On January 13, 2014, Democratic Perspective co-hosts, Mike Cosentino and Steve Williamson, examined the widening gap in incomes between ordinary Americans and the wealthy. It’s an issue that has been labeled the most significant problem of our time by both President Obama and Pope Francis.
Most economists explain that the primary driver of the economy is masses of people with money. If people have money, they spend it. That creates demand for products and services which, in turn, creates jobs. The more people who have jobs – good paying jobs – the more revenue the government collects which reduces federal deficits and debt. It’s a productive and profitable cycle in which virtually everyone benefits.
Unfortunately, we’re stuck in quite a different cycle. A cycle in which workers work harder, assuming they can find employment, and the rich get richer…much richer.
Since 1979, incomes of the bottom 80 percent of Americans, adjusted for inflation, have been stagnant. Incomes for the top 10 percent have seen modest growth. Meanwhile, incomes of the top 1 percent have more than tripled. And incomes for the top 0.01 percent have grown to an average $23,846,950 per year! By every measure, the richest Americans have not done this well since 1922.
Looking at it another way, University of California economist, Emmanuel Saez, found that the average real income grew 17.9 percent from 1993 to 2012. But, for 99 percent of Americans, the growth was just 6.6 percent while income growth for the top 1 percent was a whopping 86.1 percent! (Source: Politifact.com)
Significantly, Jacob Hacker of Yale University and Paul Pierson of UC-Berkeley point out that, since 1979, gains for the top 1 percent are roughly equal to what the bottom 80 percent would have earned had all incomes continued to grow at the rate prior to 1979. (Source: Mother Jones)
So who are the 1 percent and what has caused the increase in inequality?
Most are CEOs, executives, managers, financiers, doctors and lawyers. And the chasm between income groups has been caused by changes in political policies. These have included tax breaks for the wealthy, a reduction in capital gains taxes, a near elimination of estate taxes (the so-called death tax), the demise of labor unions and globalization. Another factor contributing to the gap is increased productivity (fewer people doing more for less). Productivity has increased by more than 80 percent since 1979. Not surprisingly, that increased productivity has also led to increased pay for those at the top. CEOs, on average, now rake in 185 times more money than workers.
To add insult to injury, more than one-third of the highest paid CEOs in the US run companies that have been subsidized by taxpayers. And every American household making $62,000 or more contributes $6,000 per year to subsidies for large corporations. (Source: Common Dreams)
From all of the data, it’s clear that we truly are engaged in class warfare. But, contrary to the belief of conservative Americans, income distribution has been upward. The richest 10 percent of Americans now control two-thirds of the nation’s wealth. Yet, according to a study by a Harvard economist, most Americans are not aware of that reality. When asked, most guessed that the top 20 percent of Americans own less than 60 percent of our wealth. But, in reality, they own more than 80 percent. In other words, most Americans believe that incomes are much more equal than they actually are, and they’d like to see even more equality…suggesting that the wealthiest Americans should control approximately 30 percent.