Wealth Inequality in the US, and Rising

Today’s Times reports on the extreme wealth of a media baron:

The media mogul Rupert Murdoch has paid more than $57 million for the top four flours of One Madison, a steel and glass luxury condominium tower in downtown Manhattan, according to people briefed on the sale.

My friends make fun of the way I occasionally caricature the ostentatiously wealthy, referring, for example, to wealth upward-redistribution policies as helping a rich man buy his fourth yacht and install a helipad next to his private jet.

But I’m barely joking. Inequality in the US is extreme, worse than any European country, approaching the level of Russia. The concentration of wealth, and the level of its redistribution, is a way of measuring the relative justice of a society, the level of its democracy, and effectiveness of power dispersion mechanisms.

It has been sad to note in recent decades as the US slides backwards, moving through history in the wrong direction. While total wealth in the country grows, various policies ensure that it gets sucked up at the very top. Hence, worker wages in real terms have been stagnant for over three decades; downward redistribution techniques such as entitlements have been reduced; while upward redistribution mechanisms have been increased, such as the lowering of top tier tax rates. The result is ever-more severe inequality. The consequences on US society are continued, and ever more severe, devastation.

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Some references on US inequality

Economist and Nobel Laureate Joseph Stiglitz:

http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran.

… But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever.

… When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

… The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.

See also, his interviews here:

http://www.democracynow.org/2011/4/7/nobel_economist_joseph_stiglitz_assault_on

http://www.democracynow.org/2012/6/6/joseph_stiglitz_on_the_price_of

Inequality in the US (6 min.)

Research Paper on same topic:

Shows that Americans overwhelmingly (92%) reject the US distribution system when given the option of a more equitable system:

http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf

Documentary: The One Percent, by Jamie Johnson (heir of the Johnson and Johnson fortune) (1:16:00)

Wealth Gap in America–Some charts

https://politicalcrumbs.wordpress.com/wealth-gap-in-america/

A recent Gallup poll makes the same point

http://dailycaller.com/2014/01/20/poll-two-out-of-three-americans-dissatisfied-with-income-wealth-distribution/

Income inequality in US worst since pre-Great Depression (Huffington Post):

U.S. income inequality has been growing for almost three decades. And it grew again last year, according to an analysis of Internal Revenue Service figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University.

In 2012, the incomes of the top 1 percent rose nearly 20 percent compared with a 1 percent increase for the remaining 99 percent.

The richest Americans were hit hard by the financial crisis. Their incomes fell more than 36 percent in the Great Recession of 2007-09 as stock prices plummeted. Incomes for the bottom 99 percent fell just 11.6 percent, according to the analysis.

But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.

That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.

Walmart heirs enjoy an enormous slice of the pie (EPI):

… between 2007 and 2010, while median family wealth fell by 38.8 percent, the wealth of the Walton family members rose from $73.3 billion to $89.5 billion. …

In 2007, it was reported that the Walton family wealth was as large as the bottom 35 million families in the wealth distribution combined, or 30.5 percent of all American families.

And in 2010, as the Walton’s wealth has risen and most other Americans’ wealth declined, it is now the case that the Walton family wealth is as large as the bottom 48.8 million families in the wealth distribution (constituting 41.5 percent of all American families) combined.

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