In an article entitled "Top Earners Not So Lofty in the Days of Recession," by the star New York Times journalist Jason DeParle, we are told to "hold the condolence cards the recession cost the rich. The share of income received by the top 1 percent -- that potent symbol of inequality -- dropped to 17 percent in 2009 from 23 percent in 2007, according to federal tax data," he explains. "Within the group, average income fell to $957,000 in 2009 from $1.4 million in 2007."
DeParle admits, almost immediately, that "analysts say the drop largely reflects the stock market plunge, and most think top incomes recovered somewhat in 2010, as Wall Street rebounded and corporate profits grew." Nevertheless, he notes, "The drop alters a figure often emphasized by inequality critics, and it has gone largely unnoticed outside the blogosphere."
Unnoticed? DeParle then quotes Occupy Wall Street critics such as Steven Kaplan of the University of Chicago and Megan McCardle of The Atlantic who insist that the 2009 numbers demonstrate the irrelevance of the arguments of the "99 Percent." "We don't want to spend years focused on income inequality, only to learn that the financial crisis fixed it for us," wrote McArdle in a blog post for The Atlantic. DeParle also quotes James Pethokoukis, a blogger at the American Enterprise Institute, as if they constitute genuine wisdom. "Get a time machine, Occupy Wall Street," wrote Pethokoukis.
To be fair, DeParle gives the "other side" a fair shake, quoting former White House official Jared Bernstein saying, "The structural forces driving inequality remain very much in place." (The mere fact that DeParle is forced to quote right-wing bloggers compared to someone with Bernstein's credentials is itself revealing.) And DeParle himself does a pretty good job of enumerating all of the reasons why inequality, "driven by political and economic forces," has been growing for more than 30 years. He reports:
Globalization created larger markets for those with scarce talents but hurt less educated workers by pitting them against cheap foreign labor. New technology also hurt unskilled workers, by replacing many with machines.
Unions declined, eroding blue-collar bargaining power. The financial industry grew, with paydays heavily weighted toward the top. Corporate culture accepted the growing gap between the executive suite and the factory floor.
Falling tax rates on the highest earners added to the net income divide, by allowing top earners to keep more of their pay and increasing their incentive to maximize it.
But the real, underlying truth is that the 1 percent's loss of income is a blip in which the super rich in America experienced a decidedly modest and temporary hit when financial markets collapsed. Structural factors have been driving this process well beyond the rate that any other western democracy has seen. The intensity of the U.S. case is discussed (and can be seen in graphs) published in this essay by University of Texas economist James Galbraith.
Indeed, using more recent data, Larry Mishel of the Economic Policy Institute explains, in a critique of DeParle's article, that what DeParle predicted has already taken place:
Wage and salary data show wage inequality rising from 2009 to 2010 (recovering more than a third of lost ground), suggesting that it is too early to shed crocodile tears for the top 1 percent. Regardless of last year's trend, it remains the case that income inequality in 2009 was still substantially greater than it was in the late 1970s. Moreover, the conclusion that a lion's share of income gains accrued to the top 1 percent or even the top 0.1 percent, while income growth was modest for the bottom 90 percent remains absolutely true.
What's more, despite the temporary drop in stock market valuations, and therefore Wall Street bonuses, Mishel notes, "Corporate profits are now substantially greater than they were before the recession." The share of corporate income going to profits was 26.2 percent last year, its highest share since World War II, when we had wage and price controls. Moreover, in 2010, Mishel explains, "The wages of those in the top 1 percent grew 6.8 percent in inflation-adjusted terms while those in the bottom 90 percent saw their real annual earnings fall 0.7 percent."
Look at the overall picture: Today half the U.S. population owns barely 2 percent of the country's wealth, putting the United States near Rwanda and Uganda and below such nations as pre-Arab Spring Tunisia and Egypt when measured by degrees of income inequality.
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