Serious Implications

“If you don’t pay the workers enough money, they can’t buy the cars.” – Henry Ford

The website Inequality.org has a summary of income trends among American households from 1947 to 2005. The following two graphs illustrate the rise and fall of the middle class since World War II. The first graph shows income growth according to quintile (20%) groups. Note the lowest 20% of households (far left) had the largest income growth from 1947 to 1979. The richest group represented by the bar on the far right had the lowest income growth, although it was still substantial. It was a time of “lifting all boats.”

The second graph shows the income trends from 1979 to 2005. It’s a much different picture with the richest group seeing the highest income growth. This graph illustrates the supply-side economic theory that has been prominent since Ronald Reagan was president. The “trickle down” economics did not in fact reach the lower wage earning groups. It created faster income growth for the rich, stagnation or even wage loss for middle and lower end wage earners.

The Republicans are trying to paint Obama as a “socialist” or “redistributionist” because he proposes to roll back the Bush Tax cuts that disproportionately helped the rich, whose earnings were growing faster than anybody else’s.

It’s time to rebalance the economy.

An earlier version of this article was posted on October 30, 2008.