San José, Costa Rica, since 1956
U.S. Inequality

In the US, the bottom 90 percent are poorer today than they were in 1987

Once upon a time, the United States economy worked for everybody, and even the middle class got richer. But this story has been only a fairy tale for almost 30 years now. The new, harsh reality is that the bottom 90 percent of households are poorer today than they were in 1987.

This is a much more dramatic statement than it sounds. While the U.S. Federal Reserve has told us that the median household is worth less now than it was in 1989 — that’s the household right in the middle — it turns out that everybody but the richest 10 percent of U.S. citizens are worse off. That includes the poor, the entire middle class and even what we would consider much of the upper class.

You can see this troubling finding in a new paper from Emmanuel Saez and Gabriel Zucman on U.S. wealth inequality, which is based on tax data.

Taking each group’s inflation-adjusted net worth from 1945 and indexing it to 100 makes it easier to compare how wealth has grown for people with lots or little of it. The bottom 90 percent actually did very well during the first few decades of the postwar period — adding more wealth, in percentage terms, than those at the top.

But the days of shared prosperity have come to an end, gradually and then suddenly. It started in the 1980s when the top 1 percent awoke from a long postwar slumber, thanks to the combination of lower taxes, financial deregulation and new technology. It wasn’t a total disaster for the bottom 90 percent. Even as most U.S. citizens saved much less, accumulating far less wealth, stock markets and housing prices continued to rise — until they didn’t, crashing down in 2007 and 2008.

The problem was that the middle class didn’t own that much in stocks but went into debt to buy lots of housing. So the housing crash turned their biggest financial asset into an albatross, wiping out their equity but not their debt. And the housing recovery hasn’t done much to fix this, since it has struggled to move beyond the “nascent” stage.

Stocks, meanwhile, collapsed during the crisis but came back soon after. The middle class missed out on the big bull market in stocks but not on the even bigger bear one in housing. That’s why the recovery has restored so little of the wealth that the recession destroyed. In fact, the bottom 90 percent have kept losing net worth the past few years, in large part because of rising student-loan debt.

It’s been a lost 25 years for the bottom 90 percent but a lost 15 for the next 9 percent, too. That’s right: Altogether, the bottom 99 percent are worth less today than they were in 1998.

But this isn’t a story about the top 1 percent running away from everybody else. It’s a story about the top 0.1 — scratch that, the top 0.01 percent — doing so. Saez and Zucman’s data of each group’s share of U.S. wealth shows that. Indeed, since 1980, the top 0.01 percent’s piece of the wealth pie has increased by 8.6 percentage points, while the next 0.09 percent’s has done so by 5.4. The bottom 99 percent, meanwhile, have seen their wealth share fall an astonishing 18 percentage points.

Here’s a bit of historical perspective: The top 1 percent own more than 41 percent of all the wealth in the country. That’s the most since 1939, but still well below the all-time high of 51 percent set in 1928.

In other words, this new Gilded Age might get even more gilded.

© 2014, The Washington Post

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freyr

While I can certainly understand rich republicans, as they are the benefactors of Reagan’s institution of corporate welfare, I can’t for the life of me understand middle class and poor people supporting republicans.
Taxing the poor to dole welfare to the rich is a phenomenon that continues. At this point in gun crazy USA, the poor are mainly killing the poor( as well as cops killing the poor)
With everyone having guns, I fear the US will become another Somalia.

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landshark

The mess in the USA started with Lyndon B. Johnson’s socialist programs under the banners of The Great Society and The War on Poverty….both of which created disincentives to work, gave opportunities and privileges those those who didn’t qualify or work for them , destroyed the family structure particularly in minority communities and destroyed the concept of merit performance based on continuous education and personal responsibility. I have sadly and increasingly angrily watched my country being torn asunder by socialists from both political parties. It is hard to tell them apart anymore.

Another reason is that much of American citizenry did not adjust to the changing nature of work as it progressed from the industrial age to the information age. Many technology jobs still go begging in the USA because our universities are producing MBA’s, attorneys, social workers and psychologists….of which there is a glut in each of those occupations. Many IT and engineering positions are either filled by foreign “visitors” or the technical or engineering work is sent off shore to China or India. Of this I personally know of what I speak as my career involved corporate recruiting for 4 Fortune 100 companies. And my younger HR friends tell me it is getting worse every year. This situation is being exacerbated every year by our failing educational system. It is utterly broken across the USA thanks to government interference and misguided teachers unions protecting people who should not be teaching.

Messers. Morris and Kahle are certainly correct with their observations as well.

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Mark Kahle

This is normal when Socialist programs are introduced and run by governments. First comes the idea… “It’s for the women and kids” “It is to help the poor” and other such keyword drivel…

Then comes the new committee, the new government workers to handle this “gift from god” followed by the new tax to support the new organization… then someone is helped and the media reports what a miracle it was to institute this for the people that needed it most…

Then we have a deeper reliance on government to solve our basic needs. This helps disintegrate the family, the church and all the private organizations that were helping at no cost to the public.

Then these organizations are banned from helping as they “don’t meet the government standards as put forth by the new agency that wants to guarantee its’ own employment. Then we see more people in need than the program can handle..

Bottom line is this… the poor, the women and kids all are worse off in greater numbers that will require a new tax and even greater government intervention in our personal daily lives while the roles of the poor are ever expanded.

Costa Rica has fewer than 1.8 million private sector workers that support all the rest. Just how sustainable is this ??

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John Morris

Thank the ACA mandates which caused several hours per week to be cut from part-time workers. Thank the Fed for giving easy money to banks and wealthy investors, while destroying savings interest for the rest. Thank entitlement programs that take away any incentive to work.

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