I think the chart above helps to resolve the debate. It shows that both sides have a point — but that it’s a mistake to divide the country into only two groups. To make grand pronouncements about the American economy, you need to talk about three groups.The first is indeed the top 1 percent of earners, and especially the very richest. Their post-tax incomes (and wealth) have surged since 1980, rising at a much faster rate than economic growth. They are now capturing an even greater share of the economy’s bounty.Then there are the bottom 90 percent of households, who are in the opposite position. The numbers here take into account taxes and government transfers, like Social Security, financial aid and anti-poverty benefits. Even so, the incomes of the bottom 90 percent have trailed G.D.P. Over time, their share of the economy’s bounty has shrunk.Finally, there is the upper middle class, defined here as the 90th to 99th percentiles of the income distribution (making roughly $120,000 to $425,000 a year after tax). Their income path doesn’t look like that of either the first or second group. It’s not above the line or below it. It’s almost directly on top of it. Since 1980, the incomes of the upper middle class have been growing at almost the identical rate as the economy.
More at The New York Times.
This explains easily why voters are pissed off. They may not understand the issue numerically, but they sure understand what happened to the 'buying power' of their wallet.
ReplyDeleteBut what's forgotten in your analysis is that these are not groups with fixed populations. Earners from the middle move to both the top and bottom. In theory the top could have all been in the middle in 1980 and therefore have had a huge increase.
ReplyDeleteYou sound like you've been sipping that trickle-down Kool-Aid.
DeleteWhat MJD has forgotten is that it's nearly impossible to fall from the top 1% to the middle 40% (so rare it's usually a news story, MC Hammer comes to mind).
DeleteBut at the same time if you don't invent something and become rich over night you have to save 25 thousand dollars a year from age 18 to 65 to have the same amount those fall proof rich people make in 3-5 years.
The income inequality isn't a matter of hard work, wise spending, etc. It's about the lack of responsibility for the richest people in the country, they can live from their bank interest and horde cash or even play fast and loose with investments because the old boys club has it set up so once you're rich you stay rich.
Jeff Bezos' money is undergoing mitosis and he's still going to be the worlds richest man. He's losing half of everything he has and still staying top .1%
As a matter of fact Jeff Bezos would have to give away half of his money 12 times before he met the criteria to be at the bottom of the TOP 1%.
And yet, 0 dollars in federal taxes paid.
That's weird, I sleep on a mattress on the floor and I paid 1,000 dollars in federal taxes.
These groups are predominately fixed. The overwhelming majority of people are similar in class (slightly higher or slightly lower) to their parents. Yes, many of the 'big names' represent atypical paths to wealth, but we use them only as an example of the extremes of holdings. Most extreme wealth is maintained intergenerationally, which is why wealth and estate taxes are seen as evening the playing field by reducing the concentration of wealth among so few people.
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