New economic evidence shows that the recovery has been almost entirely going to the top 1 percent. Immediately after the Great Recession in 2007, there were signs that the richest Americans were doing worse and that income inequality was declining. Emmanuel Saez, whose influential work has driven the renewed debate about inequality, has updated his figures for 2010 and those numbers show that the richest Americans are thriving again. In fact, any recovery in 2010 was limited to the richest 1 percent. Saez finds that: "In 2010, average real income per family grew by 2.3% but the gains were very uneven. Top 1% incomes grew by 11.6% while bottom 99% incomes grew only by 0.2."
The Economist tackles the report from earlier in the week that inequality has begun its slow upward climb again after dipping during the recession. They conclude that this may become a political vulnerability for the President, but that it shouldn't. Their takeaway on people who would criticisize the President for not taking on Wall Street:
Now, I don't think this criticism is entirely fair. Executive compensation practices have become increasingly sensitive to aggregate market performance. The significant downswing in inequality during the recession was largely a function of this fact. And it therefore stands to reason that those whose compensation is most closely tied to market performance would be the first to benefit from recovering markets. Had Mr Pethokoukis, and conservatives more generally, been demanding all along changes to the way executives and big-time Wall Street players are compensated, then they could press this complaint against Mr Obama standing on solid ground. Of course, politics is the art of winning by pressing every available advantage, not the art of forensic fairness, so I expect Rick Santorum to begin making this argument as soon as he becomes aware of it. Mitt Romney, who is no doubt among the very few to benefit significantly from the Obama recovery, might wisely choose to pass on this opportunity.
Regardless of whether this should be a political liability for President Obama, this should become a real issue in the campaign. The fact that we expect any gains from the recovery to go to the richest Americans is absurd. This is the job of our political system to rectify. And it should do so with tax policy.
The Gini coefficient is a common measurement of inequality, with a higher Gini coefficient indicating higher annual income inequality. This chart indicates that most countries have a similarly high level of inequality before taxes. It's how we redistribute income that matters. And in that, the US fails dramatically. In fact, the US has the highest income inequality of any long-standing democracy.
This should an issue because it's the direct result of our politics and it's something that has an impact all throughout American society. The uneven nature of the economy isn't Obama's responsibility, it's the responsibility of voters who the past forty years for enabling Republican fiscal irresponsibility.
Politics has consequences. The radicalization of the Republican right, which has driven most of this rise in polarization, demands a political reordering.