As written about earlier, there is an immense divergence in income growth for most of us, the bottom 90 percent, and the income growth of the mega, top 1 percent, and ultra, top 0.1 percent, rich. This point is made clear in this chart from the Center on Budget and Policy Priorities (CBPP).
The growth of the income for upper 0.1 percent is even more dramatic especially compared to how much less they have to repay the country, via taxes, for the infrastructure they used to make them so rich.
After WWII, the Greatest Generation enjoyed a more evenly distributed income growth, but starting in the late 70’s and after Reagan became President taxes kept falling, the trend shifted dramatically to the top 5 percent and above.
Timothy Noah has put together a summary of many recent studies on the factors contributing to the growing inequity of personal income since the late 70s. The problem is not so much that the rich are getting richer, it’s that this inequity is destroying the middle class, destroying our democracy and recreating a plutocracy like the one we revolted against over 230 years ago. And this gap will only grow thanks to the Supreme Court’s Citizens United decision to let the super rich buy our government.
Here is Mr. Noah’s conclusion on the major contributors to the “Great Divergence” with links to more detail in his article.
We have now reviewed all possible causes of the Great Divergence—all, at least, that have thus far attracted most experts’ attention. What are their relative contributions? Here is a back-of-the-envelope calculation, an admittedly crude composite of my discussions with and reading of the various economists and political scientists cited thus far:
- Race and gender are responsible for none of it, and single parenthood is responsible for virtually none of it.
- Immigration is responsible for 5 percent.
- The imagined uniqueness of computers as a transformative technology is responsible for none of it.
- Tax policy is responsible for 5 percent.
- The decline of labor is responsible for 20 percent.
[The other side of this coin is the surge in corporate power which just increased dramatically thanks to our conservative activist Supreme Court.]
- Trade is responsible for 10 percent.
- Wall Street and corporate boards’ pampering of the Stinking Rich is responsible for 30 percent.
- Various failures in our education system are responsible for 30 percent.
Most of the charts below came from references used by Mr. Noah.
Race is a neutral issue for the “Great Divergence” in income growth.
Gender does not account for the “Great Divergence.”
“The bar representing 1965–1998 on the graph includes about 3 million illegal foreign residents who took advantage of an amnesty offered by Congress to obtain legal residence between 1988 and 1991. It does not include 5 million others who, according to the Immigration and Naturalization Service, entered the country illegally or overstayed temporary visas between 1965 and 1998 and were not legalized. The largest number of them came from Mexico, but many other countries were represented.”
The estimates in Figure 7 suggest that the actual size-adjusted personal income in 2007 was 3.1 percent lower than would have been the case if no immigration had occurred after 1979.
The productivity of American workers have gone up due to many changes in the work place including the use of the personal computer. However, the income from increased productivity have been passed on to CEOs – not those that implemented the increases.
Over the last 30 years the U.S. economy has experienced a sea change in performance defined by the emergence of a disconnection between wages and productivity growth. The disconnection is captured in Figure A, which shows growth of productivity and hourly compensation for production and non-supervisory workers (who constitute over 80% of wage and salary employment). From 1959 to 1979 compensation moved with productivity. Since 1979 productivity has kept growing but hourly compensation has essentially flat-lined.
From Inequality and Institutions in 20th Century America, “In the quarter century between 1980 and 2005, business sector productivity increased by 71 percent. Over the same quarter century, median weekly earnings of full-time workers rose from $613 to $705, a gain of only 14 percent”
The “Top 400 are the 400 tax returns with the highest adjusted gross income reported to the IRS. Fifty percent of their income is from dividends that are taxed at 15%.
In 2003, just 1% of all households — those with after-tax incomes averaging $701,500 — received 57.5% of all capital income, up from 40% in the early 1990s. On the other hand, the bottom 80% received only 12.6% of capital income, down by nearly half since 1983, when the bottom 80% received 23.5%.
Taxes – bigger drops in marginal rates and income shifting to unearned income at even lower tax rates has shifted income to the the rich. Taxes may not have much effect on unearned income, but they certainly allow the “stinking rich” to keep more of it. What’s worse is their tax breaks reduce their payback for all of the nation’s resources they used to enrich themselves.
Union members “constituted about a quarter of the civilian labor force from 1950 to 1970. After 1970, the unionized portion of the labor force declined steadily.” WIthout unions, the CEOs decide who gets rewarded for increased productivity.
The United States stands out as the country with the highest level of inequality and, at 14%, the lowest level of union coverage.
“These results confirm that the rise in top income shares and the dramatic shift of income com- position at the top documented in Section IV are mainly driven by the surge in top wages during the last three decades.”
“Those at the very top of the income distribution therefore play a central role in the evolution of U.S. inequality over the course of the twentieth century.”
“Goldin and Katz calculate that it [college education] accounts for two-thirds of the increase in income inequality during the Great Divergence.”
“The annual number of male college graduates increased more than fivefold from 1946 to 1950, when millions of veterans took advantage of the G.I. Bill of Rights to go to college. Another steep rise was associated with the educational deferments available during the Vietnam War. ” Since then, only the rich or those willing to go into debt for years, can get a college degree.
- So, if you want the Great Divergence to widen further aided by the Koch Brothers and other rich right-wing authoritarian conservatives without a conscience, do not vote for progressive Democrats.
- If you want corporations to own our government, do not vote for progressive Democrats.
- If you want public education privatized so only the mega and ultra rich can afford it, do not vote for progressive Democrats.
- If you want people, who are mostly concerned about “me,” to continue breaking our government from their corporate headquarters, do not vote for progressive Democrats.
- If you want the mega and ultra rich who gain the most for our nation’s infrastructure to keep pillaging our infrastructure, do not vote for progressive Democrats.
- If you don’t care about others who suffer due to circumstances beyond their control, then do not vote for progressive Democrats.
- If you want your freedoms controlled by “Christianist” law, do not vote for progressive Democrats.
- If you want to buy another yacht, staff your three muli-acre homes, and scream for more tax breaks while those not like you die for unjustified wars, lose their homes, or go bankrupt trying to pay medical bills, do not vote for progressive Democrats.
- If you want to continue the transfer of the nation’s wealth from most of us to the mega and ultra rich, do not vote for progressive Democrats.
- If you believe turning over government operations to corporations will improve citizen protection and empowerment, do not vote for progressive Democrats.
- If you want to take this country back to the 1950’s or to the originial unamended Constitution, do not vote for progressive Democrats.
- If you are fearful of whites becoming a minority, do not vote for progressive Democrats.
- If you believe you have total control of your life and that those not like you deserve what they get from life, do not vote for progressive Democrats.
- If you think complicated national problems can be fixed in just 2 years, do not vote for progressive Democrats.
- If you believe a growing income is needed for success, except for the federal governmnet, do not vote for progressive Democrats.