Delving into anonymous tax data compiled by the IRS, economist Emmanuel Saez has updated U.S. income-distribution statistics through 2013. What he found will not surprise you.
“… the economic recovery so far has only boosted the incomes of the rich, and it has yielded no improvement for the bottom 99 percent of the distribution. After adjusting for inflation, the average income for the richest 1 percent (excluding capital gains) has risen from $871,100 in 2009 to $968,000 over 2012 and 2013. By contrast, for the remaining 99 percent, average incomes fell by a few dollars from $44,000 to $43,900.
“That is, so far all of the gains of the recovery have gone to the top 1 percent.”
Note that the data reported above exclude capital gains, the profits earned from the sale of investments in stocks, real estate, etc. For example, it doesn’t reflect the fact that the Dow Jones has jumped from 6,600 in March 2009 to more than 17,000 today. As Saez notes, including capital gains in the data would tilt the distribution even further toward the top 1 percent.
Note also that since the end of 2008, the national economy has grown by 9.2 percent, yet the lower 99 percent has seen almost no benefits from that growth in GDP. It has all flowed upward.
The phenomenon has become so obvious and undeniable that we’re now hearing it broached from unfamiliar quarters.
“… the facts are we’re facing right now a divided America when it comes to the economy. It’s true that the top 1 percent are doing great under Barack Obama. Today, the top 1 percent earn a higher share of our national income than any year since 1928. The sad reality is, with big government, under the Obama administration, the rich and powerful, those who walked the corridor of power in the Obama administration, have gotten fat and happy.”
What Cruz lacks in logic he attempts to cover through sheer brazenness. His suggestion that the 1 percent to whom all these benefits are flowing are largely Obama’s buddies is particularly rich, and betrays the intellectual contempt that he feels for the audience that he is attempting to fool.
And then there’s that world-renowned champion of the downtrodden 47 percent, Mitt Romney. As he put it the other day:
“Under President Obama, the rich have gotten richer, income inequality has gotten worse and there are more people in poverty in American than ever before.”
Yes, that’s the same Mitt Romney who three years ago dismissed any talk of income inequality as “class warfare” and “the bitter politics of envy.” So clearly, something fundamental has changed. The elephant in the room has grown so large that it is no longer plausible to pretend that it does not exist. The strategy now appears to be to blame the elephant’s existence on those who pointed it out in the first place, such as President Obama. (I’m sure that eventually we’ll see the same thing attempted on climate change, but I digress.)
So let’s inject a little reality into the situation, shall we?
That chart tells us several things.
— It tells us that the more egalitarian America of the mid- to late-20th century, the America that many of us knew growing up, has disappeared.
— It tells us that income and wealth concentration now exceeds the previous peak of 1928, right before the Depression.
— It tells us that Cruz and Romney are wrong to suggest that the trend began in 2009, when that socialist Barack Obama was inaugurated as president and began making all his rich and powerful friends even more rich and powerful. It can be traced back to circa 1980, when Obama was a 19-year-old college student.
— It tells us that the trend accelerated in the eight-year term of Ronald Reagan (1981-89), and also continued unabated through the two-term presidency of George W. Bush. I’m not directly blaming the trend on those men or their policies, because it clearly has more fundamental causes. But it does strongly suggest that income inequality has causes other than high taxation and government regulation.
Nonetheless, that remains the GOP’s story and they’re sticking to it. Before they were willing to acknowledge income inequality as a problem, their preferred economic strategy was more tax cuts for the wealthy and “less regulation”. After acknowledging inequality as a problem, their preferred economic strategy remains exactly the same. Nothing has changed. It’s the political moonwalk, creating the impression of forward movement while staying exactly where you’ve always been.
Over the weekend, Cruz, Marco Rubio and Rand Paul all appeared before a group of wealthy conservative donors organized by the Koch brothers. During a panel discussion, all three presidential contenders acknowledged income inequality as a major issue, and all three argued that if we just cut taxes on those persecuted, bedraggled “producers” sitting in their audience — people already benefiting from the highest corporate after-tax profits in American history — the wealth would begin to trickle down to the working folks.
Admittedly, they did not use the discredited term “trickle down,” but that was certainly the essence of their message. Nor did they even try to explain why things had changed, why this time would be the magic time, the time that their oft-tried experiment would finally work and the chart above would begin to reverse itself.
Tellingly, when they were asked whether the minimum wage ought to be raised to make up for inflation, none of the three was willing to support the existence of a minimum wage in the first place.