Economic Hodgepodge - The Plight of 70% of American Families

[Harold Hellickson]

Following my July 26th article, "Income and Net Worth Inequality" a commenter indicated he was in pursuit of additional information. I promised him that I would review my files and send him what I could find. I did. He suggested it be submitted as article for a wider audience. This is it, with only a slight modification.

For the record, the data used for the earlier article indicates seventy percent of American families earn less than $75,200.

"The two greatest obstacles to democracy in the United States are, first, the widespread delusion among the poor that we have a democracy, and second, the chronic terror among the rich lest we get it." - Edward Dowling

In a Republic, a representative democracy may be defined as "liberty plus groceries, albeit more and more are from food banks, for the approaching near majority of its citizens ". Its goal is "for the vast majority of its citizens to reach a similar status". Later, liberty can probably be deleted concurrent with cessation of food stamp availability for which the uberelites appear to have a growing reluctance to pay. - Harold Hellickson

The Uncle Buck Party, consisting of D.C. politicians and their lobbyists, in conjunction with corporate America has captured Uncle Sam and is now legally torturing him in a secret prison. He's not dead yet but the future doesn't look good for us. - www.commondreams.org/archive/2007/11/07/5087/

Bill Clinton, 1992
"The rich got the goldmine and the middle class got the shaft."
Wealth and Democracy, Kevin Phillips; pg. 97

The American working class, once the most prosperous on Earth, has been politically disempowered, impoverished and abandoned. Manufacturing jobs have been shipped overseas. State and federal assistance programs have been slashed. The corporations, those that orchestrated the flight of jobs and the abolishment of workers' rights, control every federal agency in Washington, including the Department of Labor. They have dismantled the regulations that had made the country's managed capitalism a success for ordinary men and women. The Democratic and Republican Parties now take corporate money and do the bidding of corporate interests. (This column was originally published by the Philadelphia Inquirer. )

Bill Gates and Paul Allen, the cofounders of Microsoft, together with Berkshire-Hathaway's Warren Buffett, had a 1999 net worth larger than the combined GDP of the 41 poorest nations and their 550 million people. Wealth and Democracy, Kevin Phillips; pg. 148

"The gap between the rich and the poor (1999) has grown into an economic chasm so wide that this year the richest 2.7 million Americans, the top 1 percent, will have as many after-tax dollars to spend as the bottom 100 million. Wealth and Democracy, Kevin Phillips; pg. 103

Don Bauder writes, "The 400 richest Americans are worth more than $1 trillion, as much wealth as the 50 million households in the bottom half of the population." Beyond, chapter 15, footnote 2:

While average incomes have continued to grow along with the size of the economy, the distribution of that income has come to look more and more like what one finds in a banana republic -- with a mega-wealthy elite, an ever-slimmer middle class getting squeezed in every direction, and a poor working class struggling to put food on the table and a roof overhead.

Averages can't tell that story. The most telling analysis -- and the most jarring -- of the long-term economic trends that impact most of us was done by economists Emmanuel Saez and Thomas Piketty. They sliced and diced the American economy, and found that when you lop off those in the top 10 percent of the economic ladder, earnings for the overwhelming majority of Americans actually declined during the 33 years between 1973 and 2006. In 1972, all but the top 10 percent earned, on average, $30,174 dollars per year (in 2006 dollars). In 2006, more than three decades of growth later, that number had fallen to $29,952 (Excel file). (Some conservatives argue that about half of Americans are "investors" and therefore looking only at income from paychecks, without including gains from the stock market and other investments, doesn't give the whole picture. OK, but ownership in securities is also highly concentrated at the top. If we include capital gains -- income from investments -- and again lop off the top 10 percent, incomes for the remaining 9 out of 10 Americans increased annually by about $39 bucks per year between 1972 and 2006 (in 2006 dollars). That works out to about one-tenth of 1 percent annually -- robust growth, no?)

Now, how can it be that the U.S. economy generates inflation-adjusted growth year after year and most of our incomes have shrunk for more than three decades? The answer is that a larger share of income has been captured by those at the top. In 1972, the top 10 percent grabbed about a third of America's income (including investment income). By 2006, that share had risen to 46.3 percent. In 1972, the top 1 percent of the American public grabbed 8.7 percent of its earned income, and that figure skyrocketed to more than 20 percent in 2006. The Wall Street Journal recently reported that "the richest 1 percent of Americans in 2006 garnered the highest share of the nation's adjusted gross income for two decades, and possibly the highest since 1929.

... perhaps a better way to understand economic growth in recent years is by looking at the "super-yacht index" (which really exists). According to the latest release, "just 241 yachts of 80 feet in length or greater were under construction around the world [in 1997], but by the end of 2007, 916 yachts" were being built. This year, orders for yachts over 130 feet in length -- mega-phalluses of wealth -- were up by 18 percent over last year; according to the president of the Luxury Institute, which compiles the index. (Authors note: 2009, however is not a good year for yacht builders)

The likelihood that a child born into a poor family will make it into the top 5 percent of income earners is just one percent, according to "Understanding Mobility in America," a study by economist Tom Hertz from American University. By contrast, a child born in a rich family had a 22 percent chance of also being rich as an adult. In other words, the chances of getting rich are about 20 times higher if one is born rich than if one is born into a low-income family. Even for children born in middle-class families (family incomes of $42,000 to $54,300), they had about the same chance of ending up in a lower quintile than their parents (39.5 percent) as they did of moving to a higher quintile (36.5 percent). Their chances of attaining the top five percentiles of the income distribution were just 1.8 percent. This is lower than in most other democratic countries. For example, intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.

The American Dream Is Alive and Well ... in Finland!
By Joshua Holland, AlterNet. Posted December 11, 2007.
Americans enjoy significantly less upward mobility than citizens of a number of other industrialized nations (some of the studies can be accessed here, here and here). German workers have 1.5 times the mobility of Americans, Canada is nearly 2.5 times more mobile and Denmark is 3 times more mobile. Norway, Finland, Sweden and France (France!) are all more mobile societies than the United States. Of the countries included in the studies, the United States ranked near the bottom; only the United Kingdom came in lower. Men in their thirties in 2004 had a median income that was, on average, 12 percent less than that of their fathers' generation at the same age. The scholars concluded: "The up-escalator that has historically ensured that each generation would do better than the last may not be working very well."

www.alternet.com The Great Corporate Tax Heist By Robert L. Borosage, Huffington Post. Posted August 14, 2008.
"the wealthiest 15,000 families -- one one-hundredth of 1 percent of the population -- capturing fully one-fourth of the entire income growth from 2000 to 2006. Their average income rose from $15.2 million per year to $29.7 million per year. Meanwhile, the rest of us -- 133 million households that make up 90 percent of the country -- divided up 4 percent of the nation's income, adding about $305 to our average $30,354 income.

McCain calls for cutting the top corporate rate from 35 percent to 25 percent and allowing corporations to write off investments in the first year. Combined, the Tax Policy Center wonks cost these at more than $1.3 trillion over 10 years. Len Burman of the Tax Policy Center estimates that in total, McCain would cut corporate revenues by about 50 percent from current levels.

According to a study by the Treasury Department, from 2000 to 2006, an average of 2.2 percent of GDP was collected in corporate taxes. This compares to an average of 3.4 percent in other industrial countries. The nonpartisan Congressional Budget Office projects that, under current law, corporate revenues will decline to 1.9 percent of GDP by 2017.