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Tuesday, March 19, 2019


This opinion piece originally appeared at

The aftermaths of the Great Recession and the Great Depression produced sharply different changes in U.S. incomes that tell us a lot about tax and economic policy.

The 1934 economic rebound was widely shared, with strong income gains for the vast majority, the bottom 90 percent.

In 2010, we saw the opposite as the vast majority lost ground.

National income gained overall in 2010, but all of the gains were among the top 10 percent. Even within those 15.6 million households, the gains were extraordinarily concentrated among the super-rich, the top one percent of the top one percent.

Just 15,600 super-rich households pocketed an astonishing 37 percent of the entire national gain.

The different results in 1934 and 2010 show how a major shift in federal policy hurts the vast majority and benefits the super-rich.

Starting in 1933, government policy aimed to improve the lot of the vast majority through such policies as massive government-financed jobs and construction programs. But since 1980 policy has focused on helping the already rich get richer still with such policies as lower taxes and fewer audits.

The updated figures illustrating income changes, all in 2010 dollars, come from analysis of the latest IRS data by economists Emmanuel Saez and Thomas Piketty.

Saez received the 2009 John Bates Clark Medal, awarded to the economist under 40 who has made the greatest contribution to that field, and a 2010 MacArthur genius grant.

Their data expands on what I reported first last fall – median pay fell in 2010 to its lowest level since 1999.

Saez and Piketty show that the vast majority’s average adjusted gross income, of which wages are just a part, was $29,840 in 2010. That was down $127 from 2009 and down $4,842 from 2000.

Most shocking? The average income of the vast majority of taxpayers in 2010 was just a smidgen more than the $29,448 average way back in 1966.

At the top, the super-rich saw their 2010 average income grow by $4.2 million over 2009 to $23.8 million. Compared to 1966 their income was up on average by $18.7 million per taxpayer.

We should expect this pattern of concentrated gains weighted toward the very top to continue unless we change our policies.

Saez shows that the top one percent’s share of real income growth is increasing with each economic expansion and it matters not whether the president is a Democrat or Republican. The top one percent enjoyed 45 percent of Clinton-era income growth, 65 percent of Bush-era growth and 93 percent of Obama-era growth, though that is only through 2010.

While markets are a factor, I think the evidence makes clear that government policy is at the core of the differing fortunes of the vast majority and the super-rich.

Inaugural addresses of Franklin Roosevelt and Barack Obama bring this into sharp focus. Both spoke of the need for restoring confidence, while denouncing greed and irresponsible conduct. Roosevelt in 1933 specified “callous and selfish wrongdoing” by bankers abusing a “sacred trust.” Obama vaguely referred to the “consequence of greed and irresponsibility on the part of some.”

Roosevelt said that “our greatest primary task is to put people to work.” Obama, again less specific, spoke of government that “helps families find jobs at a decent wage.”

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One response to “The Richest Get Richer”

  1. JPS says:

    According to a report by Senator Coburn (Republican) of Oklahoma, 1,500 MILLIONAIRES paid no taxes in 2009 and special tax breaks for them costs us $30 billion a year in lost revenue. Senator Coburn said “This welfare for the well-off – costing billions of dollars a year – is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and IOUs to be paid off by future generations”.
    According to another report ‘Corporate Taxpayers & Corporate Tax Dodgers’, 30 Fortune 500 companies paid ZERO federal income taxes over the last 3 years. Out of 280 PROFITABLE Fortune 500 corporations the report examines, 30 paid a NEGATIVE effective federal income tax rate between 2008 and 2010, while another 67 paid less than 10 percent.
    All in all, our wealthy and corporations have had a whirlwind decade. A CBO report found that income for the wealthiest 1 percent of Americans had exploded since 1979, by a whopping 275 percent. The Fortune 500 — the biggest companies in America — boosted their earnings a whopping 335 percent in the last year. It’s the second biggest jump since the list began in 1955. Citigroup announced 3rd quarter earnings for 2011 are up 75% to $3.1 Billion. CEO pay has skyrocketed 300% since 1990. CEO pay is now 350X the average worker’s, up from 50X from 1960-1985.
    The Republican philosophy insists “the wealthy create the jobs.” But history proves otherwise. That’s why it’s referred to as Voodoo Economics. Job growth under George W. Bush was the lowest since Harry Truman (just three million jobs over its eight years). Wages for the middle class worker has stagnated since the 1980’s. The inflation-adjusted average earnings for the bottom 20 percent of families have fallen from $16,788 in 1979 to just under $15,000, and earnings for the next 20 percent have remained flat at $37,000. Today, because of stagnating wages and higher costs for basic necessities, the average two-wage-earner family has less disposable income than a one-wage-earner family did a generation ago. 46M people today are living in poverty in the U.S. In contrast, higher-income brackets had significant wage growth since 1979, with earnings for the top 5 percent of families climbing 64 percent to more than $313,000. While the middle class disappears and poverty increases the wealthiest people in our country are not only doing extremely well, they are using their wealth and political power to protect and expand their very privileged status at the expense of everyone else.

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