Friday, August 11, 2017

The income inequality divide is the largest ever - but it can be fixed

AZBlueMeanie at Blog for Arizona alerts us to this stunning graphic showing the extreme economic inequality in America. Our Broken Economy, in One Simple Chart by David Leonhardt is based on research findings of “A well-known team of inequality researchers — Thomas Piketty, Emmanuel Saez and Gabriel Zucman…”

Inequality graph
Extreme inequality favors top 0.001%
Graph from AZBlueMeanie at Blog for Arizona

The message is straightforward. Only a few decades ago, the middle class and the poor weren’t just receiving healthy raises. Their take-home pay was rising even more rapidly, in percentage terms, than the pay of the rich.

The post-inflation, after-tax raises that were typical for the middle class during the pre–1980 period — about 2 percent a year — translate into rapid gains in living standards. At that rate, a household’s income almost doubles every 34 years. (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)

In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else.

The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.

… the country can’t magically return to the 1950s and 1960s (nor would we want to, all things considered). Economic growth was faster in those decades than we can reasonably expect today. Yet there is nothing natural about the distribution of today’s growth — the fact that our economic bounty flows overwhelmingly to a small share of the population.

Different policies could produce a different outcome. My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation.

Remarkably, President Trump and the Republican leaders in Congress are trying to go in the other direction. They spent months trying to take away health insurance from millions of middle-class and poor families. Their initial tax-reform plans would reduce taxes for the rich much more than for everyone else. And they want to cut spending on schools, even though education is the single best way to improve middle-class living standards over the long term.

Most Americans would look at these charts and conclude that inequality is out of control. The president, on the other hand, seems to think that inequality isn’t big enough.

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