Archive for the ‘Inequality.org’ tag
Income Inequality: How the Economy Fell Off a Cliff
“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.
The End of Savings
Maxed out on credit and broke, Americans have lost their buying power.
If anything characterizes the economic status of “middle class,” it’s the opportunity and practice of saving for the future. To do this requires a few things, two of which relate to policy:
(1) a living wage or better,
(2) adequate insurance against life’s major setbacks such as serious illness and job loss, and
(3) personal discipline to delay gratification.
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The above graph shows a fundamental change in the collective behavior of Americans with respect to saving. Personal savings peaked early in the Reagan Administration and have essentially taken a dive ever since.
It’s interesting to compare the above graph to this graph, which shows robust wage growth across all income brackets from 1946 to 1979, and this graph, which shows stagnant wage growth from 1979 to 2005 in the bottom 80% of income groups, and soaring growth for those at the top. This second graph reflects the “trickle down” or supply-side economic model.
Until wages and cost of living are rebalanced to enable the middle class to get out of debt and start saving again, and until the middle class can afford to make big purchases like cars and homes again, it’s doubtful whether or not the nation can pull out of a deepening recession.
More information on the graphs, including primary data sources, is available at Inequality.org
Rise and Fall of the Middle Class: 1947-2005
McCain’s Policies Would Continiue the Middle Class Decline
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. John McCain is a supply-sider. This is the condition he would continue as president. More growth for the rich, stagnation or even wage loss for the lower end.
The McCain “fear and smear” campaign is busy trying to paint Obama as a “socialist” or “redistributionist” because he proposes to roll back the Bush Tax cuts that disproportionately helped the rich since 2001, disproportianately helped the rich whose earnings were growing faster than anybody else’s.
Make no mistake about it, McCain believes this process of destroying the middle class should continue. I suspect the “glorious war” that McCain needs to make up for Vietnam will require millions of American soldiers. Poor people make willing recruits.
