A new report from the Congressional Budget Office has a pretty startling finding: From 2003 to 2005, the income growth of the top 1% of American income earners exceeded, by 37%, the total earnings of the bottom 20%.
It sounds bad -- it is, after all, about as compelling evidence as you'll find of increasing income inequality. The lowest-earning fifth of households had total income of $383.4 billion in 2005, while the richest 1% saw their earnings increase by $524.8 billion.
One factor was the appreciation in the stock market over that period, with about half of the earnings growth of the top1% coming from investments and business ventures.
Jared Bernstein of the Economic Policy Institute told the New York Times that "A lot of people justifiably feel they are working harder and smarter, they are baking a bigger and better pie, and yet their slice is not growing much at all. It is meaningless to middle- and low-income families to say we have a great economy because their economy looks so much different than folks at the top of the scale because this is an economy that is working, but not working for everyone."
This is bad news for the Republicans, who are facing pretty long odds at maintaining control of the White House. While they can point to economic growth over the past few years, the reality is that working-class Americans saw an increase in their income that is barely significant -- Wealthy Americans cleaned up.
The actual importance of income inequality is a debate that has no end in sight: Does the fact that rich Americans saw their earnings increase a lot really have anything to do with the lowest 20% of income-earners? It doesn't matter because it still make for great election-year rhetoric.
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Reader Comments (Page 1 of 1)
1-21-2008 @ 4:37PM
Boggie said...
That's right the rich are all getting richer! I hope they will be able to carry a Country, for that is what they are going to have to do! The rest of us are broke! Personally I don't think they will be able to do it!
12-31-2007 @ 1:49PM
Richard said...
As much as it pains me to say it, a certain amount of wealth redistribution has and always will be necessary. For many the next question is why? Should not all the rewards of capitalism go to those who create wealth for everyone? The answer is no but with a certain amount of qualification. Back when Adam Smith and his band of economic radicals were espousing the need for capitalism, it was always based on the fact that capitalism helped spur innovation and wealth creation by rewarding those who improved productivity by throwing sand in the wheels of traditional business practices. It was at this time that real profits were made until the me too imitators increased competition and reduced profits to the point of too low a margin of ROA.
Now what to do with this new wealth, as Adam Smith declared, reinvest it and create more wealth. Enter the dragon, excessive wealth that bred political corruption. As Adam and his band of rebels admitted, even the wealthy could not spend their way into maintaining economic prosperity for a nation. What’s a monarchy to do? Tax the rich and give a little to the poor. It’s good for maintaining political control over a nation. Those monarchs who gave back too little found themselves like the French or Russian monarchies, no longer able to eat cake!
So fellow capitalist this brings us to today. Yes, some level of wealth redistribution by government is necessary. The trick, how much, to whom and when in order to maintain economic equilibrium. Maybe it’s time to review, revise and improve capitalism. Heck we do it for everything else!
12-16-2007 @ 2:09PM
Athelstan said...
The figures indicating the "rich are getting richer" must be a lagging indicator. By the first and second quarters of 2008 more than half of the hedge funds in the United States are expected to have lost billions for their wealthiest client-investors. In fact, there have been estimates that easily 65% of hedge funds will close their doors next year. Some of them the very largest in the nation. They are truly in deep trouble now.
Consider this, if this is happening to our nation's most sophisticated investors, and they are the most sophisticated, with bright Harvard and MIT "hotshots" directing their hedge funds, what do you think will happen to countless owners of mutual funds and stocks next year as bungling Bernanke, the hand wringing old women on the FOMC, and other Republican guardians of private wealth continue to lose public confidence?
European and Asian money managers know full well that U.S. financial institutions realize the extent of the present liquidity/credit crunch crisis, and it isn't pretty. Despite the claim, "we don't know how much farther the losses will go" rubbish. We desperately need clarity and direction from both the Fed and Wall Street and we aren't getting it.
Perhaps, it is time to permit the banks to fail and abolish the Federal Reserve Board. The Fed didn't prevent the last great depression. So why should we expect it to prevent the depression now on its way?
Vote for Ron Paul and forget the usual legion of Republican and Democratic has beens and never will be's. Their lackeys in Congress twiddled their thumbs for decades while banks, credit card companies, and mortgage bankers sold and resold worthless securities while gouging the public. Where was Congress? Let these institutions sink out of sight.