By ICLT member, Marshal Auron
I’ve been trying to expand my news sources outside of “progressive” media, so I’ve been listening to some “moderate” commentators on the POTUS channel. Recently, one former Republican-now Independent reflected on his childhood in the 1970s: how his father was a Pennsylvania public school teacher and yet had a comfortable middle-class lifestyle: nice house, cars, vacations. He lamented that lifestyle is not possible today. It hit me immediately that the cause was that both wealth and income (two related but different concepts) have become more concentrated in the US during the 40+ years of my working life and in turn have led to the deterioration of middle and working-class lifestyles.
Wealth
Wealth consists of all your assets… bank accounts, investments, retirement funds, property owned MINUS all your debt. US household wealth currently totals around $139 Trillion or about $1 million for each of the 131 million families in the US. Since few of us have $1 million in our pockets, it’s clear that wealth is not distributed equally. Americans in the “Bottom 50%” have average wealth of less than $50,000, the “Top 10%” averages nearly $8 million and the “Top .1%” averages more than $150 million! About 8% of American families have negative wealth. Between 1980 and 2022 wealth on average increased by 234% for the “Bottom 50%”, by 311% for the “Top 10%” and by a striking 904% for the ”Top .1%”.
Income
Income is what households earn and the story for income growth is bleaker. Between 1980 and 2022 income increased on average by 14% for the “Bottom 50%” of Americans, by 150% for the “Top 10%” and by 400% for the “Top .1%”. It’s more troubling to learn that income and wealth inequality in the US is higher than in most other developed countries. Income feeds wealth since it drives savings and investment after folks take care of all their living expenses.
“It’s The Economy Stupid!”
We brag about how strong the US economy has been since COVID, but a huge slice of our population is standing on the sidelines. Channeling James Carville, “It’s the economy stupid” may give us better insight into why so many people are disenchanted with the government and the economy. How did this happen? What are the implications of this? What do we do about these inequities?
How did this poor distribution of wealth and income occur?
Decline in Tax Rates - Federal income tax rates for the highest wage earners have declined dramatically since the 1960s. Corporate and capital gains (investment gains) tax rates also have declined. In particular, Ronald Reagan’s 1984 tax cut fueled growth in the equity markets and the economy contributed to wealth concentration among the wealthiest folks. Donald Trump’s 2017 tax cut didn’t help. The highest wage earners benefited from lower taxes and strong investment returns, while many working-class folks’ situation stagnated in the face of the economic boom.
Income/Wealth Inequality Due to Uniformity- Lack of race, ethnic and gender diversity of opportunity have all contributed to income inequality. Black Americans still face some level of labor discrimination and there is still a gender pay gap that adversely affects women’s earnings. Studies show that White families receive twice as much financial help from their relatives as Blacks and Latinos. This is likely due to income inequality that results in a lower level of wealth available to be passed from generation to generation.
Reduced Funding for Education - College and graduate education should produce higher wages and increased levels of wealth. People like me who grew up in poverty, benefited from Lyndon Johnson’s “Great Societies” programs in the 1960’s and were able to get great university educations and increase our economic situation.. But over the last 25 to 50 years, this benefit has declined as the cost of education and student borrowing levels have increased in the face of decreased federal and state government funding for higher education.
Declining Union membership- Union members typically earn more than non-union workers, however anti-union efforts and the decline in union representation and membership has resulted in wage stagnation for growing numbers of non-unionized workers.
Global Competition, Mergers, Acquisitions - Increased competition for American businesses from globalization in the economy, less than favorable trade with other countries, outsourcing to less expensive markets and technology and automation have increased joblessness. Resulting mergers and acquisitions have led to huge business conglomerates run by powerful executives underscoring the concentration of wealth.
How does wealth and income inequality affect us?
Reduced Economic Demand- Inequality reduces demand in the economy for goods and services: the wealthy have an increasing share of the “wealth pie”. However, they typically spend a smaller percentage of their income than the working class.
Struggling Working Class-Since the working class have a declining slice of the pie, they can’t afford basic necessities.
Weaker Job and Income Growth- Reduced demand for goods and services weakens job and income growth. This leads to a decrease in working-class ability to become upwardly mobile.
Reduced Government Programs-Reduced tax rates paid by the wealthy have reduced the government’s ability to provide vital government programs. For example, programs that aid the less fortunate, promote educational opportunities, and even strengthen our military are at risk. The tax revenue shortfall is endangering our economy as government borrowing levels and budget deficits grow.
Turn to Populist Leaders- It’s the economy stupid! Despite a strong US economy, it’s believed that working class voters turn to populist leaders for help.. At the same time, the wealthy can exert significant influence on the government to enhance their wealth and power. This may provide some insight into a major reason why many voters turned to Donald Trump in the 2024 election.
Stay tuned for my next installment….I’ll dig into this more deeply and suggest some policy paths to correct this that Democrats and Independents need to highlight.
