Most Americans realize that the United States has become more unequal over the past three decades or so. But it's unlikely that most Americans have a full grasp of the sheer magnitude of the change in the distribution of wealth since the end of the 1970s, or its impact on the lives of ordinary Americans.
Many data point to what the political scientists Jacob Hacker and Paul Pierson, in their important new book, Winner Take-All Politics, call "trickle up" economics. For example, according to the Congressional Budget Office, via Lane Kenworthy, the lowest twenty percent of households in America saw their post-tax wages increase from $15,500 in 1979 to $17,500 in 2007 (in constant, inflation- adjusted dollars). The middle sixty percent saw their incomes increase from $44,000 to $57,000 during that period. And the top one percent saw their post-tax incomes explode from $350,000 to $1.3 million, a near quadrupling. The increases for the top one-tenth of one percent and top-hundredth of one percent were greater still.
Of course, many think inequality is irrelevant, as long as a rising tide lifts all boats. But while the wealthiest Americans live ever more opulent lifestyles, ordinary Americans, especially at the sixtieth percentile and below are running in place, if not falling further behind. For one thing, the typical household puts in longer work hours now than was true in 1979, placing added strains on many American families. Furthermore, in the past three years the general picture of distribution has likely worsened, with record levels of long-term unemployment as well as draconian cuts to basic services like health care and education at the state and local level, which have disproportionately affected people lower down the income ladder. So, the relatively weak gains for the majority of Americans in the past thirty years have been precarious, subject to a swift and un-nerving reversal of fortune, while those at the top continue to enjoy record incomes and wealth.
And the growing concentration of wealth at the top is arguably directly related to that growing precariousness for most of the rest of us. Had the pattern of wealth distribution that existed in the 1970s held steady over the subsequent decades, Hacker and Pierson estimate that the lowest sixty percent of households would have enjoyed incomes between $6,000 and $12,000 higher in 2006 than they actually were. That'd be a nice cushion to have in the face of an economic downturn.
Defenders of the status quo might argue that growing inequality and the conditions that support it are a product of the very policies that fueled robust growth, which benefits everyone. But in fact, growth in the past three decades has not been better than it was in the previous three decades, when income and wealth were much more evenly distributed in America. So, this profound new skew in wealth has meant, in effect, a significant transfer of wealth up the income ladder. As former Clinton Treasury secretary and Obama economic adviser Larry Summers -- no populist firebrand -- put it in 2007: "By definition what one group gains from changes in the distribution of income another group must lose...If middle income families had shared fully in the economy's income growth over the past generation their incomes would have risen twice as rapidly!"
So, is this what Americans want? Dan Ariely of Duke and Michael Norton of Harvard University recently reported the results of a fascinating survey they conducted of over five thousand randomly sampled Americans to explore Americans' preferences for an ideal distribution of wealth, and to see how accurately Americans assessed wealth concentration in the US.
Respondents were shown three unlabeled pie charts, each divided into fifths and each representing a different distribution of wealth for some unnamed country (wealth was defined as income, property, stocks, bonds and other assets). One pie chart showed the top twenty percent owning thirty-six percent of the country's wealth and the bottom twenty percent owning eleven percent of the wealth -- a society with moderate inequality.
A second pie chart showed each of the five quintiles owning twenty percent of the wealth -- a society of perfect equality. A third pie chart showed a country in which the top fifth owned 84% of the wealth and where the lowest quintile owned one-tenth of one percent of the total wealth.
The results were striking. Ninety percent of Americans -- virtually regardless of gender, income level or partisan affiliation -- preferred either the first pie chart or the second pie chart; only ten percent of respondents preferred the third. The third pie chart, the one almost no one deemed preferable, represents the actual distribution of wealth in the United States. And that first pie chart was not a bunch of random numbers -- it's the distribution of wealth in Sweden. When given a direct choice between Sweden's distribution and the US's (both unlabeled), fully 92% preferred Sweden's to the United States.
Respondents were also asked to estimate the distribution of wealth in the United States. On average, they thought that the wealthiest fifth of Americans owned 59% of the wealth, indicating that although Americans are aware that inequality in the US is substantial, they profoundly underestimate its extent.
So, what explains this dramatic change in the structure of American wealth? It seems very unlikely that this is what Americans want (our willingness to tolerate it is a separate question).
Many economists have argued that changes in technology and globalization more broadly have provided increasing benefits to the highly educated. But Hacker and Pierson reject these explanations or deem them greatly overstated. Europe has experienced very similar technological and globalization-driven changes but has not remotely witnessed the degree of wealth concentration that America has, or the erosion of health and other services that are affecting a growing number of Americans.
Education and skills-based explanations also cannot tell us why the top one percent has pulled away from the (also highly educated) top ten percent, or the top one tenth of one percent from the top one percent, and so on.
Hacker and Pierson note that the causes are complex, but believe that a key explanation is politics. Specifically, they contend, organized business interests and their ideological allies have waged an extraordinarily successful battle to enact policies -- including changes in tax rates and tax law enforcement, labor law, financial de-regulation and curtailing public assistance -- that benefit the wealthiest Americans. At the same time, those interests have succeeded in achieving what Hacker and Pierson call policy "drift" -- obstructing policy changes that would be necessary to attenuate the conditions fueling growing inequality. Successfully blocking minimum wage increases is one example.
The GOP's push in this direction since 1980 has been undeniable. But the Democratic Party has also played a significant, if more ambivalent, role in this process, particularly its growing cultivation of Wall Street donors, frequent advocacy for Wall Street's de-regulatory agenda and its equivocal policy response to the decline of organized labor.
Hacker and Pierson contend that winner-take-all-interests have successfully rigged our political institutions regardless of which party holds the reins of power, though they acknowledge that the health care reform act of 2010, assuming it achieves full implementation, could represent a meaningful move in the opposite direction. But the extent of wealth concentration in America over the past generation and the degree to which politics seem to play a crucial role in that process raise depressing doubts about the capacity of our presumably representative institutions to produce policy outcomes that benefit ordinary Americans or that reflect Americans' preferences for a minimally just distribution of wealth.
(A version of this article originally appeared in the Independent Weekly of North Carolina)
Follow Jonathan Weiler on Twitter: www.twitter.com/jonweiler
To bad our Tea baggers are not like this group ours are just the far fringe of the republican party.
http://www.thenation.com/article/158282/how-build-progressive-tea-party
When are you going to write a book?
For example, recently, a few Republicans claimed that U.S. corporations needed more tax breaks in order to be competitive. However, any comparisons should be based on “effective” tax rates (i.e., tax liability divided by the ∑taxable income + net subsidies + excluded income= the effective tax rate). The bottom line is that the corporate share of federal income tax revenue in 2009 was significantly less than the share that individuals paid due to low "effective" tax rates.
The Democratic Party's ideology favors a progressive income tax structure for individuals,but many American households pay no income taxes and/or are granted low income tax credits. Therefore, if the effective tax rates for different income groups of taxpayers are assessed, I believe it will show that the costs of the ‘free-rider’ problem and the tax credits have had a greater marginal impact on lower income earning households. The bottom line is that the current individual income tax structure has become less progressive ... possibly regressive. (additional comments and recommendations posted on www.mary4money.com)
In the first place in 2008 Americans were paying LOWER taxes in constant dollars than they have in decades. In the second a Flat tax is one way to guarantee either raising the rates for 90% of the country or exploding the deficit.
www.economicstruth.com
The fact is that in the US there is a constant churning effect of who occupies each determined strata over time. The founder of Facebook was not in the highest income strata in 2005. Nor was JK Rowling in 1985 (indeed - at one time she was a single parent welfare recipient).
The point is that the overall rise in incomes (at all levels) is much more important than the divination of the pieces of pie belonging to whichever strata, since the occupants of those strata are constantly changing.
The few Americans who do care and do understand what is happening only sit at home and write blogs and comments at websites like this.
I do not live in America but I can see it clearly.
What to do?
Learn from the Egyptians.
And show them how to re-take your democracy back from the right wing conservative theocratic powers that be. Show the world what a real democracy is. Set an example again.
Americans will be clamoring for government change, and it would behoove the Democrats to offer a candidate to lead that, rather than be swept out for the amateurish performance of a President who does not lead.
The fact that benefits bear no relation to contributions is what's undermining its solvency.
The upper class blames the little guy for wanting the same things they have yet bombards them with images of the good life and the consumer goods that entertain or make life a bit easier , but the cost of health care , heating , and lack of healthy foods and housing are our fault .
The cost of essentials is far outstripping the income of most of us BUT the electronics are crazy cheap ! this is the imbalance that is getting out of hand not our wish to enjoy the fruits of our labours .
If you're not, you have delivered one of the most patently absurd comments I've ever seen or heard.
Congratulations.
Especially this part,
"The GOP's push in this direction since 1980 has been undeniable. But the Democratic Party has also played a significant, if more ambivalent, role in this process, particularly its growing cultivation of Wall Street donors, frequent advocacy for Wall Street's de-regulatory agenda and its equivocal policy response to the decline of organized labor."
I hope that many here read through your blog posting to the end to see that part.
By the way your average wages and conditions have dropped in almost complete step with the reduction of influence of your unions. You really need something new to blame, have you thought about the overpaid gibbons who are managing the places?
And the point still stands why is an IT prof who never made a job or a business pass judgment on world economic policy?
Unions are at their lowest level in the USA in decades, not a recent development. Which in accordance with your approach, should of brought about great wealth creation and wage inflation in the last 5-8 years but that did not happen.
Unions being more than decimated in the USA occurred during the period above that Weiler described above. Evidently, getting rid of unions has helped the USA wealthy, but has not helped the lower 95% of the USA. Therefore, the article shows quite well how labor unions were good for the lower 95% of the USA, as is not only the case in Sweden, but also in Germany.
Max, " You have a big omission on the downward quality the education system in the US."
Why does everybody on Earth wish to attend USA colleges and universities then?
Max, "We have a generation of workers who can not function in a world economy."
Why don't you explain that one. How is it that you believe American workers cannot function?
Wages?
Max, "You blame the rich and the wealthy but how many billionaires are in Sweden?"
And how is that good for the lower 98% of the USA?
Max, "How many millionaires are created there when you compare them to the United States?"
Again, how is that good for the lower 90% of the USA?
If US colleges were so good how come cost keep going up and graduate rates decline? as for the future skills the education system is not teaching enough math and science. A college degree used to mean something but now they are just window dressing. People wonder why China and India are going to be bigger then the US, it is a matter of when. China and India treats education as a national security priority. Do we?
As for which is better the USA wins because we are citizens and not subjects to a royal crown or family. In the US you want to work hard you can be a billionaire! You liberals think the state has to regulate who is rich.