Sunday, September 15, 2013

Wealthy Take Record Share Of U.S. Income In 2012

Nathan W. Armes/Reuters/File

The wealthiest Americans accrued a record share of income in 2012 and are almost fully recovered from the financial crisis, according to a recent study. Income inequality in the U.S. outpaces that of a number of developing countries, while current economic policies ensure that the trend will continue:

The top ten percent of earners in the United States took home more than 50 percent of all income in 2012, the highest amount ever recorded since data was first collected in 1917, according to an updated report from economists Emmanuel Saez and Thomas Piketty.

While the wealthiest took a big hit during the financial crisis, they’ve almost fully recovered. Last year, income for the top 1 percent of earners “increased sharply,” the report notes, growing by nearly 20 percent, while the bottom 99 percent only saw money rise by 1 percent. “In sum,” the authors write, “top 1% incomes are close to full recovery while bottom 99% incomes have hardly started to recover.”

...the response to the Great Recession, which mostly amounted to the Dodd-Frank financial reform bill and an increase in the top tax rate, “are modest relative to the policy changes that took place coming out of the Great Depression,” [the authors] write. It’s unlikely they will make any lasting change.

The U.S. suffers from particularly drastic income inequality. It is worse here than in Egypt, Tunisia, Yemen, the Ivory Coast, Pakistan, and Ethiopia. It’s a trend that began in the 1970s and has continued: Through the 2000s, the richest 20 percent of Americans saw their incomes grow by $2,550, while the bottom 20 percent just saw $1,330 in growth. The top 10 percent now has 15.9 times the income of the bottom.

And U.S. policy is mostly to blame. The deregulation of Wall Street meant huge profits in the sector, attracting the 1 percent, whose incomes then took off from everyone else’s. Changes in the tax code for capital gains income, or money made through investment rather than salaries, is one of the largest factors. While the social safety net has helped keep the gap smaller than it otherwise would be, the U.S. has been cutting back drastically on social spending. We’re set to cut $1.5 trillion in spending over the next decade.

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