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Time for Pitchforks: Why The Obscene Wealth Gap Can Only Mean One Thing

Time for Pitchforks: Why The Obscene Wealth Gap Can Only Mean One Thing
Fri, 10/24/2014 - by Paul Buchheit
This article originally appeared on Originally published by Common Dreams

It was recently reported that Americans greatly underestimate the degree of inequality in our country. If we were given proper media coverage of the endless takeaway of our country's wealth by the super-rich, we would be infuriated. And we would be taking it personally.

Each of nine individuals (Gates, Buffett, 2 Kochs, 4 Waltons, Zuckerberg) made, on average, so much from his/her investments since January 2013 that a median American worker would need a quarter of a million years to catch up. For the most part it was passive income, new wealth derived from the continuing productivity of America's workers.

Why We Should Take It Personally

First, because our productivity is rewarding a relatively few people. In addition, many of the top money-makers are damaging other American lives. The top nine include four people (Waltons) who pay their employees so little that we taxpayers have to pay almost $6,000 a year to support each one of the employees.

And it includes two people (Kochs) who have polluted our air and water to enrich themselves while quietly funding organizations that threaten to dismantle what's left of our democracy.

Another personal issue: While the Forbes 400 made almost enough in one year to fund the entire safety net, they don't even have to pay taxes on their half-trillion dollars of investment gain until they cash in, which may be never.

On Average, Most of Us Got ONE DOLLAR for Every BILLION DOLLARS of New Wealth

A look at the numbers compiled by Us Against Greed shows how personal it really is. Out of that $5,350,000,000,000 ($5.35 trillion) made since the start of 2013, the bottom 80 percent of America took an average of less than $5,000 each. The richest 6 to 20 percent fared better, taking an average of about $65,000.

Now it begins to heat up. From that $5.35 trillion, the richest 2 to 5 percent took an average of about $343,000. The one-percenters need to be split up into the rich, the super-rich, and the filthy-rich:

  • The more common members of the one-percent (1,068,000 families) made over $1,000,000 each ($1,068 billion total)

  • The .1 percent (108,000 families) made about $4 million each ($480 billion total)

  • The .01 percent made about $40 million each ($480 billion total)

The unimaginably rich Forbes 400 each took, on average, almost $1,500,000,000 ($1.5 billion) since January, 2013.

That brings us to the Final 9 (Gates, Buffett, 2 Kochs, 4 Waltons, Zuckerberg). Each of them has accumulated, on average, over $13,000,000,000 ($13 billion) since January 2013.

Getting Billions for Working Less

A big reason to get angry: Our country's wealth grew from $64 trillion to $80 trillion (a 25 percent increase!) in two years, reflecting the unprecedented surge in America's productivity and wealth over the past few years.

But there was little if any new innovation or job creation by these big takers over the past two years. The simple fact that they were already incomprehensibly rich allowed them to sit back and collect more and more and more.

Mainstream Media: Incompetent or In Bed with Business

And thus a final reason to be incensed about inequality: The fact that the regular media doesn't properly inform the public about all this. That should be their job, to report on issues that have a great impact on our lives, instead of hushing up the perversity of redistributed national wealth. But apparently it's good business for the super-rich media owners to keep their viewers harmlessly underestimating the truth.

*

Meanwhile, Isaiah J. Poole reports for Campaign for America's Future on a new report by economist Emmanuel Saez showing how wealth inequality and the middle-class decline is worse than people think:

We know how bad income inequality has gotten in the past few years in America, thanks largely to the work of economist Emmanuel Saez and his colleagues at University of California at Berkeley’s Center for Equitable Growth.

But Saez’s latest paper finds that the share of the nation’s wealth going to the bottom 90 percent of Americans has declined to where it was in the 1940s, erasing decades of hard-won gains due to pro-worker, pro-middle-class economic policies.

Meanwhile, the top 0.1 percent of Americans – the 160,000 families with net assets in excess of $20 million in 2012 – now hold 22 percent of the nation’s wealth, up from 7 percent in 1978. That monopolization of a large share of national wealth by an elite few hasn’t been seen since the late 1920s.

The bottom 90 percent, by contrast, saw their wealth share fall from 35 percent in the mid-1980s to about 23 percent in 2012, the paper said. It was about 20 percent in the 1920s, it said.

The paper, “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data,” focuses not just on wages and income but on the accumulation of overall wealth, including the value of real estate, stocks and certain other assets.

It explicitly refutes the view that while nearly all of the gains in national income since the 2008 recession have gone to the top 1 percent, that hasn’t translated into a substantial increase in the concentration of overall wealth at the top. To the contrary, the paper said, “we find that wealth inequality has considerably increased at the top over the last three decades.”

“Wealth concentration has increased particularly strongly during the Great Recession of 2008-2009 and in its aftermath,” the paper said. Largely because of the decline in housing prices, the share of wealth held by the bottom 90 percent fell more than 10 percent from the middle of 2007 to mid-2008.

Afterward, real wealth continued declining at a rate of 0.6 percent a year on average through 2012, while it increased at a rate of almost 6 percent a year for the top 1 percent and almost 8 percent a year for the top 0.1 percent.

The bottom line: “Wealth is getting more concentrated in the United States,” and is in fact “ten times more concentrated than income today.”

How did this happen? “The share of wealth owned by the middle class has followed an inverted-U shape evolution,” the paper said. Middle-class households reached the apex of the upside-down “U” in the mid-1980s, driven by the accumulation of housing wealth and, more significantly, pensions.

Since then, housing values for the bottom 90 percent as a share of total household wealth has fallen by as much as two-thirds, and most workers have IRAs or 401(k) defined contribution plans instead of pensions. And these households have significantly higher debt than they did in the 1980s.

What can we do about it? The paper points out that it was New Deal policies of the 1930s that began reversing the effects of Gilded Age inequality in the 1930s, particularly “very progressive income and estate taxation” that made it difficult for the wealthy to accumulate large fortunes and pass them to their heirs. “The historical experience of the United States and other rich countries suggests that progressive taxation can powerfully affect income and wealth concentration,” the paper said.

Other steps that can help include “access to quality and affordable education, health benefit cost controls, minimum wage policies, or, more generally, policies shifting bargaining power away from shareholders and management toward workers.”

Finally, the paper suggests policies that “nudge” workers toward sound investment and savings vehicles and offer alternatives to short-term debt at high interest rates.

The fact that a group of people equal to the population of Salem, Oregon controls as much of the nation’s wealth as 90 percent of the rest of the country speaks to the fundamental unfairness of our economy. It is a level of imbalance that is as unsustainable today as it was before the crashes of 1929 and 2008.

It also stands as a dire warning that we cannot afford to elect more politicians whose policies of giving more relief to the wealthy and more pain to the working class would only make wealth inequality and, and economic inequity, even worse.

 

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