An imbalance between rich and poor is the oldest and most fatal ailments of all republics.
-- Plutarch
The Census Bureau reports that the gap between rich and poor reached its widest amount since records started being kept in 1967. Add that to the Joint Economic Committee's Income Inequality and the
Great Recession and the Census Bureau's report on Income, Poverty, and Health Insurance Coverage in the United States: 2009 and you've got a nasty little synopsis of economic failure.
Americans in the top 20 percent of income - $100,000 or more a year - collected 49.4 percent of all income. Those below the poverty line earned 3.4 percent. This ratio of 14.5-to-1 in 2009 was an increase from 13.6 to 1 in 2008. In 1968, the ratio was 7.69 to 1.
A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations. [Among other findings]:
• The poorest poor are at record highs. The share of Americans below half the poverty line - $10,977 for a family of four - rose from 5.7 percent in 2008 to 6.3 percent. It was the highest level since the government began tracking that group in 1975.
• The poverty gap between young and old has doubled since 2000, due partly to the strength of Social Security in helping buoy Americans 65 and over. Child poverty is now 21 percent compared with 9 percent for older Americans. In 2000, when child poverty was at 16 percent, elderly poverty stood at 10 percent.
• Safety nets are helping fill health gaps. The percentage of children covered by government-sponsored health insurance such as Medicaid and the Children's Health Insurance Program jumped to 37 percent, or 27.6 million, from 24 percent in 2000. That helped offset steady losses in employer-sponsored insurance.
As we've been reminded the past year, quite a slew of rightist ideologues have not given up their dream of getting that rich-poor ratio into banana republic territory by pushing additional tax cuts for the wealthiest and by further shredding of the safety net, including Medicaid, Medicare and the grand-daddy of all, Social Security.
The JEC report noted:
Over the past three decades, income inequality has grown dramatically. After remaining relatively constant for much of the post‐war era, the share of total income accrued by the wealthiest 10 percent of households jumped from 34.6 percent in 1980 to 48.2 percent in 2008. Much of the spike was driven by the share of total income accrued by the richest 1 percent of households. Between 1980 and 2008, their share rose from 10.0 percent to 21.0 percent, making the United States as one of the most unequal countries in the world.
High levels of income inequality can precipitate economic crises. Peaks in income inequality preceded both the Great Depression and the Great Recession.
Severe income inequality may make the economy more vulnerable to a deep recession. In the case of the Great Recession, income inequality fueled economic instability in two ways. First, stagnant middle‐class incomes meant increased demand for credit, fueling an unsustainable bubble. Second, the ever‐richer rich amassed increasing sums of money to invest in new financial products. Bank deregulation allowed for the development of exotic financial
instruments, and the collapse of this house of cards in
stigated the Great Recession.
For the Washington Independent, Annie Lowery interviewed Yale political scientist Jacob Hacker. Among his comments:
Hacker: There is reason to think that gap will continue to widen unless there’s some changes in public policy and in the economy.
The hallmark of the last three downturns has been very anemic job growth after the recession ends, leading to high long-term unemployment and putting very little pressure on employers to raise wages for workers. It’s reasonable to expect middle-class income will be stagnant at best. Meanwhile, there’s no reason right now to expect the runaway gains are going to end for the rich.
They seem to be driven by the financial market and by the very good results we’re seeing in corporate profits. It could continue to be that companies won’t be hiring, even though they will pay their chief executives a lot and their stocks will boom. That means stagnation for the middle class, and income for the rich.
So, inequality is continuing to widen. Those of us who have been following this trend for a while wonder if there’s some natural limit. The United States has experienced the same dynamics as a lot of other developed countries, but its inequality has widened whereas other countries’ has not. Inequality looks in the United States more like some developing countries. And, again, there is no natural limit to that. There’s no natural course correction I see. It will take some substantial response in public policy.
It's not as if there aren't policy changes that could return that ratio to a more reasonable level. Revamping trade policy, creating disincentives for companies to off-shore jobs, reinstituting a truly progressive income tax system, boosting the minimum wage, making unionizing easier, providing a real safety net that adapts good ideas from Europe, and creating programs to spur the creation of rivals to corporate hegemony over everything. These latter could include state banks like North Dakota's and worker-owned and -operated businesses.
While all of that could improve matters, and ought to be part of the platform of any political party that claims to really supportive of rank-and-file Americans, it will take more than these few remedies to create a new, environmentally sustainable economics for the 21st Century in which inequalities in income and wealth are reduced along with the power of the oligarchy. However, merely getting to the point of even seriously considering such a shift in thinking will require persuading vastly more Americans that their ultimate rulers are oligarchs.