The United States of in­equal­ity

Pakistan Observer - - OPINION - Teresa Tritch

IT will come as lit­tle sur­prise that in­come in­equal­ity in the United States is great­est in New York and Con­necti­cut. Those states are home base for Wall Street, where the in­come gains of the few have been am­pli­fied by out­sized growth in the fi­nan­cial sec­tor and pro­tected by tax­payer-provided bailouts. But forces of ris­ing in­equal­ity are op­er­at­ing through­out the US, as a new study by re­searchers at the Eco­nomic Pol­icy In­sti­tute makes clear.

The study, which mea­sures in­come in­equal­ity by state, metro area and county, shows that in­equal­ity has risen in ev­ery state since the 1970s. It also shows that ris­ing in­equal­ity is en­trenched. Re­ces­sions in re­cent decades have tem­po­rar­ily slowed in­come growth among the top 1 per­cent, but they have not al­tered the ba­sic pat­tern in which the rich have got­ten much richer while nearly ev­ery­one else has seen in­come stag­nate or de­cline. Be­tween 2009 and 2013, for ex­am­ple — a pe­riod that en­com­passes most of the post-Great Re­ces­sion era – the top 1 per­cent cap­tured all of the in­come growth in 15 states (Con­necti­cut, Florida, Ge­or­gia, Louisiana, Mary­land, Mis­sis­sippi, Mis­souri, Ne­vada, New Jer­sey, New York, North Carolina, South Carolina, Vir­ginia, Wash­ing­ton and Wy­oming). In another 9 states (Ari­zona, Cal­i­for­nia, Illi­nois, Kansas, Mas­sachusetts, Michi­gan, Ore­gon, Penn­syl­va­nia and Texas), the top 1 per­cent cap­tured half to nearly all of the in­come growth.

In all, the top 1 per­cent in the United States cap­tured 85.1 per­cent of to­tal in­come growth from 2009 to 2013. In 2013, the 1.6 mil­lion fam­i­lies in the top 1 per­cent made 25.3 times as much on av­er­age as the 161 mil­lion fam­i­lies in the bot­tom 99 per­cent. Those and other fig­ures are rem­i­nis­cent of con­di­tions in the Roar­ing Twen­ties. In 1928, the peak year of that decade’s boom, the top 1 per­cent took home 24 per­cent of the na­tion’s in­come. In 2013, the top 1 per­cent na­tion­ally took home 20.1 per­cent of all in­come, while in five states, the in­come share for the top 1pc ex­ceeded the peak from 1928.

To ex­plain how the econ­omy be­came so lop­sided, the EPI study com­pares the decades of ris­ing in­equal­ity since 1979 with the era from 1928 to 1979, when in­equal­ity nar­rowed and the Amer­i­can mid­dle class emerged, grew and pros­pered. The mid-20th cen­tury was char­ac­ter­ized by pub­lic poli­cies and so­ci­etal norms that fos­tered broad pros­per­ity, in­clud­ing a ris­ing min­i­mum wage, firm rules for time-and-a-half for over­time, strong pri­vate-sec­tor unions and cul­tural and po­lit­i­cal taboos against high pay and bonuses for ex­ec­u­tives in the face of lay­offs of work­ers.

In con­trast, the decades since 1979 have been char­ac­terised by ero­sion of the min­i­mum wage and over­time-pay stan­dards, a de­cline in union­i­sa­tion and cul­tural and po­lit­i­cal ac­cep­tance of ex­ces­sive ex­ec­u­tive pay. Ris­ing in­equal­ity in the cur­rent eco­nomic re­cov­ery also has roots in pol­i­tics and pol­icy. Since the end of the Great Re­ces­sion in 2009, the Fed has been con­sis­tent — and cor­rect — in try­ing to stim­u­late the econ­omy by keep­ing in­ter­est rates low. But Congress backed off fis­cal stim­u­lus ef­forts start­ing as early as 2010, largely for par­ti­san rea­sons that have noth­ing to do with the pub­lic in­ter­est.

Loose Fed pol­icy in the ab­sence of loose fis­cal pol­icy tends to con­cen­trate the ben­e­fit of stim­u­lus among the al­ready wealthy, re­sult­ing in wider in­equal­ity. A so­lu­tion would be for Congress to stim­u­late the econ­omy with more spend­ing on in­fra­struc­ture like roads, bridges and air­ports, which would cre­ate jobs and lift pay, help­ing to nar­row in­come in­equal­ity. Un­for­tu­nately, the Repub­li­can-dom­i­nated Congress has not been will­ing to do what’s nec­es­sary to get the econ­omy back on track. — Cour­tesy: The New York Times

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