Recent Items

Yes, Virginia, the Rich Continue to Get Richer: the Top 1% Got 121% of Income Gains Since 2009

Posted on by

Yes, sports fans, you read that headline correctly. The top 1% has captured all of the income gains since 2009 and then some, roaring ahead while the rest of the population slipped behind. A new paper by Emmanuel Saez (along with his frequent co-author Thomas Piketty, a long-standing cataloguer of income inequality) estimates that the income gains to the top 1% from 2009 to 2011 were 121% of all income increases. How did that happen? Incomes to the bottom 99% fell by 0.4%.

This confirms a pattern that Matt Stoller highlighted: that income inequality increased more under Obama than under Bush. And the new Saez paper also describes how it came about. In short form, income to the top 1% is significantly influenced by capital gains. Remember, the tax reporting is not clean here: rising equity and bond markets help all those private equity and hedge fund professionals, who are able to get capital gains treatment for what ought to be labor income. But the paper also stresses that the lower orders were hit hard in the aftermath of the global financial crisis than in the dot-bomb era, which also saw a big drop in capital gains. That isn’t as hard to understand. The collapse of the dot-com mania didn’t impair the real economy overmuch because it was not fueled in a meaningful way by borrowings. By contrast, the housing bubble, and more important (in terms of damage to the financial system) the much housing exposure created synthetically by CDOs that consisted entirely or mainly of credit default swaps was highly geared, hence when it collapsed, it took credit providers down with it.

It’s important to recall that at least in America, the relentless pursuit of wealth for its own sake dates from the Gilded Era, or at least so argues Richard White in the Boston Review:

After his death, Lincoln’s personal trajectory from log cabin to White House emerged as the ideal American symbol. Anything was possible for those who strived.

But the goal of this striving was not great wealth. Perhaps the most revealing memorial to Lincoln and his world is found in one of the most mundane of American documents: the census. There he is in the Springfield, Illinois, listing of 1860: Abraham Lincoln, 51 years old, lawyer, owner of a home worth $5,000, with $12,000 in personal property. His neighbor Lotus Niles, a 40-year-old secretary—equivalent to a manager today—had accumulated $7,000 in real estate and $2,500 in personal property. Nearby was Edward Brigg, a 48-year-old teamster from England, with $4,000 in real estate and $300 in personal property. Down the block lived Richard Ives, a bricklayer with $4,000 in real estate and $4,500 in personal property. The highest net worth in the neighborhood belonged to a 50-year-old livery stable owner, Henry Corrigan, with $30,000 in real estate but only $300 in personal property. This was a town and a country where bricklayers, lawyers, stable owners, and managers lived in the same areas and were not much separated by wealth. Lincoln was one of the richer men in Springfield, but he was not very rich.

Not only was great wealth an aberration in Lincoln’s time, but even the idea that the accumulation of great riches was the point of a working life seemed foreign. Whereas today the most well-off frequently argue that riches are the reward of hard work, in the Civil War era, the reward was a “competency,” what the late historian Alan Dawley described as the ability to support a family and have enough in reserve to sustain it through hard times at an accustomed level of prosperity. When, through effort or luck, a person amassed not only a competency but enough to support himself and his family for his lifetime, he very often retired. Philip Scranton, an industrial historian, writes of one representative case: Charles Schofield, a successful textile manufacturer in Philadelphia who, in 1863, sold his interest in his firm for $40,000 and “retired with a competency.” Schofield, who was all of 29 years old, considered himself “opulent enough.” The idea of having enough frequently trumped the ambition for endless accumulation.

Now there were robber barons who dated before that era, such as John Jacob Astor. And the railroad boom (and related stock market speculation) may have been a catalyst for the shift in American values. But if you buy White’s thesis, there’s a reason Thorstein Veblen coined the expression “conspicuous consumption”. He was describing a novel phenomenon, at least for the New World.

And do read the Saez paper:

"Getting Richer" Edmund Saez by

Print Friendly
Twitter153DiggReddit18StumbleUpon67Facebook699LinkedIn1Google+38bufferEmail

89 comments

  1. ambrit

    It could be put in the perspective of “The Financialization of Social Status.” In essence, the separation of status from real achievement. An aristocratization of the society. Oh my, I’m getting deeper and deeper into it, aren’t I.

  2. jake chase

    All this talk about “the 1%” misses the essential point: more than 50% of the income gains of “the 1%” flow to the top 1/10%; more than 50% of that top 1/10 flow to the top 1/100%. If America is 300 million people, the top 1% is 3 million. Does anyone seriously think that 3 million people are benefitting from the past four years?

    The last time I looked, $5 million in net worth put a person in the top 1%. Most of those 3 million lucky stiffs were retired. In the past four years they could have earned more than 1/2% on their money only by gambling. Gambling results are not income. The fact that you made money in markets yesterday doesn’t mean you will make money tomorrow.

    When are people going to wake up and realize that our problems are caused by the looting of a relative handful of plutocrats enabled by stooges in the government, the media, faux professions like consulting and law, and the universities?

    1. Skippy

      Jake the USA is irrelevant when expanded to the world.

      Leaders must aim to bring down global inequality at least to 1990 levels

      An explosion in extreme wealth and income is exacerbating inequality and hindering the world’s ability to tackle poverty, Oxfam warned today in a briefing published ahead of the World Economic Forum in Davos next week.

      The $240 billion net income in 2012 of the richest 100 billionaires would be enough to make extreme poverty history four times over, according Oxfam’s report ‘The cost of inequality: how wealth and income extremes hurt us all.’ It is calling on world leaders to curb today’s income extremes and commit to reducing inequality to at least 1990 levels.

      The richest one per cent has increased its income by 60 per cent in the last 20 years with the financial crisis accelerating rather than slowing the process.

      http://www.oxfam.org/en/pressroom/pressrelease/2013-01-19/annual-income-richest-100-people-enough-end-global-poverty-four-times

      Extreme wealth and inequality are reaching levels never before seen and are getting
      worse
      Over the last thirty years inequality has grown dramatically in many countries. In the US the share of national income going to the top 1% has doubled since 1980 from 10 to 20%. For the top 0.01% it has quadrupled to levels never seen before. At a global level, the top 1% (60 million people), and particularly the even more select few in the top 0.01% (600,000 individuals – there are around 1200 billionaires in the world), the last thirty years has been an incredible feeding frenzy. This is not confined to the US, or indeed to rich countries. In the UK inequality is rapidly returning to levels not seen since the time of Charles Dickens. In China the top 10% now take home nearly 60% of the income. Chinese inequality levels are now similar to those in South Africa, which are now the most unequal country on earth and significantly more unequal than at the end of apartheid.

      Even in many of the poorest countries, inequality has rapidly grown.

      http://www.oxfam.org/sites/www.oxfam.org/files/cost-of-inequality-oxfam-mb180113.pdf

      Skippy… the nations state is just a farm, under contract, by is financial betters.

      1. jake chase

        Skip,

        The poor we will always have with us. The primary American victims of the current depression are (or were) middle class.

        I live in America and worry about America. Thirty years ago I spent a week in Mexico and saw shit I could not imagine. I doubt things there have improved, and most energetic Mexicans seem to be here.

        All this global village shit is sentimental. IMHO. what makes Mexico and similar countries what they are is the absence of a middle class.

        1. Me

          I don’t know about that. There is obviously a finite amount of resources in the world. If every person consumed on a per capita basis like the US we would need at least six planets. If China consumed as the US does on a per capita level they alone would consume all of the world’s resources. If you look at the US, it is about 6% of the world’s population. The US none the less consumes about a quarter of worldwide resources. Then do an analysis of Europe, Japan, China and a handful of other already developed countries. There simply aren’t enough resources for the rest of the world to be anything but poor. I would argue it is the middle class and the rich in the capitalist countries as well as the rich and middle class in the developing countries (especially in China) that make Mexico and similar countries what they are. You can’t talk about poverty or inequality in isolation and within individual countries. The inequality between countries also matters. If you look at a country like Cuba and compare it to a more capitalist country like Mexico or El Salvador, you see obvious differences and there is obviously a different ideological makeup of the governments themselves. None the less, those countries will have a hell of a lot in common because of their poverty.

          Uneven development is also an issue. If Mexico were to develop it would necessarily come at the expense of countries like the US, it certainly shouldn’t come at the expense of Bangladesh. If Mexico were to develop it would have to develop its own industry and that industry would have to be able to stand if need be without the aid of FDI, it would have to be able to feed its own people too. That would also necessarily come at the expense of capitalists, the agricultural interests (and the state support the interests enjoy in the US and other developed countries) and the rich in countries like the US.

          Global poverty and inequality is an issue but the rich countries won’t do a damn thing about it really. It involves sacrifice, it involves challenging inequitable trade agreements already in place, it involves taking on the expansion of WTO type agreements (which the TPP is) and it involves the capitalists in these countries sacrificing for the benefit of the poor countries and people. Isn’t going to happen. Inequality will not be solved by begging the rich people or countries or by trying to appeal to their non-existent morals. The developing countries and poor people will either band together and fight the rich, they have to create economic alternatives or they will have to accept their continued poverty. Same goes here.

          1. jake chase

            The only solution to the situation you describe would be the replacement of electricial power and gasoline power with animal power. Perhaps you could also burn the excrement for fuel? Then, at least we would have heat if not electricity. No television, but that would be a plus. Personally, I consume as little as possible. I drive about 20 miles a month. I could do as much with a bicycle, if others weren’t making that too dangerous by driving.

            Resources will run out soon enough regardless of what our politicians say and our population does. Those counting on a future of SuperBowls, online poker and celebrity game shows will be SOL. But unless they burn down the libraries we will still have plenty of books. I will read during the day and sleep at night, instead of what I do now, which is the reverse.

          2. ebear

            “If every person consumed on a per capita basis like the US we would need at least six planets.”

            Relax man, we’ve got at least nine and four of them are really big!

          3. Ed

            I see this argument all the time, usually advanced by the left, sometimes by the right in support of various schemes to make middle class Americans poorer.

            Is there an accounting issue here? Do these figures simply take GDP, or even GNP, and divide it by 300 million? Or take the total amount of carbon emissions and divide it by 300 million? I suspect that these measurements include a good deal of industrial production and military operations that ordinary individual Americans have no control over and probably don’t benefit from.

        2. Skippy

          Gezzz jake…

          For all your learnedness and experience, a few weeks in Mexico is your empiric yard stick, your observation ie the middle class buffer theory and sentencing a large (growing as we speak) demographic of the total world population… too impoverished permanence (lack of basics). Seriously, unemployment is a *tool* of classical – neo classical economics and not just some environmental condition… eh.

          Let us not to forget that the occurrence of the middle class and the factors that preceded it, it was engineered, resulted of, a hole bunch of factors, after a global conflict over securing cheep inputs. The elites of the time could not give a rats ass about the wellbeing of other humans, only how their bottom line looked… the middle class grew out of the – customer – consumer- of last resort – and not some high and mighty sense of doing the right thang for Americans [unless you believe the romantic exceptional narrative].

          Your “I care about America]ns” is more than ever a moot point, the globe is tightly coupled via finance and physical activity (increases in back ground toxicity don’t lie nor is the speed it travels these days). It is also observed that after it almost finished raping its self, it expanded outward… you know 2nd – 3rd world country’s, that’s become troublesome [see H. Clinton's bye bye speech].

          Now on top of all that… we now have this gigantic ball of liquid virtual capital seeking returns in virtual time lines of increasing speed. I call it *Galactus [planet eater]* you know fab 4 thingy, its actually a creature spawned from the wealthiest on the planet and no single or group identity has complete control over it. Its damn near autonomous and has zero respect for sovereignty either, it lives only to consume raw inputs so as to further leverage its virtual mass exponentially.

          Skippy… actually your lucky, like my mother, going to the grave spitting splinters of a broken dream… where if my genealogy holds… will observe much more…

          1. jake chase

            You aren’t wrong Skip, but you are sentimental.

            Civilizations come and go. They go when the glue holding them together vaporizes. Personally, I view the looting of the corporations as a sideshow, because disciplined people can still cobble together sensible lives. All the raw materials are there, you just need to avoid the pitfalls and the traps. In fifty or one hundred years the game will be over. Whether climate change or war will do us in, who can say?

            This idea that somehow humanity can live happily ever after in a spirit of communal cooperation ignores all of history. Greed and lust power are catnip for humans.

            Perhaps, we should be glad our contemporary elite is satisfied with manipulating and bamboozling us. Not long ago they were rounding us up in boxcars, or marching us off to foreign trenches, jungles, etc., etc.

          2. Skippy

            Jake my experience is different, there are places in the here and now which, even under duress, show strong signs of a community first mindset. Sure its not completely homogeneous, but, it is elegant ie. the Mud Army that deals with floods [now being tapped by the state], the volunteer rural fire depts, the SES [volunteer state emergency services], family and friends networks.

            Search them up, you’ll be surprised.

            Skippy… even with all the financial rubbish ongoing down under, a significant portion of the population – understands – the – necessity – of community wellbeing. Hell even if one of my neighbors was a fire breathing neoliberal and befell some tragedy… I would do what I could to help… especially if it meant breaking a sweat or donating goods.

            PS. your environment is corrosive to this ethos… its not good for profit.

          3. vlade

            @Skippy & LS:
            Yes, but on what scales? W/o a horrible disaster, it’s hard to care about someone even 1000 miles away unless you have direct connection. As humans, we can operate pretty well in small societies (up to about low 10s of thousands I’d say). It breaks horribly after that. It makes sense – most of our history we lived in small societies, and even 10,000 people in one place was quite a lot. 10m people in one place does not generate great outcomes. See, even in large cities we feel the need to split into smaller, more manageable communities.

      2. different clue

        The US is enTIREly relevant to those of us living in the US. Just as Australia is enTIREly relevant to those of you living in Australia.

        If Jake Chase’s description of the problem in the US is correct within the US, then that understanding might be helpful to American people working to solve their OverClass Aggression and Exploitation problem within the US.

        1. anyone

          Question is, is the well being of the US relevant to the rest of the world anymore? And when it inevitably isn’t, should the rest of the world apologize for turning THEIR backs on US, like we’ve ALREADY turned our backs on THEM? Oh yeah, won’t THAT be the final turn of the screw? And WHO exactly will be doin’ the splainin’ THEN and what will they say?

    2. jfleni

      I much prefer right between the eyes, blunt plain English “FAKE professions like consulting and law”; using French “faux” doesn’t have the same, kick-in-the-guts impact.

    1. R Foreman

      Have to remember that much (or all) of this is funny money.. it doesn’t exist. Apply deflation to their wealth level consistent with a long-term mean reversion and you see what they’re really worth (a paltry amount).

      In fact such a deflation would financially wipe out most of them, as they couldn’t sell their assets to cover their ongoing bills. This is the real secret they’re hiding. The kings have no clothes.

    2. different clue

      And since privately owned lawmakers and judiciocrats will prevent public funding in order to benefit their private owners, saying public campaign financing is the only solution amounts to saying that there is no solution and there never will be. So, do we really want to walk the “one forbidden solution” pathway to hopeless despair?

    3. Carla

      On February 11, Congressional Representatives Rick Nolan (D-MN) and Mark Pocan (D-WI) introduced in Congress Move to Amend’s proposed 28th Amendment to the Constitution. Here is the text of the Amendment in its entirety:

      WE THE PEOPLE AMENDMENT

      Section 1. [Artificial Entities Such as Corporations Do Not Have Constitutional Rights]

      The rights protected by the Constitution of the United States are the rights of natural persons only.

      Artificial entities established by the laws of any State, the United States, or any foreign state shall have no rights under this Constitution and are subject to regulation by the People, through Federal, State, or local law.

      The privileges of artificial entities shall be determined by the People, through Federal, State, or local law, and shall not be construed to be inherent or inalienable.

      Section 2. [Money is Not Free Speech]

      Federal, State, and local government shall regulate, limit, or prohibit contributions and expenditures, including a candidate’s own contributions and expenditures, to ensure that all citizens, regardless of their economic status, have access to the political process, and that no person gains, as a result of their money, substantially more access or ability to influence in any way the election of any candidate for public office or any ballot measure.

      Federal, State, and local government shall require that any permissible contributions and expenditures be publicly disclosed.

      The judiciary shall not construe the spending of money to influence elections to be speech under the First Amendment.

      http://www.MoveToAmend.org

  3. RueTheDay

    It would be interesting to see a similar study done that looked at the period immediately following a financial crisis or depression during other eras and in other countries.

    I have a hunch that this would be found to be a fairly common pattern. Crisis develops, the government intervenes to save the economic system, the poor and middle class nevertheless get swept away by the crisis, and then once the system is stabilized (at public expense) the wealthy swoop in to buy assets up at fire sale prices and make a killing over the next few years. To add insult to injury, the poor and middle class along with the government get blamed for the whole thing.

    1. Massinissa

      To be fair, government IS part of the problem, but that is of course mostly due to its political capture by this new aristocracy.

      How people are naive enough to have their anger diverted towards the poor, homeless, and immigrants (such as the Rights everpresent anger on welfare, even though welfare expenditures are only 2/3 as much as corporate welfare…) is beyond my rational understanding, unfortunately.

      1. Nathanael

        For answers, research kyriarchy theory (or the older version, patriarchy theory).

        Short version: Suppose you have a “hierarchy” which has gone bad, such as we have had in many societies through most of history. In such a hierarchy, the people at the top keep the people in the middle participating (rather than angrily overthrowing the hierarchy) by giving them the “reward” of being able to look down on, or abuse, the people at the bottom.

        Why does this work as a “psychic reward”? I don’t know. I have unusual psychology and it doesn’t work for me. It does work for most people though. Psychologists and anthropologists have been studying the human desire for relative status for a long time — it seems to be a monkey thing.

        Anyway, this means that the people in the middle feel (often inaccurately) as if the “system” works for them. When the people on the bottom start getting uppity, the people in the middle get angry at them for breaking “the system”. And when the people at the top decide to screw over the people in the middle, they tell them “But you can still beat up the people at the bottom! See, so you still have status!”

        This depends *absolutely* on the people at the top hiding how luxuriously they are living and hiding how much they sneer at the people in the middle. So propaganda is critically important to keep the people in the middle misdirected. Once the people in the middle get a full understanding of exactly how far away from them the people at the top are, their consciousness changes and they overthrow the people at the top.

        (Unfortunately, if they still have the habits of hierarchy in their heads and a taste for status, as they usually do, they will create a new elite. But there will be some redistribution of wealth and power towards the 99% during the revolution, and the process of concentration of power and wealth will have to start over again from a new baseline. See the Russian Revolution or the French Revolution for more.)

    2. jrs

      “Crisis develops, the government intervenes to save the economic system, the poor and middle class nevertheless get swept away by the crisis,”

      nevertheless, haha, as if it weren’t deliberate policy to bail the too big to fail and let the devil take the poor and middle class!! It somehow just happens, mistakes were made …

  4. wunsacon

    The top 1% own 50% of all paper promises (i.e., financial paper). Therefore, when the Fed buys (the most worthless of) paper promises in exchange for cash, 50% of that cash goes straight to the top 1%.

    As it has been practiced, QE is and will continue to be a huge transfer of wealth from the poor to the already-wealthy.

  5. diptherio

    Yves says: “Incomes to the bottom 99$ fell by 0.4%.”

    LOL! Sometimes it feels like $99 is about all we’ve got to split between us…ha. Freudian slip, perhaps?

  6. diptherio

    I’ve often commented (in real life, not here) on the bizarre paradox of many working people’s mentalities. On the one hand, we take pride in being hard working and in earning our way in the world. On the other hand, the sincerest wish of every working stiff is to win the lottery, to be made rich without working, without earning it at all.

    Something about this particular sort of cognitive dissonance seems rather deeply embedded in most of our psyches. I think it may well be the result of overlapping and contradictory social narratives: the one which values work and “earning” comes from a previous age, a residual framework left-over from the time of Lincoln and before. The one that desires “money for nothing and chicks for free,” as Dire Staits puts it, is the new, modern, financialized framework. Whereas, in the old narrative living from the fruits of one’s labors was considered the respectable thing to do, the new narrative makes living off the labor of others the honorable goal to pursue. The old narrative still exerts it’s hold on us, but the modern one has made extensive inroads.

    Of course, Veblen, Graeber and others have argued that honor has consisted in exploitative power over others for most of recorded history. Perhaps the yeoman farmer mentality is an aberration, historically speaking, I really couldn’t say, but I do think it’s a healthier mentality than the new one.

    1. Birch

      Veblen’s take was that honour and the glory of exploitation have been trained into us for most of recorded history, and that the other ethic – workmanship as Veblen called it – is way more ancient. He figured we as a species spent so much time working together as strong and cooperative communities that even thousands of years of violent training has not succeeded in destroying that earlier ethic.

      Which would mean that the yeoman farmer ethic is not an aberration, but the comfortable norm that institutions such as the public education system have been erected to destroy.

      1. Nathanael

        Veblen did feel that the exploitation ethic had been trained into people for quite a long time, starting in ancient times.

        I’m not sure if Veblen said this, but I’ve always suspected that a certain small percentage of the population finds the exploitation ethic natural and the yeoman farmer ethic unnatural.

        Let’s call this small percentage “psychopaths”, because they are. They then have to propagate the exploitation ethic as a meme among people who are not naturally psychopathic.

    2. jake chase

      This is not a paradox. Sane industrious people enjoy working. Being sane, they understand work doesn’t pay shit. The goal is to get enough money, then quit and do whatever you want, without worrying about getting paid.

      1. diptherio

        You’re right, but I think that’s a sad commentary on the state of our society and economy. The best we can hope for is being able to remove ourselves from the economic system which, in some sense, is to remove ourselves from society.

        The best that our economy has to offer us is freedom from the vagaries of the economy! Now that seems like a paradox.

    3. jfleni

      RE:the sincerest wish of every working stiff is to win the lottery, to be made rich without working”. Almost always untrue. Winning the lottery (or some euivalent good fortune) means that you can never be disposed of like yesterday’s garbage by lying, conniving plutocrats and politicians, far more important to most people than mere wealth.

      1. diptherio

        I think it is true. I’ve had and overheard the “what would you do if you won the lottery” conversation many a time. I think it’s the reason so many people of modest means got into the house-flipping business during the sub-prime boom. Who doesn’t want free money? I know I sure wouldn’t mind.

        I think people have figured out, if only subconsciously, that work and wealth don’t have anything to do with one another any more. We desire security first and so desire the wealth that would ensure it and we know that working isn’t the way to it, so we dream about winning the lottery or flipping houses or at least finally being able to just pay others to run our business for us. Yet, there is still a part of us that thinks work and wealth should be tied together and so we still feel the need to be “hard working” and to earn our way.

        We feel disdain for those wealthy inheritors who “never had to work a day in their life,” while at the same time we desire to join their ranks; we desire that our children may themselves become wealthy inheritors who never have to slave away to make a living like their poor old Pa. I’m not casting disparagement here, just observing. I recognized these countervailing tendencies in myself first, and can only assume that others have a similar experience. Like I said, I think this is some very deep-seated cognitive dissonance. Recognizing it and understanding it is the important part, not trying to judge it.

          1. anyone

            All the same, that’s a product of the “winner take all” capitalist mindset we’ve embraced. We’ve got to realize that it’s: 1.) Simply not possible for all of us humans (not that that seems to be an impediment whatsover), and 2). Not sustainable for everything else either; i.e., “the environment,” and 3.) Simply not SATISFYING in any sense of the word, even if we were to achieve it.

        1. Nathanael

          I’m not even sure this qualifies as cognitive dissonance.

          Our society as a whole is rich — rich enough to give everyone a comfortable living.

          Yet we still need people to do work.

          The *ideal* is that everyone is guaranteed a basic standard of living, and then most of us voluntarily work at what we are most skilled at in order to help out our buddies (who should be everyone in an ideal society). Which is, y’know, Marx’s ideal of communism.

          We haven’t quite figured out how to get there, partly because there are greedheads who are not happy with a basic standard of living, partly because there are lazybones who don’t want to do voluntary work to help people, partly because there are unskilled people who can’t do anything useful to help out, and finally because there is work which needs to be done but which practically nobody wants to do, even to help out our buddies.

  7. Birch

    I don’t think Veblen was describing conspicuous consumption as anything absolutely new. It and conspicuous leisure together form the all-important conspicuous waste of the leisure class, and have done so since the advent of barbarism.

    He said that the few hundred years before him had focussed mainly on conspicuous leisure (aristocrats and church people who conspicuously did nothing productive themselves) but that this trend had moved significantly toward conspicuous consumption in the modern age.

  8. Thomas McGovern

    How can a person or a group of people receive 121% of anything when 100% of a thing is all there is?

    1. Birch

      Because they got all of it, and they took some more from everyone else (who lost some), so they got even more than all of it.

      The math correct, just offensive to the intellect.

    2. diptherio

      From the paper:

      From 2009 to 2011, average real income per family grew modestly by 1.7% (Table 1) but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery.

  9. pathman

    Obama must be so proud! It’s his baby now. Let’s see what it is at the end of his second term. My guess is it will be the same or worse.

  10. Hugh

    This is kleptocracy. This is how it works. You work, they loot.

    The thing you should ask yourself everytime you hear about the absurd amounts a bankster, Koch brother, Walton heir, movie star, sports figure, pop star, former politician, or even Mary Jo White receive each year is are they worth it to society? Has anything they have done come remotely close to what they cost our society?

    This is an important question because all of us are paying for their wealth in the jobs we have lost, the crap wages we receive, the healthcare we don’t have or that is becoming too expensive to use, the debts we have amassed, the houses we have lost, the decline of public education and the ballooning of student debt, the decay and privatization of American infrastructure, and the increasingly sharp attempts to slash and loot Social Security and Medicare.

    The only other question worth asking is how long will it be before we as a society take back what is ours?

    1. LifelongLib

      We should separate out movie/sports/pop stars from the others. They presumably “earn” their (admittedly outlandish) amounts from something like labor (broadly defined), rather than by already possessing huge amounts of money. And they don’t have the kind of systemic influence that the others have.

      1. different clue

        I have to agree. No one ever died of a basketball defficiency. No one ever died of a movie defficiency. No one ever died of a compact disc defficiency. If one is offended, one can stop watching movies or buying tickets or cds. There is not a thing Michael Jordan can do to MAKE you watch a basketball game.

        Whereas the Koch Brothers to name just one instance control things we either live with or die without. They can practice forcible extraction through government protection of their private power.

      2. Hugh

        That is what we have to unlearn. It is not that they do nothing. It is not that their contributions to society are zero. It is that their compensation is out of whack by a factor of ten or even a hundred, and not just theirs but the even richer producers and team owners behind them where the discrepancy between value to society and contribution to society is even greater.

        That wealth represents huge amounts of resources that are not being productively used. It’s a pretty simple choice really. Do you want ultra-rich sports and entertainment celebrities or do you want jobs, homes, healthcare, education, retirements, and good infrastructure? Your choice. I know what mine is.

        1. LifelongLib

          The story you get about “stars” is that they’re benefiting from a winner-take-all system where a small number of people at the top get all the income that might have gone to the people who never made it. And certainly the sports ones benefit from what are essentially monopolies (NFL, NBA, etc.). But the stars aren’t impoverishing the larger economy (at worst, just their less-successful peers), and they don’t really have much power even within the system they’re a part of (you don’t see George Clooney trying to break the actors’ union). Quite a difference from the Koch brothers et al.

          1. Hugh

            I am not sure what point you are making. “Stars” as you call them do not inhabit an alternate universe. They live in this one, and their outsized wealth, compared to anything they do remotely useful for our society, just propagandizes for the massive wealth inequality we have. After all, if they can be outlandishly wealthy relative to what they contribute to society, then why not all the other major looters and rentiers who are sucking the life out of our economy, country, and society?

            If George Clooney was paying a marginal tax rate of 90% on his income from all sources, he would still be reasonably wealthy and well compensated for his work. So why would he or anyone need more? How many houses does he need, and how big? Is his having all that he has worth it to the rest of us to have a country that is falling apart?

            I get the feeling you are trying to draw some kind of line between “good rich” and “bad rich”, that somehow it is OK to overcompensate the good rich but not the bad rich. The question is why, when both are receiving too many of society’s resources. The day that everyone in the country has a job paying a living wage, good housing, education, healthcare, retirement, and infrastructure in a sustainable economy, get back to me about George Clooney and we’ll talk.

          2. LifelongLib

            Not “good rich” vs. “bad rich”, but the rich we need to worry about vs. the very well-off we don’t. A few pop stars and football heroes do not an economic system make. A temporary high income (and it IS temporary for most of them) that mainly goes up their noses or to medical bills for their head injuries is not in the same ballpark (npi) as the massive inter-generational wealth accumulation and system-gaming that the truly rich indulge in. Lumping the two groups together is misleading.

          3. jonboinAR

            I agree with LifelongLib. The wealth of “stars” doesn’t amount to that much. I don’t think theirs is the income hogging that’s tipping the scales. They’re basically very well paid wage earners. While they’re in a quite different financial bracket than most of the rest of us, they’re most likely not the wealth extractors that the lords of finance and capital are. For one thing as the above commenter pointed out, their careers tend to be short and the aftermath sometimes chronically painful.

          4. Hugh

            I don’t think you grasp the concept. Once you permit and legitimize some forms of excessive wealth, you permit and legitimize them all. The contribution of “star” wealth to the aggregate wealth of the 1% to which they belong is irrelevant. Besides this, celebrity makes for extremely effective propaganda for excessive wealth. Excessive wealth in all its forms is exactly what is killing this country. If Clooney or JLo or quarterback A or point guard B have to do with one less house or a smaller estate, I seriously don’t care.

          5. Nathanael

            Hugh: one of the ways to “split the baby” is to legitimize unreasonable amounts of wealth *during one person’s lifetime* but require it to vaporize at death. Actually, even Andrew Carnegie supported this.

            The people who are causing the biggest trouble are arranging for massive multigenerational wealth. A new inherited aristocracy. The people who *distribute* all their wealth at their death are not a serious problem.

            Think about it: the Koch Brothers did not accumulate that money in their lifetimes; they started by inheriting wealth and power from their father.

        2. different clue

          That choice is excercisable right now at the individual level by boycotting sports events, music events, cds, etc. right now. So I am not going to resent the boycottable-at-no-price-to-myself football star the same way I will resent the near-unavoidable extortion racketeer Monsanto, for example. And the vastly highpaid sports star did not steal money the way the organizers of Grand Theft FraudLending/FraudClosure did/do.

          But yes, in the collective longer-term, a shallowly-to-sharply rising progressive tax on income from all sources equally would stop the paying out of money as income over a certain threshhold of pointlessness. Perhaps the same amount of discretionary sports spending would be spread out over ten times as many pro-athletes each being paid ten times as little money apiece as today.

    2. jake chase

      It will most likely be forever, because you would have to reengineer the popular psyche to eliminate the dream of personal success. Most everyone believes that the world may be a cesspool, but HE can make it big. This daydream is reinforced by every organ of communication, with the possible exception of a few blogs.

      And that may not be a bad thing, on balance. Have you ever considered what the society would have to go through to achieve what you are advocating? We’re talking French Revolution on Steroids, in the face of overwhelming military force. How happy would you be in the United States of Afghanistan?

      1. Nathanael

        What “overwhelming military force”? You mean the underpaid and abused US military? Whose side do you *REALLY* think they’d be on?

        I guess some of them might keep working for the elite. But a lot would not. Not Afghanistan: Syria.

  11. David Petraitis

    The conclusion that “Lincoln was one of the richer men in Springfield, but he was not very rich” begs the question of how to compare today to 1860. Apples vs. oranges at best (gold standard days vs fiat currency, long term inflation data is sketchy, no 8 hour day rules). In a Marxian fit of pique I thought what is the wealth of Lincoln expressed in day-wages?

    As a research I looked for daily wages in 1860 and came up with the National Bureau of Economic Research chapter:
    http://www.nber.org/chapters/c2496.pdf

    This gives the wage for 1860 of $1.19 to $1.32 let’s call it at a buck and a quarter for a day-wage. For a wealth of $17,000 Lincoln had a stored labor wealth of 13,600 days.

    If we bring that up to date. Let’s just say that Obama does a good thing and raises the minimum wage to $9 per hour. This would give an 8 hour day-minimum wage of $72. At 13,600 days this makes the equivalent amount of Lincoln’s wealth in labor $979,200! Which would put him in the top of the wealth class at least in the top 2% today.

    Hmm… not very wealthy?

    1. David Petraitis

      Oh… and if you worked 365 days a year the 13,600 hours is 37 person-years of labor. If you work a more typical 250 days a year it would be 54 person-years.
      That is why someone retiring with $40,000 then would find himself (it was a man after all) ‘opulent enough’… He had enough wealth to hire someone full time 365 days a year for the next 87 years, assuming no growth at all in his wealth, just running it down.

    2. LifelongLib

      Lincoln’s personal interest was in politics rather than wealth. One thing his contemporaries noted was how little he charged in legal fees compared to other lawyers in similar positions. His law partner William Herndon died in relative poverty. Lincoln was at best decently well-off for his time, but certainly no plutocrat.

      1. David Petraitis

        Lifelong…
        Just my point. The people who retire today (my generation) with $1 million do not think of themselves as part of the plutocracy of today. And yet they are at the top of the heap and have interests in common with the plutocracy in preservation of financial wealth.

        These real interests may sometimes clash with liberal visions and values of wealth redistribution through progressive taxation, wage raises, shorter work hours, more paid holidays, social security, universal healthcare at no cost for the poor.

        When the interests of a class in preserving or accumulating their wealth clashes with their stated visions and values, then it is likely that the real interests will trump (over time) the vision and values. That being said one of my perennial surprises is how much the working class stiffs in the USA are willing to buy into visions and values of the plutocracy hidden as ideology of “Freedom,” “Liberty,” and “Justice” (just read any Von Hayek or Ayn Rand) when the actions of the plutocracy are in fact freedom to steal from the poor, liberty to run roughshod over them and impunity to justice.

        1. different clue

          If mere minimillionaires find themselves ripped off as a class by megamillionaires, they might stop identifying upward, and even seek to tear the megamillionaires down in self defense. Do the several professional farmers I read about who had their stored-up money stolen by MS Global really identify with MS Global’s OverClass interests? Or with John Corzine’s OverClass interests?

          Perhaps such ideas as raising “progressive” tax rates to punitive tax rates starting at somewhere OVer a million dollars might recruit the “unimillionaires” to join the 99 percent in social class interest terms.

          1. Nathanael

            You’re saying exactly what I’m saying — and you’re correct.

            I think “a million dollars a year” is the cutoff point between the “mini-millionaire”, who cares about capital preservation — versus the plutocrat who is looting so fast that he doesn’t think that he has to worry about capital preservation, who figures that he can just gamble wildly with his money, buy Congressmen, etc.

        2. Nathanael

          “Just my point. The people who retire today (my generation) with $1 million do not think of themselves as part of the plutocracy of today. And yet they are at the top of the heap and have interests in common with the plutocracy in preservation of financial wealth.”

          No. We’re not at the top of the heap. This is a common misconception among people who haven’t paid attention to the top of the pyramid.

          We, the “mini-millionaires”, have interests in preservation of the legal system, a functioning government, personal safety, etc.

          The current crop of plutocrats have interests in looting and stealing, in eliminating the legal system in favor of “the rights of the nobleman”, and they figure that their own private armies will take care of any personal safety needs.

          In short, the “mini-millionaires” interests are NOT allied with the interests of the plutocrats who are actually in power. Not at all. The plutocrats who are actually in power are targeting the mini-millionaires right now. After all, who else has anything left to steal?

  12. Hugh

    You can find the text of Obama’s SOTU here:

    http://www.whitehouse.gov/the-press-office/2013/02/12/remarks-president-state-union-address

    What is interesting is that you can use your browser’s find function to look up the frequency of individual words and phrases. “Inequality” is not mentioned at all. “Rich” is not mentioned either. “Wealth” is not mentioned once. “Wealthiest” gets 4 hits: one is just generic “wealthiest nation” so doesn’t count. The three others are:

    1. “Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion — mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans.”

    2. “But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and the most powerful.”

    3. “We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors”

    Consider these. In the first instance, spending cuts affect mainly ordinary Americans. But Obama doesn’t reference who’s taking the hit here but he does for the rich where the minority of the cuts are coming from. And, unsurprising I know, he isn’t even honest about those. They stem from allowing the “temporary” but extended Bush tax cuts to expire, and not on all the rich but just those making more than $400,000 a year, you know those who are most able to hide and shelter their income.

    In the second, note the weasel word “entire”.
    “We can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction.” No, just mostly, although it was the wealthiest Americans who blew up the economy and were the only ones government bailed out and made whole afterwards. Again Obama makes it sound like he is conceding something when the reality is the reverse. The rich got the bailouts. The rest of us got most of the cuts in government spending.

    And even the little bit more Obama wants from the rich isn’t even a token. It’s a poisoned chalice, as the third quote shows. “Wealthiest seniors” refers to means testing Medicare. What’s so bad about that? It’s a wedge. Obama wants to start this Medicare premium raising with the wealthiest but then he wants to extend it well down into what remains of the retired middle class.

    There is nothing in Obama’s SOTU about attacking the massive wealth inequality that is killing the country and the middle class. Nothing.

    The speech also includes the word “jobs” 34 times. A quick glance at the occurrences suggests 3 main categories of usage.

    1. Boasting about his job creation. About as cynical as you can get considering the massive, and massively understated, size of the jobs crisis in the country (both in numbers and quality).

    2. Contradictorily, blaming Republicans for obstructing his stellar jobs creation efforts.

    3. Trickledown tax cuts and incentives (which have never worked, not under Reagan, not under Bush, not under Obama) to spur new job growth. Again not surprising. Obama is the Austerity President. He is actively suppressing demand and cutting spending.

    His “job” policies won’t work, but then just like his efforts on the foreclosure front, they aren’t meant to. They are just crumbs thrown to the rubes to distract them and keep them confused. His proposals will disappear into Congressional committees. What little substance that is in them, if any, will be hacked pieces and then filibustered. Obama and the Democrats will blame Republicans much as he and they are already doing, and nothing will change, or rather things will continue to get worse for most of us.

  13. kevinearick

    Take a closer look at that data and you will find some interesting behavior among the middle class event horizons, not that anyone really wants to know.

  14. RS

    I’d like to know how anyone can have 121% of something. Would you like to rephrase some of this in a way that makes mathematical sense?

    1. Nathanael

      See above. The 1% got all the income gains since 2009, and the 99% actually LOST income — which went to the 1%.

      I’d like to see a breakdown for the 0.1%, the million-a-year gang, however. And another for the 0.01% (the richest 30,000), and another for the 0.001%, and another for the Forbes 400.

      Only looking at the “1%” is a way of deflecting attention from how few people are collecting most of the money.

  15. ScottB

    Saez does great research. It’s important to remember that he looks at reported income. Compared with 40 years ago, the use of offshore trusts to hide income has flourished, so things are even worse than he reports.

  16. Work From Home

    When someone writes an piece of writing he/she keeps the thought of a
    user in his/her mind that how a user can know it. Therefore that’s why this post is outstdanding. Thanks!

  17. Jim in SC

    I think government has been destroying much middle class wealth by constantly increasing property taxes. We spend eighty five percent more, adjusted for inflation, on elementary and secondary education than we did thirty years ago, while our results, as measured by testing, have improved little if at all:

    http://nces.ed.gov/fastfacts/display.asp?id=66

    http://www.theatlantic.com/national/archive/2011/09/falling-sat-scores-widening-achievement-gap/245176/

    We’re spending too much for the government we get, and that spending, which produces little in the way of economic growth, uses funds that could otherwise be used to start businesses and employ people.

    1. Nathanael

      How much of that is actually going to teachers — and how much is going to showy buildings, administrators, expensive and useless standardized tests, etc.?

      In every school district I’ve looked at, huge portions of the school spending don’t actually go to teaching — and large portions of that have been on stupid things, like closing old schools and opening new ones.

  18. John Steinsvold

    An Alternative to Capitalism (since we cannot legislate morality)

    Several decades ago, Margaret Thatcher claimed: “There is no alternative”. She was referring to capitalism. Today, this negative attitude still persists.

    I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to my essay titled: “Home of the Brave?” which was published by the Athenaeum Library of Philosophy:

    http://evans-experientialism.freewebspace.com/steinsvold.htm

    John Steinsvold

    “Insanity is doing the same thing over and over and expecting a different result.”
    ~ Albert Einstein

  19. Ep3

    But yves, isn’t looking at neighborhoods a bad example? Lawyers and other skilled persons in any time period all congregate together. Today we have subdivisions where housing holds a premium with the idea that like folks will live together. Also, there’s no mention of the color of the ppl living on mr Lincoln’s street. What is the context of the incomes/wealth of these ppl? This article assumes there’s the 1% and then everyone else is equal. But there’s a collection of 20% who are upper middle class that, with both husband and wife working, have a collective income nearing six figures yet the costs of housing, education, living, etc don’t allow for tremendous growth in value based assets. Believe me yves, there are a lot of families in Michigan that both parents are college educated (teachers etc) yet seem to have financial cash flow problems.

Comments are closed.