Luxury retailers are smiling. So are the owners of high-end restaurants, sellers of upscale cars, vacation planners, financial advisors, and personal coaches. For them and their customers and clients the recession is over. The recovery is now full speed.
But the rest of America isn't enjoying an economic recovery. It's still sick. Many Americans remain in critical condition.
The Commerce Department reported Thursday that the economy grew at a 3 percent annual rate last quarter (far better than the measly 1.8 percent third quarter growth). Personal income also jumped. Americans raked in over $13 trillion, $3.3 billion more than previously thought.
Yet it's almost a certainty that all the gains went to the top 10 percent, and the lion's share to the top 1 percent. Over a third of the gains went to 15,600 super-rich households in the top one-tenth of one percent.
We don't know this for sure because all the data aren't in for 2011. But this is what happened in 2010, the most recent year for which we have reliable data, and there's no reason to believe the trajectory changed in 2011 or that it will change this year.
In fact, recoveries are becoming more and more lopsided.
The top 1 percent got 45 percent of Clinton-era economic growth, and 65 percent of the economic growth during the Bush era.
According to an analysis of tax returns by Emmanuel Saez and Thomas Pikkety, the top 1 percent pocketed 93 percent of the gains in 2010. 37 percent of the gains went to the top one-tenth of one percent. No one below the richest 10 percent saw any gain at all.
In fact, most of the bottom 90 percent have lost ground. Their average adjusted gross income was $29,840 in 2010. That's down $127 from 2009, and down $4,843 from 2000 (all adjusted for inflation).
Meanwhile, employer-provided benefits continue to decline among the bottom 90 percent, according to the Commerce Department. The share of people with health insurance from their employers dropped from 59.8 percent in 2007 to 55.3 percent in 2010. And the share of private-sector workers with retirement plans dropped from 42 percent in 2007 to 39.5 percent in 2010.
If you're among the richest 10 percent, a big chunk of your savings are in the stock market where you've had nice gains over the last two years. The value of financial assets held by Americans surged by $1.46 trillion in the fourth quarter of 2011.
But if you're in the bottom 90 percent, you own few if any shares of stock. Your biggest asset is your home. Home prices are down over a third from their 2006 peak, and they're still dropping. The median house price in February was 6.2 percent lower than a year ago.
Official Washington doesn't want to talk about this lopsided recovery. The Obama administration is touting the recovery, period, without mentioning how narrow it is.
Republicans would rather not talk about widening inequality to begin with. The reverse-Robin Hood budget plan just announced by Paul Ryan and House Republicans (and endorsed by Mitt Romney) would make the lopsidedness far worse -- dramatically cutting taxes on the rich and slashing public services everyone else depends on.
Fed Chief Ben Bernanke -- who doesn't have to face voters on Election Day -- says the U.S. economy needs to grow faster if it's to produce enough jobs to bring down unemployment. But he leaves out the critical point.
We can't possibly grow faster if the vast majority of Americans, who are still losing ground, don't have the money to buy more of the things American workers produce. There's no way spending by the richest 10 percent -- the only ones gaining ground -- will be enough to get the economy out of first gear.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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well on our way to becoming a feudal society.
Just look at what is going on with the banks that
have forclosed on homeowners, only to turn around
and RENT those same homes to the people who
had owned them. But hey, don't worry about it. Just
get up in the morning, go to work - if you still have a
job that is - make just enough money to survive on and
pay your taxes, and - above all - keep your mouth shut.
Got it now...?
"If I feed the poor, you call me a Saint.
If I ask why the poor are hungry, you
call me a Communist...."
Archbishop Romero
(who, for those that are not aware of who he is,
was assasinated because he would NOT "keep
his mouth shut")
Selah
But there's one more critical item left out of the analysis... if the rich are the only one's gaining and the Republicans keep driving tax cuts for the rich, we will NEVER reduce the debt on the tax revenue side, recovery or no recovery.
We are the fools if we let this mentallity prevail and assure that the ONLY way to recover the debt is with massive cuts to services. The Republicans are cutting our throats... and their own... they're just too focused on the very short term to realize that they make more with a healthy populus.
http://www.businessweek.com/news/2012-03-27/fha-bailout-risk-looming-larger-after-guarantee-binge-mortgages
Thanks for this great article. The top 10% took the biggest financial hit during the Great Recession and it is heartening to see that they are recovering their wealth. This is great news and something to be celebrated.
People who save and invest and make this country better should face the greatest financial risk and get the greatest financial returns. The fact that they had the biggest downturn in finance and now the biggest gains is testament that the system works.
Hope fully the other 90% will take this crisis as a warning that savings and investment is what makes people wealthy and insulates against financial downturns not Keynesian gimmicky and spending and consumption predicated on borrowing and government handouts.
Good to see that the rich are also fueling a recovery in the F&B, auto, and retail sectors. This only gives further credence that the economy needs our wealthy and that our tax and regulatory system should encourage more of them to locate and stay in the US.
Again, thanks for the heartening news.
Kai
Why? Do you hate the 3million of them or 30 million of them despite the fact that most of them have done nothing wrong except, pay attention in school, save when others were spending, invest when others were borrowing, take risk when others were inactive. The average 1% is simply an entrepreneur, or a doctor, or retired, etc…why do you hate doctors and old people?
Kai
wealthy in the US inherited their wealth. It has been handed down
from generation to generation. And that wealth has bought political
power that perpetuates an economic system that benefits themselves
at the expense of those of us who do not belong to the "lucky sperm
club". Can the public change the system to benefit themselves? Sure
they can....but not without fighting for it.
"Those that make peaceful change impossible,
make violent revolution inevitable..."
JFK
This could wel have been predicted in the moral from a parallel story from the realm of Eastern Civilization:
Cracking the Safe
For security against robbers who snatch purses, rifle luggage, and crack safes,
One must fasten all property with ropes, lock it up with locks, bolt it with bolts.
This (for property owners) is elementary good sense.
But when a strong thief comes along he picks up the whole lot,
Puts it on his back, and goes on his way with only one fear:
That ropes, locks and bolts may give way.
Thus what the world calls good business is only a way
To gather up the loot, pack it, make it secure
In one convenient load for the more enterprising thieves.
Who is there, among those called smart,
Who does not spend his time amassing loot
For a bigger robber than himself?
Food for thought, as the big wheel keeps on turning. Additional grist for Mr. Reich's mill.
The US has set its sights on the stars to guide us through the night; planted stars on Wall St, illuminating obstruction and greed. Reality is isolated to noir complete; shut your eyes and ears if you want to see. Recovery is all a state of mind; your ability to afford food, or rent, or gas, or health insurance has absolutely nothing to do with it.
That obscene socialist rag, The Wall Street Journal, recently reported that our latest statistics show that 100 million people in the US now either meet the criteria for poverty, or fall above that line by the thinest of margins. One third of our population. If this is ‘recovery,’ I guarantee you that number’s still climbing strong. Poverty today may be a tick better than it was in 1930, but still produces comparable results, and there’s more of us there.
“The top 1% pocketed 93% of the gains in 2010,” because this is precisely what the ‘system’ is set up to do. Its default setting. If you think that satisfied anyone, remember 2010 was still a bad year. It wouldn’t surprise me if 2011 turns out to be a banner year, the best on record, and 1% took 99% of all gains.
I have read similar comments to yours in this particular blog post. There is something missing. I don't have to read anything more to believe your assessment of the current situation. My frustration grows over your not providing any solutions that will correct the problem. Tax the rich more and tax the middle class less is about it. But that never happens. Someday I hope to find someone's remarks which are concrete and which will lead to concrete action and that in turn will lead to concrete solutions. When do you think that will happen?
IMHO, the altered lifestyles this recession has created are of no concern to those making the decisions. Going Global doesn't support it. Buying junk we don't need is no longer an American hobby. It doesn't even make sense to consumers who can. We woke up and had less. Nothing changes that.
I suppose if he lists them all in these posts there would be no reason to buy the book...?
40.8% -Executives, Managers, supervisors (non-finance)
18.4% -Financial professions, including management
6.3% -Not working or deceased
6.2% -Lawyers
4.7% -Real Estate
4.4% -Medical
3.6% -Entrepreneur
3.1% -Arts, media, sports
3.0% -Computer,math,engineering,technical
etc.
The biggest surprise for me on this list was how little wealth is credited to entrepreneurship.
http://www.frumforum.com/incredible-shrinking-workers-income
Incredible Shrinking Workers' Income | FrumForum
"Workers’ share of U.S, national income is collapsing.
Two questions for the Republican presidential candidates:
1) Is this a problem?
2) If yes, what can be done about it?"