Tag: income inequality

A recent analysis of IRS data on income and wealth in the United States found that the gap  between the richest 1 percent and the rest of America is the widest it’s been since the 1920’s.

The top 1 percent of U.S. earners collected 19.3 percent of household income in 2012, their largest share in Internal Revenue Service figures going back a century.

U.S. income inequality has been growing for almost three decades. But until last year, the top 1 percent’s share of pre-tax income had not yet surpassed the 18.7 percent it reached in 1927, according to an analysis of IRS figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University.

One of them, Emmanuel Saez of the University of California, Berkeley, said the incomes of the richest Americans might have surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January.

That soaring stock market means nothing to 99% of Americans, it just proves the rich are getting richer.

According to DSWright at the FDL News Desk, we may rapidly be approaching the bursting of another bubble:

But what’s worse is that the 1% hit a consumption limit – they can only buy so many cars, meals, homes – so the only way they can benefit from their wealth is to invest in financial assets which inflates those assets into bubbles. Then the bubbles pop, and in theory, they should eat the losses. But what we all know, or should know by now, is that the 1% refuses to eat the losses and instead use what is left of their wealth to buy favors in Washington to make them whole at your expense. It is a pretty awful system, especially if you are in the 99%.

And now due to the destruction of the labor movement, wages have frozen and even more income from production is going to the top 1% who are re-inflating the financial markets and having a great time doing so as the corporate profits to wages ratio is massive. This while America continues to have record unemployment and underemployment.

The 99% do not have a seat at the economic table as Washington ignores their needs and bends over backwards to help the 1% campaign contributor class. And when you aren’t at the table you are on the menu.

Freelance writer Sasha Abramsky joined Democracy Now! hosts Amy Goodman and Juan González to discuss his new book “The American Way of Poverty: How the Other Half Still Lives.” and ther reocrd breaking income inequality in the US.

Income inequality is growing in the United States. Occupy Wall Street brought the income gap between the 99% and the 1% into the light and changed the conversation. Bill Moyers explores what happened in Silicon Valley where the homeless problem has grown 20% in the last two years and tent cities are common place among the million dollar mansions. Poverty shows no sign of abating despite the market thriving.

“A petty, narcissistic, pridefully ignorant politics has come to dominate and paralyze our government,” says Bill, “while millions of people keep falling through the gaping hole that has turned us into the United States of Inequality.”

Our growing income inequality causes 43% of the projected Social Security shortfall

by Gaius Publius, Americablog

Upward redistribution of income – what we’ve been calling the “looting of the economy” by the billionaire CEO class – is responsible for at least 43% of the projected Social Security shortfall for the next 75 years.

Let that sink in. This is yet another way that the looters want the victims to pay for their victimhood and hold the looters lossless. The CEO class has worked for three decades to create an economy where working people have a far less share of the economic growth than they used to have. One of the results of that inequity was an unexpected shortfall in the income collected by Social Security.

Think about it – everyone could see that the big demographic shift, the baby-boom generation, would show up on schedule. They could see that in the 1950s. But who knew 30 years ago (1983, if you’re not subtracting quickly), when the last Social Security adjustment occurred, that Reagan, Clinton, Bush and Obama would create a bipartisan consensus around handing all the fruits of productivity to the “rich and famous” set that you’re not a part of? That was not part of the calculation in those golden Reagan Days, and the Social Security Trust Fund has suffered ever since.

City Report Shows a Growing Number Are Near Poverty

by Sam Roberts

The rise in New York City’s poverty rate as a result of the recession has apparently eased, but not before pushing nearly half of the city’s population into the ranks of the poor or near-poor in 2011, according to an analysis by the Bloomberg administration.

That year, according to the city’s measure, about 46 percent of New Yorkers were making less than 150 percent of the poverty threshold, a benchmark used to describe people who are not officially poor but who still struggle to get by. That represents a rise of almost two percentage points since 2009, when the nation’s recession officially ended. [..]

Though more New Yorkers were working in 2011 than the year before, larger shares of children and working adults were classified as poor in 2011, and the proportions of Asians, noncitizens and Queens residents – overlapping groups – each rose by more than four percentage points since 2008.

Last week the House of Representatives killed a proposal that would have raised the minimum wage tp $10.10 an hour over two years. It failed with not one Republican vote in favor and six Democrats voting against it, as well. In an article for the Los Angeles Times, David Horsey says that while both Democratic and Republican politicians express concern for the middle class, they have failed miserably to address the growing class divide in the Unites States.

As politicians in Washington slam one another over competing budget priorities, most avoid facing up to the disturbing question behind all the numbers: Is the American Dream temporarily stalled or permanently kaput? [..]

This is not the country we like to think we are and it is not the country our political leaders are willing to admit they have helped create. Thirty years of catering to Wall Street, big business and the U.S. Chamber of Commerce has not boosted the American economy the way it was meant to do. Yes, the financial industry and giant corporations are awash in wealth, but they are not hiring more workers, they are not paying better pay, they are not enhancing benefits, they are not sharing the wealth. On the contrary, the typical American is working much harder for worse compensation. He or she is paying a bigger share of the healthcare bill and has no pension plan waiting at the end of the line.

This is an all-American crisis bigger than the deficit or the war on terrorism, but no one seems ready to take it on.

Mr. Horsey notes a rundown of the facts about today’s American economy by economics columnist Jon Talton:

• Worker productivity has increased nearly 23% since 2000, but hourly wages rose a pitiful 0.5% in that period.

• Taking a longer view back to 1973, productivity is up 80% between now and then, but pay is up only 11%.

• People at the bottom of the wage scale are earning less now than similar workers in 1979.

• Employees in the middle of the wage scale are getting 6% more than in 1979, but all that increase happened in the 1990s.

• High earners, meanwhile, are making 37% more than back in the 1970s, and the much-talked-about folks in the top 1% have enjoyed a 131% increase in earnings.

In his article, Mr. Talton furthers concludes:

This reality is at complete odds of our self-image as the Land of Opportunity. It is also a change from a previous America. We’ve been losing ground. Some reasons are obvious, others are complex. Many are familiar to readers of this column, and a few are the subject of sharp debate.

Globalization, offshoring and technology have decimated the old blue-collar middle class. The economy has shifted to service jobs that not only tend to pay less but are increasingly part time and temporary. [..]

Whatever the causes, little is being done to correct our trajectory into historic high inequality that is greater than other advanced nations.

Things may have to get worse before change happens. One thing is clear: Our situation is unsustainable and un-American.

Economist Richard Wolff joins Bill to shine light on the disaster left behind in capitalism’s wake, and to discuss the fight for economic justice, including a fair minimum wage. A Professor of Economics Emeritus at the University of Massachusetts, and currently Visiting Professor in the Graduate Program in International Affairs of the New School. [..]

“We have this disparity getting wider and wider between those for whom capitalism continues to deliver the goods by all means, [and] a growing majority in this society facing harder and harder times,” Wolff tells Bill. “And that’s what provokes some of us to begin to say it’s a systemic problem.”

Nobel Prize winning economist Joseph E. Stiglitz posted an interesting piece in the New York Times Opinionator that examines how income inequality is holding back the economic recovery:

The re-election of President Obama was like a Rorschach test, subject to many interpretations. In this election, each side debated issues that deeply worry me: the long malaise into which the economy seems to be settling, and the growing divide between the 1 percent and the rest – an inequality not only of outcomes but also of opportunity. To me, these problems are two sides of the same coin: with inequality at its highest level since before the Depression, a robust recovery will be difficult in the short term, and the American dream – a good life in exchange for hard work – is slowly dying.

Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena, when they are in fact intertwined. Inequality stifles, restrains and holds back our growth. [..]

Prof. Stiglitz notes four factors that are the cause:

The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. [..] The growth in the decade before the crisis was unsustainable – it was reliant on the bottom 80 percent consuming about 110 percent of their income.

Second, the hollowing out of the middle class since the 1970s, a phenomenon interrupted only briefly in the 1990s, means that they are unable to invest in their future, by educating themselves and their children and by starting or improving businesses. [..]

Third, the weakness of the middle class is holding back tax receipts, especially because those at the top are so adroit in avoiding taxes and in getting Washington to give them tax breaks. [..]

Fourth, inequality is associated with more frequent and more severe boom-and-bust cycles that make our economy more volatile and vulnerable.

Noting that one fifth of US children live in poverty, the professor points out that children living in Canada, France, Germany and Sweden have better economic futures simply because education and training are more affordable. The countries that responded best to the crisis on Europe had strong unions and strong social safety nets, something that this country is seems hell bent to destroy.

However, Prof. Stiglitz’s contemporary, Paul Krugman, somewhat disagrees arguing that these factors may have caused the recession, they are less of a draw on the recovery than Prof. Stiglits beleives. In the face of the recovery, Prof. Krugman rejects the “underconsumption” and tax receipt hypothesis:

It’s true that at any given point in time the rich have much higher savings rates than the poor. Since Milton Friedman, however, we’ve know that this fact is to an important degree a sort of statistical illusion. Consumer spending tends to reflect expected income over an extended period. If you take a sample of people with high incomes, you will disproportionally include people who are having an especially good year, and will therefore be saving a lot; correspondingly, a sample of people with low incomes will include many having a particularly bad year, and hence living off savings. So the cross-sectional evidence on saving doesn’t tell you that a sustained higher concentration of incomes at the top will lead to higher savings; it really tells you nothing at all about what will happen. [..]

Joe also argues that high income inequality depresses tax receipts, fueling fiscal fears. Again, I have trouble with this point: our tax system isn’t as progressive as it should be, but it is at least mildly progressive even when you take state and local taxes into account.

I’m in agreement with Prof Stiglitz on this, even with my rudimentary knowledge of economics. It would seem logical that if incomes are falling and the middle class is shrinking, then consumption of goods and services will fall as people have less disposable income. It follows that all tax revenues would also decrease.  

Practically since the modern social safety net was created wealthy, powerful right-wingers and organizations have been trying to kill it.  In recent years, those right wing forces have had a lot of help from Democrats in making their twisted dreams a reality.  Organizations like the billionaire Koch family created and funded Cato Institute and hedge fund billionaire Peter Peterson’s namesake foundation have led the fight against Social Security.

The extreme right wing’s attacks and deceptive campaigns over the course of decades are now close to fruition with the help of neoliberal Democrats.

President Obama has come very close to helping right-wingers realize their long-desired goal; only the incredible intransigence of congressional Republicans has saved the social safety net thus far.  

Income equality in the United States continues to widen between the 99% and the 1%. It was one of the main issues that Occupy Wall St. brought to the forefront of the conversation on the economy and the phony concern over the deficit. One of the big issues is tax inequality, the poor and middle class pay a greater percentage of their income to the government than do the top earners. President Obama and the Congressional Democrats have proposed a minimum tax of 30 percent to individuals making more than a million dollars a year, called the Buffet Rule, after billionaire Warren Buffet who thinks that it is unfair that he pays less in taxes than his secretary. Although it has been pointed out that revenue generated from the increase would only minimally help reduce the deficit, it is wildly popular with 67% of Americans in support of its passage. Unfortunately, it didn’t have the votes in the Senate to even get to the floor for a vote. Even if it did it would never see the light of day in the intransigent House. We mustn’t tax the job creators who haven’t created jobs in the US for over a decade. We must continue to allow millionaires, like Romney, to give their children millions as a gift tax free, thanks to a tax loophole on “carried interest,” presumably one of the loopholes that would have been closed:

When the Romney campaign disclosed in December that the couple’s five sons had a $100 million trust fund, I suspected that, in setting up the fund, the Romneys used a tax strategy that allows some very rich people to avoid paying gift taxes. But it was impossible to know if this was the case without seeing their tax returns going back years. [..]

Reuters emailed the Romney campaign spokeswoman to ask how much the Romneys paid in gift taxes on assets put into the sons’ trust over the last 17 years. The spokeswoman, citing Brad Malt, the Romney family tax lawyer, answered: none.

The idea that someone could pay zero gift taxes on contributions to a $100 million trust fund may surprise people who have heard arguments that the wealthy are overburdened by gift and estate taxes. But the Romneys’ gift-tax avoidance strategy is perfectly legal.

A good discussion on whether Obama’s ‘Buffett Rule’ would bridge tax divide was had on MSNBC’s Up with Chis Hayes with University of Pennsylvania Wharton professor Betsey Stevenson, Reuters columnist David Cay Johnston, former Rep. Tom Perriello, D-Va., and Demos Vice President Heather McGhee.

This bill had very little chance of passing and was in all reality merely a political gambit to make the Republicans look like they are out of touch with the average American voter. How well that will work this early in the campaign remains to be seen.

The Congressional Budget Office (CBO) recently released a report that added more evidence that income inequality between the top American income earners and the middle and lower classes continues to grow, as the top one percent saw its average after-tax income grow by 275 percent between 1979 and 2007.

Click on image to enlarge

The CBO report highlighted these points:

The share of after-tax household income for the top 1 percent of the population more than doubled, climbing to 17 percent in 2007 from nearly 8 percent in 1979.

The most affluent fifth of the population received 53 percent of after-tax household income in 2007, up from 43 percent in 1979. In other words, the after-tax income of the most affluent fifth exceeded the income of the other four-fifths of the population.

People in the lowest fifth of the population received about 5 percent of after-tax household income in 2007, down from 7 percent in 1979.

People in the middle three-fifths of the population saw their shares of after-tax income decline by 2 to 3 percentage points from 1979 to 2007.

There is also a great divide between how the Americans want the government to deal with this and the path that the government is headed down. The Occupy Wall Street protests across the country have started the news media talking about jobs and not the fake deficit/debt crisis. In a poll take by the New York Times and CBS, most Americans approve of the OCW movement:

and by two thirds believe that the wealthiest Americans should pay higher taxes:

and the wealthiest Americans agree. In a survey released by the Spectrum Group, 67% of those those with investments of $1 million or more support raising taxes on those with $1 million or more in income.

Their approval of Congress has hit a record low in the single digits:

nor do they approve of the way Barack Obama or Congress has handled creating jobs:

If anyone is still wondering why there are protests and people are fed up, then you are either not listening and reading or you are part of the problem.

Crossposted at Daily Kos  and Docudharma

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Note: Sections 1-4 contain dozens of additional editorial cartoons and commentary.  I’m not sure why but I was getting the below error when trying to post the complete diary.  Check out the remaining portions of the diary at Daily Kos.

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