving
Finland attend preschool less than anyone else, which seems to buck
research linking preschool to later educational and economic success.
But, as the report explains, that statistic is somewhat misleading:
preschool begins later in Finland than it does elsewhere, which throws
off the numbers.
Finally, there are some interesting, if unpleasant, hints on how
Europe’s recent economic crises could impact youth there. In Spain,
Italy and Ireland, more than 10 percent of children ages 15 to 19 are
not enrolled in education, employment or training — a frightening figure
that might reflect post-recession unemployment numbers and which could,
per UNICEF, augur “mental health problems, drug abuse, involvement in
crime, and long-term unemployment and welfare dependence” in the future.
Some of those effects could be playing out in Spain already. More
than half of the surveyed Spanish children said they’d been in a
physical fight within the past year, a huge 15 percent jump from
UNICEF’s 2001 survey. Greece reported a similar jump in the past decade.
Both countries have suffered in the European financial crisis.
As the report notes, these types of statistics are interesting less as a snapshot of the present than a predictor of the future.
“At the heart of the case to be made is the fact that childhood is … a
time in which future patterns and pathways of health and well-being are
being laid down and in which disruption can have lifelong
consequences,” the report concludes. “Protecting the years of childhood
is therefore essential both for the well-being of those who are children
today and for the well-being of the societies of tomorrow.”
OP-ED CONTRIBUTOR ORIGINAL HERE Grand Old Parity By SHEILA C. BAIR Published: February 26, 2013
WASHINGTON
LAST month Emmanuel Saez, a celebrated economist at the University of California, Berkeley, issued another depressing report on income inequality.
Among other things, Mr. Saez examined how real family incomes changed
in the United States from 2009 to 2011, the first two years of the
recovery. The richest 1 percent of Americans, he found, saw their
incomes grow, on average, by more than 11 percent. As for the other 99
percent? You guessed it: incomes shrank by nearly half a percent.
The phenomenon is hardly new. The yawning gap between rich and poor has
been growing since the 1970s and reached a 90-year peak in 2007, just
before the financial crisis. The Great Recession narrowed the gap a bit,
but now, once again, the richest Americans are vacuuming up what wealth
is out there, a trend that Mr. Saez expects to continue.
I am a capitalist and a lifelong Republican. I believe that, in a
meritocracy, some level of income inequality is both inevitable and
desirable, as encouragement to those who contribute most to our economic
prosperity. But I fear that government actions, not merit, have fueled
these extremes in income distribution through taxpayer bailouts,
central-bank-engineered financial asset bubbles and unjustified tax
breaks that favor the rich.
This is not a situation that any freethinking Republican should accept.
Skewing income toward the upper, upper class hurts our economy because
the rich tend to sit on their money — unlike lower- and middle-income
people, who spend a large share of their paychecks, and hence stimulate
economic activity.
But more fundamentally, it cuts against everything our country and my
party stand for. Government’s role should not be to rig the game in
favor of “the haves” but to make sure “the have-nots” are given a fair
shot.
President Obama, who has rightly made income inequality a signature
issue, cannot be pleased that the über-rich have gained under the
policies pursued by his administration, while the bottom 99 percent have
not. Unfortunately, his economic team, populated by acolytes of the
former Treasury secretary Robert E. Rubin, has relied on the same
“growth” policies that got us into trouble precrisis: generous treatment
of the financial sector and easy money from the Federal Reserve. These
strategies have done little to encourage sustainable economic growth,
but they have worked wonders to increase Wall Street profits and inflate
the value of stocks and bonds — which are disproportionately owned by
the rich.
Why haven’t Republicans made an issue out of this? No doubt some fear
that discussing it openly would catalyze support for redistributionist
policies, which are anathema to a party that prides itself on increasing
the pie, not redividing it. But there are other policy options to
demonstrate Republicans’ commitment to the average Joe and Jane that are
very much in the party’s tradition.
For instance, as part of renewed fiscal discussions over sequestration,
Republicans should put fundamental tax reform on the table and make it
our priority to end preferential treatment of investment income, which
lets managers of hedge funds pay half the tax rate of managers of shoe
stores.
Defenders of this giveaway make the unsubstantiated claim that it
encourages job-creating investments. But what we have now is merely an
immense pool of investment funds that has created far too few jobs. A report
last year by Bain and Co. projected that by 2020 there will be $900
trillion in financial assets around the globe, chasing investments in a
real economy worth only $90 trillion in gross domestic product. Why in
heaven’s name do we need to keep a tax preference to encourage more?
If we eliminate this and other unjustified tax breaks, we can produce
enough new revenues to lower marginal rates and reduce the deficit,
according to both the Simpson-Bowles and Domenici-Rivlin debt-reduction plans.
Republicans should also put rebuilding the nation’s transportation and
energy infrastructure high on our political agenda. From Lincoln’s
transcontinental railroad to Eisenhower’s highway system, Republicans
have understood that investing in critical infrastructure projects
creates jobs and expands commerce.
And given that the Federal Reserve insists on giving us cheap money,
let’s use it for the benefit of the country by issuing long-term debt to
finance such projects and repay it over decades through dedicated taxes
and user fees.
Some may say I am tilting at the windmills of Tea Party orthodoxy in
making these suggestions, but I believe that most Republican politicians
would be sympathetic to them, if only they could overcome their fear of
primary challenges and the loss of Wall Street money. Having worked for
Senate Republicans in the 1980s, I remember a time when Republicans
stood up to special interests and purged the tax code of preferences for
investment income and other special breaks.
They managed to survive re-election by showing leadership, taking
principled positions and defending them vigorously. It’s time for the
Grand Old Party to return to those roots.
James K. Galbraith presents his study of the world economy just before the great crisis
April 19, 2012
Inequality and Instability - Part 2
James K. Galbraith: The Bush years - Growth demanded new markets among debtors who previously had not qualified for mortgages
April 20, 2012
Inequality and Instability - Part 3
James K. Galbraith on link between inequality and instability: Societies that are more egalitarian are more stable
April 22, 2012
Inequality and Instability - Part 4
James K. Galbraith on his study of the world economy just before the great crisis
Bio
James K. Galbraith teaches economics at the University of Texas where he is a Senior Scholar of the Levy Economics Institute and the Chair of the Board of Economists for Peace and Security. The son of renowned economist, the late, John Kenneth Galbraith, he writes a column called "Econoclast" for Mother Jones, and occasional commentary in many other publications, including The Texas Observer, The American Prospect, and The Nation. He is an occasional commentator for Public Radio International's Marketplace.He directs the University of Texas Inequality Project, an informal research group based at the LBJ School.
Blogger's Note: The graph above was derived from earlier work by Emmanuel Saez (the author of the article below) and Thomas Piketty. It was not part of the new work by Saez presented below, which was taken from a pdf file available here. Four footnotes to the present article appeared originally at the bottoms of the pages where they were first cited but are here placed in square brackets and moved to the end, together with the author's coordinates. Conversely, the figures found at the end of the original version are here moved to where they are first mentioned in the text.
Striking it Richer:
The Evolution of Top Incomes in the United States
(Updated with 2009 and 2010 estimates)
Emmanuel Saez•
March 2, 2012
What’s new for recent years?
Great Recession 2007-2009 During the Great Recession, from 2007 to 2009, average real income per family declined dramatically by 17.4% (Table 1),[1] the largest two year drop since the Great Depression. Average real income for the top percentile fell even faster (36.3 percent decline, Table 1), which lead to a decrease in the top percentile income share from 23.5 to 18.1 percent (Figure 2). Average real income for the bottom 99% also fell sharply by 11.6%, also by far the largest two year decline since the Great Depression. This drop of 11.6% more than erases the 6.8% income gain from 2002 to 2007 for the bottom 99%.
Computations based on family market income including realized capital gains (before individual taxes). Incomes exclude government transfers (such as unemployment insurance and social security) and non-taxable fringe benefits. Incomes are deflated using the Consumer Price Index. Column (4) reports the fraction of total real family income growth (or loss) captured by the top 1%. For example, from 2002 to 2007, average real family incomes grew by 16.1% but 65% of that growth accrued to the top 1% while only 35% of that growth accrued to the bottom 99% of US families. From 2009 to 2010, average real family incomes increased by 2.3% and the top 1% captured 93% of those gains. Source: Piketty and Saez (2003), series updated to 2010 in March 2012 using IRS tax statistics.
The sharp fall in top incomes is explained primarily by the collapse of realized capital gains due to the stock-market crash. Aggregate realized capital gains fell from $895 billion in 2007 to $236 billion in 2009. Indeed, including realized capital gains, the top decile income share dropped from 49.7% in 2007 to 46.5% in 2009 while excluding realized capital gains, the top decile income share remained virtually constant from 45.7% in 2007 to 45.5% in 2009 (Figure 1). The fall in top decile income share from 2007 to 2009 is actually less than during the 2001 recession from 2000 to 2002, in part because the Great recession has hit bottom 90% incomes much harder than the 2001 recession (Table 1), and in part because upper incomes excluding realized capital gains have resisted relatively well during the Great Recession. The top 1% absorbed 49% of income losses from 2007 to 2009 while they absorbed a bigger 57% share of the income losses from 2000 to 2002.
FIGURE 1 The Top Decile Income Share, 1917-2010
Source: Table A1 and Table A3, col. P90-100. Income is defined as market income (and excludes government transfers). In 2010, top decile includes all families with annual income above $108,000.
2010: Recovering from the Great Recession
In 2010, average real income per family grew by 2.3% (Table 1) but the gains were very uneven. Top 1% incomes grew by 11.6% while bottom 99% incomes grew only by 0.2%. Hence, the top 1% captured 93% of the income gains in the first year of recovery. Such an uneven recovery can help explain the recent public demonstrations against inequality. It is likely that this uneven recovery has continued in 2011 as the stock market has continued to recover. National Accounts statistics show that corporate profits and dividends distributed have grown strongly in 2011 while wage and salary accruals have only grown only modestly. Unemployment and non-employment have remained high in 2011. This suggests that the Great Recession will only depress top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s. Indeed, excluding realized capital gains, the top decile share in 2010 is equal to 46.3%, higher than in 2007 (Figure 1). Looking further ahead, based on the US historical record, falls in income concentration due to economic downturns are temporary unless drastic regulation and tax policy changes are implemented and prevent income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced income concentration until the 1970s (Figures 2, 3). In contrast, recent downturns, such as the 2001 recession, lead to only very temporary drops in income concentration (Figures 2, 3).
FIGURE 2
Decomposing the Top Decile US Income Share into 3 Groups, 1913-2010
Source: Table A3, cols. P90-95, P95-99, P99-100. Income is defined as market income including capital gains. Top 1% denotes the top percentile (families with annual income above $352,000 in 2010) Top 5-1% denotes the next 4% (families with annual income between $150,000 and $352,000 in 2010) Top 10-5% denotes the next 5% (bottom half of the top decile, families with annual income between $108,000 and $150,000 in 2010).
FIGURE 3
The Top 0.01% Income Share, 1913-2010
Source: Table A1 and Table A3, col. P99.99-100. Income is defined as market income including (or excluding) capital gains. In 2010, top .01% includes the 15,617 top families with annual income above $7,890,000.
Getting income distribution data faster
Timely distributional statistics are central to enlighten the public policy debate. This is particularly true at this time of great public interest in inequality. Distributional statistics used to estimate our series are produced by the Statistics of Income Division of the Internal Revenue Service (http://www.irs.gov/taxstats/). Those statistics are extremely high quality and final, but come with an almost 2-year lag.
The Statistics of Income, in partnership with academic researchers, is developing methods to produce preliminary distributional statistics significantly earlier. The goal is to use tax return data processed in real time by the IRS to project distributions for the complete year. Preliminary investigations show that it is possible to obtain reliable statistics about one year in advance of the final statistics.
Text of “Striking it Richer” updated with 2010 estimates
The recent dramatic rise in income inequality in the United States is well documented. But we know less about which groups are winners and which are losers, or how this may have changed over time. Is most of the income growth being captured by an extremely small income elite? Or is a broader upper middle class profiting? And are capitalists or salaried managers and professionals the main winners? I explore these questions with a uniquely long-term historical view that allows me to place current developments in deeper context than is typically the case. Efforts at analyzing long-term trends are often hampered by a lack of good data. In the United States, and most other countries, household income surveys virtually did not exist prior to 1960. The only data source consistently available on a long-run basis is tax data. The U.S. government has published detailed statistics on income reported for tax purposes since 1913, when the modern federal income tax started. These statistics report the number of taxpayers and their total income and tax liability for a large number of income brackets. Combining these data with population census data and aggregate income sources, one can estimate the share of total personal income accruing to various upper-income groups, such as the top 10 percent or top 1 percent.
We define income as the sum of all income components reported on tax returns (wages and salaries, pensions received, profits from businesses, capital income such as dividends, interest, or rents, and realized capital gains) before individual income taxes. We exclude government transfers such as Social Security retirement benefits or unemployment compensation benefits from our income definition. Non-taxable fringe benefits such as employer provided health insurance is also excluded from our income definition. Therefore, our income measure is defined as cash market income before individual income taxes. Evidence on U.S. top income shares Figure 1 presents the income share of the top decile from 1917 to 2010 in the United States. In 2010, the top decile includes all families with market income above $108,000. The overall pattern of the top decile share over the century is U-shaped. The share of the top decile is around 45 percent from the mid-1920s to 1940. It declines substantially to just above 32.5 percent in four years during World War II and stays fairly stable around 33 percent until the 1970s. Such an abrupt decline, concentrated exactly during the war years, cannot easily be reconciled with slow technological changes and suggests instead that the shock of the war played a key and lasting role in shaping income concentration in the United States. After decades of stability in the post-war period, the top decile share has increased dramatically over the last twenty-five years and has now regained its pre-war level. Indeed, the top decile share in 2007 is equal to 49.7 percent, a level higher than any other year since 1917 and even surpasses 1928, the peak of stock market bubblein the “roaring” 1920s. In 2010, the top decile share is equal to 47.9 percent. Figure 2 decomposes the top decile into the top percentile (families with income above $352,000 in 2010) and the next 4 percent (families with income between $150,000 and $352,000 in 2010), and the bottom half of the top decile (families with income between $108,000 and $150,000 in 2010). Interestingly, most of the fluctuations of the top decile are due to fluctuations within the top percentile. The drop in the next two groups during World War II is far less dramatic, and they recover from the WWII shock relatively quickly. Finally, their shares do not increase much during the recent decades. In contrast, the top percentile has gone through enormous fluctuations along the course of the twentieth century, from about 18 percent before WWI, to a peak to almost 24 percent in the late 1920s, to only about 9 percent during the 1960s-1970s, and back to almost 23.5 percent by 2007. Those at the very top of the income distribution therefore play a central role in the evolution of U.S. inequality over the course of the twentieth century. The implications of these fluctuations at the very top can also be seen when we examine trends in real income growth per family between the top 1 percent and the bottom 99 percent in recent years as illustrated on Table 1. From 1993 to 2010, for example, average real incomes per family grew by only 13.8% over this 17 year period (implying an annual growth rate of .76%). However, if one excludes the top 1 percent, average real incomes of the bottom 99% grew only by 6.4% from 1993 to 2010 (implying an annual growth rate of .37%). Top 1 percent incomes grew by 58% from 1993 to 2010 (implying a 2.7% annual growth rate). This implies that top 1 percent incomes captured slightly more than half of the overall economic growth of real incomes per family over the period 1993-2010.
The 1993–2010 period encompasses, however, a dramatic shift in how the bottom 99 percent of the income distribution fared. Table 1 next distinguishes between five sub-periods: (1) the 1993–2000 expansion of the Clinton administrations, (2) the 2000-2002 recession, (3) the 2002-2007 expansion of the Bush administrations, (4) the 2007-2009 Great Recession, (5) and 2009-2010, the first year of recovery. During both expansions, the incomes of the top 1 percent grew extremely quickly by 98.7% and 61.8% respectively. However, while the bottom 99 percent of incomes grew at a solid pace of 20.3% from 1993 to 2000, these incomes grew only 6.8% percent from 2002 to 2007. As a result, in the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth. Those results may help explain the disconnect between the economic experiences of the public and the solid macroeconomic growth posted by the U.S. economy from 2002 to 2007. Those results may also help explain why the dramatic growth in top incomes during the Clinton administration did not generate much public outcry while there has been a great level of attention to top incomes in the press and in the public debate since 2005.
During both recessions, the top 1 percent incomes fell sharply, by 30.8% from 2000 to 2002, and by 36.3% from 2007 to 2009. The primary driver of the fall in top incomes during those recessions is the stock market crash which reduces dramatically realized capital gains, and, especially in the 2000-2002 period, the value of executive stock-options. However, bottom 99 percent incomes fell by 11.6% from 2007 to 2009 while they fell only by 6.5 percent from 2000 to 2002. Therefore, the top 1 percent absorbed a larger fraction of losses in the 2000-2002 recession (57%) than in the Great recession (49%). The 11.6 percent fall in bottom 99 percent incomes is the largest fall on record in any two year period since the Great Depression of 1929-1933.
From 2009 to 2010, average real income per family grew by 2.3%(Table 1) but the gains were very uneven. Top 1% incomes grew by 11.6% while bottom 99% incomes grew only by 0.2%. Hence, the top 1% captured 93% of the income gains in the first year of recovery.[2] Such an uneven recovery can possibly explain the recent public demonstrations against inequality. The top percentile share declined during WWI, recovered during the 1920s boom, and declined again during the great depression and WWII. This very specific timing, together with the fact that very high incomes account for a disproportionate share of the total decline in inequality, strongly suggests that the shocks incurred by capital owners during 1914 to 1945 (depression and wars) played a key role.[3] Indeed, from 1913 and up to the 1970s, very top incomes were mostly composed of capital income (mostly dividend income) and to a smaller extent business income, the wage income share being very modest. Therefore, the large decline of top incomes observed during the 1914-1960 period is predominantly a capital income phenomenon. Interestingly, the income composition pattern at the very top has changed considerably over the century. The share of wage and salary income has increased sharply from the 1920s to the present, and especially since the 1970s. Therefore, a significant fraction of the surge in top incomes since 1970 is due to an explosion of top wages and salaries. Indeed, estimates based purely on wages and salaries show that the share of total wages and salaries earned by the top 1 percent wage income earners has jumped from 5.1 percent in 1970 to 12.4 percent in 2007.[4]
Evidence based on the wealth distribution is consistent with those facts. Estimates of wealth concentration, measured by the share of total wealth accruing to top 1 percent wealth holders, constructed by Wojciech Kopczuk and myself from estate tax returns for the 1916-2000 period in the United States show a precipitous decline in the first part of the century with only fairly modest increases in recent decades. The evidence suggests that top incomes earners today are not “rentiers” deriving their incomes from past wealth but rather are “working rich,” highly paid employees or new entrepreneurs who have not yet accumulated fortunes comparable to those accumulated during the Gilded Age. Such a pattern might not last for very long. The drastic cuts of the federal tax on large estates could certainly accelerate the path toward the reconstitution of the great wealth concentration that existed in the U.S. economy before the Great Depression.
The labor market has been creating much more inequality over the last thirty years, with the very top earners capturing a large fraction of macroeconomic productivity gains. A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II - such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality. We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it.
_______________________________
• University of California, Department of Economics, 549 Evans Hall #3880, Berkeley, CA 94720. This is an updated version of “Striking It Richer: The Evolution of Top Incomes in the United States”, Pathways Magazine, Stanford Center for the Study of Poverty and Inequality, Winter 2008, 6-7. Much of the discussion in this note is based on previous work joint with
Thomas Piketty. All the series described here are available in excel format at http://elsa.berkeley.edu/~saez/TabFig2010.xls
[1] This decline is much larger than the real official GDP decline of 3.8% from 2007-2009 for several reasons. First, our income measure includes realized capital gains while realized capital gains are not included in GDP. Our average real income measure excluding capital gains decreased by 10.8% (instead of 17.4%). Second, the total number of US families increased by 2.5% from 2007 to 2009 mechanically reducing income growth per family relative to aggregate income growth. Third, nominal GDP decreased by 0.6% while the total market nominal income aggregate we use (when excluding realized capital gains) decreased by 5.5%. This discrepancy is due to several factors: (a) nominal GDP decreased only 0.6% while nominal National Income (conceptually closer to our measure) decreased by 2%. In net, income items included in National Income but excluded from our income measure grew over the 2007-2009 period. The main items are supplements to wages and salaries (mostly employer provided benefits), rental income of persons (which imputes rents for homeowners),
and undistributed profits of corporations (see National Income by Type of Income, Table 1.12, http://www.bea.gov/national/nipaweb/SelectTable.asp).
[2] The exact percentage 93% is sensitive to measurement error, especially the growth in the total number of families from 2009 to 2010, estimated from the Current Population Survey. However, the conclusion that most of the gains from economic growth was captured by the top 1% is not in doubt.
[3] The negative effect of the wars on top incomes can be explained in part by the large tax increases enacted to finance the wars. During both wars, the corporate income tax was drastically increased and this reduced mechanically the distributions to stockholders.
[4] Interestingly, this dramatic increase in top wage incomes has not been mitigated by an increase in mobility at the top of the wage distribution. As Wojciech Kopczuk, myself, and Jae Song have shown in a separate paper, the probability of staying in the top 1 percent wage income group from one year to the next has remained remarkably stable since the 1970s.
Richest 1 Percent Account For Nearly All Of U.S. Recovery's Gains: Report
The Huffington Post Alexander Eichler
First Posted: 03/ 5/2012 11:31 am Updated: 03/ 5/2012 5:44 pm
Technically, the economy has been in recovery for two years. But it turns out the rich have been doing most of the recovering.
In 2010 -- the first full year since the end of the Great Recession -- virtually all of the income growth in America took place among the country's very wealthiest people, says an economist at the University of California, Berkeley. The top 1 percent of earners took in a full 93 percent of all the income gains that year, leaving the other 7 percent of gains to be sprinkled among the vast majority of society.
Those numbers come courtesy of Emmanuel Saez, the Berkeley economist who co-created a resource known as the World Top Incomes Database. Saez and his colleagues crunched the data on income growth from 2010, the most recent year available, and found that it was shockingly lopsided.
While much of the country is simply treading water, with a growing number of people either edging toward poverty or already there, the richest of the rich seem to be coping nicely.
Saez's findings suggest that even though the recession dealt a blow to the 1 percent, it did little to push the U.S. off the path it's been on for decades -- that of a vast and growing disparity between the richest and poorest citizens.
Income for most workers has barely risen in the last 30 years, but the top 1 percent of earners have seen their income almost triple in the same amount of time. Economists and other experts say that could be the result of any number of factors, including the decline of labor unions, the explosion in capital gains during the middle part of the aughts, and tax policies put in place in recent years that favor the wealthy.
In his State of the Union address this past January, President Obama called economic fairness "the defining issue of our time," perhaps mindful of the growing number of voters who say they can't even afford basic necessities like food.
The wealth gap has been cited as a major concern for the nationwide Occupy movement, and research has suggested that income inequality might be associated with the kind of underwhelming economic growth the country has experienced for the past two years.
Senator Bernie Sanders (VT) President Dwight D. Eisenhower
Some Reflections on Obama's State of the Union Address
The first article reproduced below reflects on the how Obama came across as so centerist last Wednesday ...and what the present redefinition of "center" seems to be.
The second one is a short video editorializing on portions of Obama's speach ...and wondering about the "state of the States" (which is clearly abysmal) and where the money will come from to revive them. The implied question is: If most of the 50 states are in a state of economic freefall and the Federal Government will not even loan them the money they need to continue functioning, how can one be at all optimistic about "The State of the Union"?
Rachel Maddow: In America Today, Republican President Dwight D. Eisenhower Would Be Bernie Sanders in the U.S. Senate
The huge ever rapid shift rightward makes Dwight Eisenhower and Richard Nixon look like lefty radicals today.
January 28, 2011 | The following is a shortened version of Rachel Maddow's opening monologue from her show on Wednesday on MSNBC:
For the next hour, we begin with the president of the United States addressing the nation and calling for a massive investment in this country's infrastructure, rebuffing the idea of giant tax breaks for the richest Americans, and warning anyone who would dare touch Social Security to keep their hands off.
You want to talk about red meat for the base? Listen to some of the language the president used. "Workers have a right to organize into unions and to bargain collectively with their employers. And a strong, free labor movement is an invigorating and necessary part of our industrial society." Wow.
How about this one? "Only a fool would try to deprive working men and women of their right to join the union of their choice."
Listen to the way he goes after the right here. "Should any political party attempt to abolish Social Security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things, but their number is negligible and"--and the president says--"their number is negligible and they are stupid."
That is not what Barack Obama said last night. That is way to the left of any national Democrat at this point. That was all Republican President Dwight David Eisenhower. That was all the stuff he said when he was president.
Republican President Dwight Eisenhower, president when the top tax bracket for the richest people in this country was 92 percent. President Eisenhower defended that tax bracket. He said we cannot afford to reduce taxes until, quote, "the factors of income and outgo will be balanced." Eisenhower insisting there must be a balanced budget and that taxes on the rich are the way to balance it. Dwight Eisenhower, you know, noted leftist.
Plots of income inequality (top) and marginal tax rate (bottom) added by blogger.
The Republican Party platform of Eisenhower's 1956 called for expansion of Social Security, broadened unemployment insurance, better health protection for all of our people. It called for voting rights--full voting civil rights for D.C. It called for expanding the minimum wage to cover more workers. It called for improved job safety for workers, equal pay for workers regardless of sex.
This is the Republican Party circa 1956. The Republican Party.
The story of modern American politics writ large is the story of your father's and your grandfather's Republican Party now being way to the left of today's leftiest liberals [emphasis added]. If Dwight Eisenhower were running for office today, he would have to run, I'm guessing as an independent, and not as some Joe Lieberman, in between the parties, independent. He'd be a Bernie Sanders independent.
In 1982, who passed the largest peacetime tax increase in U.S. history? That would be Ronald Reagan.
Who called for comprehensive health reform legislation during in a State of the Union address in 1974, a program that was well to the left of what either Bill Clinton or Barack Obama ultimately proposed? That would be Richard Nixon.
Eisenhower and Reagan and Nixon--they were not the liberals of their day. They were the conservatives of their own time.
But the whole of American politics has shifted so far to the right in the last 50 years that what used to be thought of as conservative is now considered to be off-the-charts lefty.
Former Supreme Court Justice John Paul Stevens pointed out this whole phenomenon of American politics shifting to the right when he told "The New York times" this--he said, quote, "Including myself, every judge who's been appointed to the court since Lewis Powell in 1971 has been more conservative than his or her predecessor, except maybe Justice Ginsburg." That was the one exception he could come up with.
Over the past half a century, the center in American politics has gone further and further and further to the right. Halfway through Barack Obama's first term, his State of the Union address last night is being pretty universally hailed as centrist, as not too liberal, not too conservative, but right down the middle of American politics.
And that is something that Americans like to hear. The instant reaction polls to President Obama's speech last night were almost comically positive. CBS reported that 92 percent of the people who watched the speech approved of Mr. Obama's proposals, 92; CNN reporting that 84 percent of people had a positive response.
Those sorts of numbers do not happen in politics. Those are crazy numbers.
Historically, the process of a Democrat trying to find the center in politics has seen Democrats chasing the center as it moves to the right. The thing that's different about the left and the right in this country is that there isn't an equal and opposite force on the left that's anything like the conservative movement on the right. The conservative movement exists outside the Republican Party, and it serves to constantly pull the Republican Party further to the right.
So, when you have a president like Bill Clinton who found popular centrist decisions by splitting the difference between where the Republicans were and where the Democrats were, and the Republicans kept moving further to the right because they're being pulled there by the conservative movement, when you have a president who triangulates like that, what you end up with is a president who as a Democrat moves the country further to the right, because he shifts to the right every time he takes another centrist position.
Is President Obama doing the same thing?
The dynamics on the right are the same as they've ever been. The right word drift of Republican politics from Eisenhower to Nixon to Ford to Reagan to Bush, Sr. to Bush, Jr., it's less of a steady drift now than a fast rightward jerking motion. The rightward movement in Republican politics is going faster, I think, than it ever has before.
For example, George W. Bush, he ran for president on a platform of comprehensive immigration reform. He ran for president saying that he has supported the assault weapons ban. But by the time he was president, supporting the assault weapons ban was no longer all that tenable, so he let that ban expire. He did try for immigration reform, and then he abandoned it.
Then his entire party ran against him on it by the time they needed a new presidential nominee. It was a quick turnaround.
You know, it was only 2008 when John McCain and Sarah Palin ran for office by saying they supported a cap-and-trade energy program. Remember that? Cap-and-trade used to be their idea, used to be a Republican idea.
The individual mandate for health reform--that used to be a Republican idea.
The DREAM Act on immigration--that was sponsored by John McCain once upon a time. But by the time Democrats brought it up for a vote, John McCain had turned against his own idea. Why? Because Republican politics are jerking so fast to the right that Republicans are being forced to turn against their own policy positions when the new right wing position dictates it. They can't even keep up within their own careers.
On the right, the process that has dragged the political center to the point where Dwight Eisenhower would be denounced as a socialist now, Ronald Reagan wouldn't even pass a Republican purity test, he'd be the guy they excluded from the debates for being a wingnut, that process is still very much in tact. On the right, things are working sort of the way they always have, if not faster.
But heading into last night's State of the Union address, the question was: would President Obama continue to change Republicans to the right? There are two ways to approach this, right? There are two ways to claim the 92 percent instant approval rating of sounding like the man in the center.
One way is the Clintonian way--to let your policies just drift right because the Republicans drifted right, too.
But there's another way. A way we heard about last night. It is to claim the center, to claim the political spoils you get for sounding like you're in the center, that 92 percent CBS rating, right, but to put the center back vaguely somewhere where center actually is.
January 26, 2011
Big Question is the State of the States
Bob Pollin and Bill Fletcher: State of the Union featured clean energy but didn't address funding states and cities on verge of bankruptcy
Blogger's Note: For some reason this video was greatly condensed from a longer version featuring a discussion with Bob Polin and Bill Fletcher. However, the transcript was provided, from which I cut the following questions and answers relating to the states:
JAY: If you put so much emphasis on education, and we know we're at a moment where states are going bankrupt or talking about going bankrupt--they're certainly in great fiscal crisis--and many states are cutting funding to municipalities, and thus laying off teachers. I mean, the educational system's in enormous crisis. It's not primarily, at least in the most urgent sense, a crisis of quality of teaching; it's a crisis of defunding, is it not?
FLETCHER: The point that he would not talk about, that we remain in this great recession, that we have millions of people out of work--. As you said, the states are facing the fiscal crises that are going to lead some to declare bankruptcy as a way of getting out of pension obligations and destroying unions. There was none of that urgency contained in his speech. It was as if that was not happening. So it was a speech that was, I think, aimed at making us feel that--particularly in the aftermath of Tuscon, that we actually can come together as a country and walk forward and figure out ways of problem-solving. That's sort of what I think that this, the objective of the speech, was. It was not about the kind of policies that we need fundamentally in the middle of this profound economic and [environmental] crisis.
JAY: But isn't that part of the problem, that if what they cooperate on (meaning "they", the Democratic leadership and the Republican leadership) is essentially a freeze in spending, more talk about debt cutting, and that the recession, the back of the recession's been broken, he says, very little talk about unemployment--I mean, if that's what the collaboration's about, then why is that good for the rest of us, Bob?
POLLIN: You're both absolutely right that the thing that was missing was discussion about solving the recession, which is still--may even be entering its most severe phase. When we talk about, as Bill just did, these reports that are coming out that state governments are contemplating declaring bankruptcy and breaking their pension fund obligations--which, by the way, in my view, is probably the worst outcome of the recession that I've heard about so far, if that's how far our political leaders are willing to go, as opposed to raising taxes on the rich. Now, there is a simple way to prevent that, which is to fund state governments, which is what we've been doing for the last two years. Revenue sharing to state and local governments have prevented these kinds of severe cuts thus far, including from my own institution where I'm sitting right now, UMass Amherst, which got a $50 million stimulus check. We need another one. And the alternative of cutting pensions and busting public-sector unions, which is a big story, right, was not discussed. And that's something that, you know, progressives in government and fighting in Washington are going to have to focus on quite strongly in the future. And it's true Obama left that out entirely from his discussion.
JAY: But isn't that the whole point of what's facing us now is that the economic crisis, the recession that, as you say, could be getting even worse--. I mean, this speech seemed to me designed to get a maximum amount of applause from both sides of the aisle.
FLETCHER: And the decision of this administration, particularly in the aftermath of the November elections, is to basically create a government of national unity. And this is exactly the wrong path that needs to be taken. It--even if Fox News is saying that they approved of the speech, that's what they're saying now, and in 12 hours they'll find something else to go after. The point is that the people that are watching this program and others need to realize that nothing short of mass movements is going to make any difference in terms of this, because this, the direction, the comfort level, the comfort level of this administration, is focused on trying to build some sort of rapprochement with the Republicans. And we're going to have to shake that up.
POLLIN: Now, are the Democrats willing to sit there and watch pension fund contracts get broken? I don't really know the answer to that, and I don't think any of us know that. The severity of the state and local budget crisis is just starting to happen because up to now the federal government has funded it through stimulus funds. But if we're going to start seeing cuts in pension funds, cuts to teachers, cuts to firefighters and cops, cuts to health-care workers immediately, and then the implications of that flowing through the community, I think we're going to see very quick sharpening of the debates around the things that really do matter in terms of the recession.
Bios
Robert Pollin is Professor of Economics and founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. His research centers on macroeconomics, conditions for low-wage workers in the U.S. and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the U.S. Most recently, he co-authored the reports "Job Opportunities for the Green Economy" (June 2008) and "Green Recovery" (September 2008), exploring the broader economic benefits of large-scale investments in a clean-energy economy in the U.S. Bill Fletcher, Jr. is a columnist, activist, author and labor organizer. He is the Executive Editor of The Black Commentator and his newest book, cowritten with Fernando Gapasin, is entitled "Solidarity Divided: The Crisis in Organized Labor and a New Path Toward Social Justice". He is the a cofounder of the Center for Labor Renewal, has served as President of TransAfrica Forum and was formerly the Education Director and later Assistant to the President of the AFL-CIO.
In my reporting, I regularly travel to banana republics notorious for their inequality. In some of these plutocracies, the richest 1 percent of the population gobbles up 20 percent of the national pie.
But guess what? You no longer need to travel to distant and dangerous countries to observe such rapacious inequality. We now have it right here at home — and in the aftermath of Tuesday’s election, it may get worse.
The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.
That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.
At a time of 9.6 percent unemployment, wouldn’t it make more sense to finance a jobs program? For example, the money could be used to avoid laying off teachers and undermining American schools.
Likewise, an obvious priority in the worst economic downturn in 70 years should be to extend unemployment insurance benefits, some of which will be curtailed soon unless Congress renews them. Or there’s the Trade Adjustment Assistance program, which helps train and support workers who have lost their jobs because of foreign trade. It will no longer apply to service workers after Jan. 1, unless Congress intervenes.
So we face a choice. Is our economic priority the jobless, or is it zillionaires?
And if Republicans are worried about long-term budget deficits, a reasonable concern, why are they insistent on two steps that nonpartisan economists say would worsen the deficits by more than $800 billion over a decade — cutting taxes for the most opulent, and repealing health care reform? What other programs would they cut to make up the lost $800 billion in revenue?
In weighing these issues, let’s remember that backdrop of America’s rising inequality.
In the past, many of us acquiesced in discomfiting levels of inequality because we perceived a tradeoff between equity and economic growth. But there’s evidence that the levels of inequality we’ve now reached may actually suppress growth. A drop of inequality lubricates economic growth, but too much may gum it up.
Robert H. Frank of Cornell University, Adam Seth Levine of Vanderbilt University, and Oege Dijk of the European University Institute recently wrote a fascinating paper suggesting that inequality leads to more financial distress. They looked at census data for the 50 states and the 100 most populous counties in America, and found that places where inequality increased the most also endured the greatest surges in bankruptcies.
Here’s their explanation: When inequality rises, the richest rake in their winnings and buy even bigger mansions and fancier cars. Those a notch below then try to catch up, and end up depleting their savings or taking on more debt, making a financial crisis more likely.
Another consequence the scholars found: Rising inequality also led to more divorces, presumably a byproduct of the strains of financial distress. Maybe I’m overly sentimental or romantic, but that pierces me. It’s a reminder that inequality isn’t just an economic issue but also a question of human dignity and happiness.
Mounting evidence suggests that losing a job or a home can rock our identity and savage our self-esteem. Forced moves wrench families from their schools and support networks.
In short, inequality leaves people on the lower rungs feeling like hamsters on a wheel spinning ever faster, without hope or escape.
Economic polarization also shatters our sense of national union and common purpose, fostering political polarization as well.
So in this post election landscape, let’s not aggravate income gaps that already would make a Latin American caudillo proud. To me, we’ve reached a banana republic point where our inequality has become both economically unhealthy and morally repugnant.
