Wealth Inequality in America, Perception vs Reality

Wealth Inequality in America, Perception vs Reality

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WEDNESDAY, JUL 15, 2015 10:15 AM PDT

35 soul-crushing facts about American income inequality

The money given out in Wall Street bonuses last year was twice the amount all minimum-wage workers earned combined

LARRY SCHWARTZ, ALTERNET

LINK TO THIS ARTICLE ONLINE

While Hillary Clinton occasionally gives some lip service to the problem of extreme inequality, Bernie Sanders is the only candidate really hammering away at it. He has even blasted the orthodoxy of economic growth for its own sake, saying according to Monday’s Washington Post that unless economic spoils can be redistributed to make more Americans’ lives better, all the growth will go to the top 1% anyway, so who needs it? Sanders might know his history, but the rest of the candidates could use a little primer.

The United States was not always the most powerful nation on Earth. It was only with the end of World War II, with the rest of the developed world in smoldering ruins, that America emerged as the free world’s leader. This coincided with the expansion of the U.S. middle class. With the other war combatants trying to recover from the destruction of the war, America became the supermarket, hardware store and auto dealership to the world. Markets for American products abounded and opportunity was everywhere for American workers of all economic means to get ahead. America had a virtual monopoly on rebuilding the world. Combined with the G.I. Bill of 1944, which provided money for returning veterans to go to college, and government loans to buy houses and start businesses, the middle class in America boomed, as did American power, wealth and prestige. Between 1946 and 1973, productivity in America grew by 104 percent. Unions led the way in assuring wages for workers grew by an equal amount.

The 1970s, however, brought a screeching halt to the expansion of the American middle class. The Arab oil embargo in 1973 marked the end of cheap oil and the beginning of the middle-class decline. The Iranian Revolution in 1979, with more resultant oil instability, combined with the rise of Ronald Reagan’s conservative revolution at home, accelerated the long and painful contraction of the middle class. Cuts in corporate taxes, stagnant worker wage growth, the right-wing war on unions, and corporate outsourcing of work overseas greased the wheels of the middle-class decline and the upper-class elevation. Cuts in taxes on the wealthy, under the guise of trickle-down economics, have resulted in lower government revenue and cuts to all kinds of services. All of which has led to today, an era of national and international inequality unparalleled since the days of the Roaring ’20s.

Here are 35 astounding facts about inequality that will fry your brain.

1. In 81 percent of American counties, the median income, about $52,000, is less than it was 15 years ago. This is despite the fact that the economy has grown 83 percent in the past quarter-century and corporate profits have doubled. American workers produce twice the amount of goods and services as 25 years ago, but get less of the pie.

2. The amount of money that was given out in bonuses on Wall Street last year is twice the amount all minimum-wage workers earned in the country combined.

3. The wealthiest 85 people on the planet have more money that the poorest 3.5 billion people combined.

4. The average wealth of an American adult is in the range of $250,000-$300,000. But that average number includes incomprehensibly wealthy people like Bill Gates. Imagine 10 people in a bar. When Bill Gates walks in, the average wealth in the bar increases unbelievably, but that number doesn’t make the other 10 people in the bar richer. The median per adult number is only about $39,000, placing the U.S. about 27th among the world’s nations, behind Australia, most of Europe and even small countries like New Zealand, Ireland and Kuwait.

5. Italians, Belgians and Japanese citizens are wealthier than Americans.

6. The poorest half of the Earth’s population owns 1% of the Earth’s wealth. The richest 1% of the Earth’s population owns 46% of the Earth’s wealth.

7. More locally, the poorest half of the US owns 2.5% of the country’s wealth. The top 1% owns 35% of it.

8. Inequality is a worldwide problem. In the UK, doctors no longer occupy a place in the top 1% of income earners, London plays host to the largest congregation of Russian millionaires outside of Moscow, and also houses more ultra-rich people (defined as owning more than $30 million in assets outside of their home) than anywhere else on Earth.

9. The slice of the national income pie going to the wealthiest 1% of Americans has doubled since 1979.

10. The 1% also takes home 20% of the income. This figure is the most since the 1920s era of laissez faire government (under Republicans Warren Harding, Calvin Coolidge and Herbert Hoover).

11. The super rich .01% of America, such as Jamie Dimon, CEO of JP Morgan, take home a whopping 6% of the national income, earning around $23 million a year. Compare that to the average $30,000 a year earned by the bottom 90 percent of America.

12. The top 1% of America owns 50% of investment assets (stocks, bonds, mutual funds). The poorest half of America owns just .5% of the investments.

13. The poorest Americans do come out ahead in one statistic: the bottom 90% of America owns 73% of the debt.

14. Tax rates for the middle class have remained essentially unchanged since 1960. Tax rates on the highest earning Americans have plunged from an almost 70% tax rate in 1945 down to around 35% today. Corporate tax rates have dropped from 30 percent in the 1950s to under 10 percent today.

15. Since 1990, CEO compensation has increased by 300%. Corporate profits have doubled. The average worker’s salary has increased 4%. Adjusted for inflation, the minimum wage has actually decreased.

16. CEOs in 1965 earned about 24 times the amount of the average worker. In 1980 they earned 42 times as much. Today, CEOs earn 325 times the average worker.

17. Wages, as a percent of the overall economy, have dropped to an historic low.

18. In a study of 34 developed countries, the United States had the second highest level of income inequality, ahead of only Chile.

19. Young people in the U.S. are getting poorer. The median wealth of people under 35 has dropped 68% since 1984. The median wealth of older Americans has increased 42%.

20. The average white American’s median wealth is 20 times higher ($113,000) than the average African American ($5,600) and 18 times the Hispanic American ($6,300).

21. America’s highest incomeinequality is located in the states surrounding Wall Street (New York City) and the oil-rich states.

22. Since 1979, high school dropouts have seen median weekly income drop by 22 percent. Ethnically, the highest dropout rates are among Hispanic and African American children.

23. In 1970, a woman earned about 60% of the amount a man earned. In 2005 a woman earned about 80% of what a man earned. Since 2005, there has been no change in that figure. African-American women earn just 64% of what a white male earns, and Hispanic women just 56%.

24. Over 20 percent of all American children live below the poverty line. This rate is higher than almost all other developed countries.

25. Union membership in the US is at an all-time low, about 11% of the workforce. In 1978, 40 percent of blue-collar workers were unionized. With that declining influence has come a concurrent decline in the real value of the minimum wage.

26. Four hundred Americans have more wealth, $2 trillion, than half of all Americans combined. That is approximately the GDP of Russia.

27. In 1946, a child born into poverty had about a 50 percent chance of scaling the income ladder into the middle class. In 1980, the chances were 40 percent. A child born today has about a 33 percent chance.

28. Despite massive tax cuts, corporations have not created new jobs in America. The job creators have been small new businesses that have not enjoyed the same huge tax breaks.

29. More than half of the members of the United States Congress, where laws are passed deciding how millionaires are taxed, are millionaires.

30. Twenty five of the largest corporations in America in 2010 paid their CEOs more money than they paid in taxes that year.

31. In the first decade of the 21st century, the U.S. borrowed $1 trillion in order to give tax cuts to households earning over $250,000.

32. In 1970, there were five registered lobbyists working on behalf of wealthy corporations for every one of the 535 members of Congress. Today there are 22 lobbyists per congressperson.

33. In 1962, the 1% household median wealth was 125 times the average median wealth. In 2010 the divide was 288 times.

34. During the Great Recession, the average wealth of the 1% dropped about 16 percent. Meanwhile the wealth of the 99% dropped 47 percent.

35. Between 1979 and 2007, the wages of the top 1% rose 10 times more than the bottom 90 percent.

The Roots of Trump's Strength - by George Friedman, Editor, This Week in Geopolitics

The Roots of Trump’s Strength

Mar 07, 2016

Donald Trump appears likely to be the Republican candidate for president. This does not mean that he will become president, but it does mean that he might. It also means that the basic dynamic of the American political system has shifted, suggesting the behavior of the United States might change. And that makes Trump a matter of geopolitical interest.

These geopolitical consequences cannot be considered until we have looked at how and why Trump differs from other candidates and why he has emerged as a political power.

Let’s begin with a criticism that has generally been made of him. His supporters tend to be less educated, less well-off, and white. This has become a central, disaffected class in the United States, and while focus has been on other groups, Trump has spoken to this one. He has addressed their economic and cultural interests, and no candidate has done that in a long time. 

This strategy is what has made him effective. Yet it also poses a challenge, as this class by itself isn’t large enough to give him the presidency. And it generates an almost unanswerable question: Did Trump plan this strategy or did it just happen? But let’s begin with why poorer, less educated white voters have flocked to him.

The Invisible Man—The White Lower-Middle Class

In the United States, the median household income is about $51,000. In California, a state with high taxes, the take-home pay would be about $39,000 a year. That translates into about $3,250 a month in take-home pay for living expenses. If we assume that a home in an inexpensive suburb, a car, and some limited annual vacation is what we mean by middle class life, it is hard to see how the middle class affords that life today.

The fourth quintile, the heart of lower-middle class, earns about $31,000 a year before taxes per household. I grew up in a lower-middle class household (my father was a printer, my mother a homemaker, and there were two children). We owned a house and a car and took a vacation.

Today, people in the lower-middle class are bringing home, at best, $2,000 a month, and they will not own a house but instead pay $1,200 a month to rent an apartment, with the rest going to food and other basics. The lower-middle class can no longer afford what used to be a lower-middle class life.

The Democrats have made a huge case about inequality, assuming that the problem is that the rich own too much. American political culture has rarely been triggered by inequality, but by the inability to acquire the basics of American life. The problem with the Republicans is that they have not noticed that the defining issue of this generation is the collapse in the standard of living of the middle and lower-middle classes. This is part of what brought Trump to where he is today, but only part.

The deeper problem was the perception of the white segment of the lower-middle class that their problems were invisible. They heard talk about African-Americans or Hispanics and the need to integrate them into society. However, from the white lower-middle class perspective, there appeared to be little interest in the challenges facing their demographic. Indeed, there was a perception that the upper strata and the media not only didn’t care about them, but had contempt for their beliefs.

The white lower-middle class is divided into two parts. One part has already been shattered by economic pressures, family fragmentation, drugs, and other forces. Another part is under equal economic pressure but has not yet fragmented. It retains values such as religiosity, traditional sexual mores, intense work ethic, and so on.

This is the class that has been deemed pathological by the media and the upper classes. Its opposition to homosexuality, gay marriage, abortion, promiscuity, and the rest (which was the social norm a generation ago) is now treated as a problem that needs to be overcome, rather than the core of a decent society. The speed of the shift in the values of dominant classes has left this class in a position where those values taught at home and at church are now regarded by the broader society as despicable. Repercussions are bound to happen.

The simultaneous economic disaster and delegitimation of their values marginalized this class. When Mitt Romney referred to the 47% who were parasites in our society, he was referring to these people. When Barack Obama was elected, this group felt that the focus had shifted to the black community and saw itself as invisible (and to the extent seen, contemptible). Economic, social, and cultural evolutions had bypassed them.

Their perception of the political system has become intensely cynical. They see the political elite, bankers, lawyers, and lobbyists as a near criminal and entirely incompetent class. We speak of unemployment after the 2008 recession in terms of numbers. These are the people who were unemployed. They view this elite as claiming rights they haven’t earned. The lower-middle class can tolerate earned wealth, and even respect it, but cannot accept what they see as manipulated wealth and power.

They also see politicians as being dishonest in other ways: saying whatever they need to say in order to be elected. This is not a new view of politics. However, in this case, what the politicians have said is neither in the language of the white lower-middle class, nor does it address any of their issues. It is not only indifference to the economic problems of the white middle and lower-middle class, but obeisance to a political correctness that delegitimized their values. The politicians are implicitly and explicitly rejecting lower-middle class values.

The Champion of the White Lower-Middle Class

Enter Trump. He is rich, but he is perceived, rightly or wrongly, to have earned his wealth—not stolen it through financial trickery. That was one of Trump’s first assertions. The fact that he is a billionaire has helped, not hurt him. The Democratic fantasy of class jealousy doesn’t work where Trump is concerned. The lower-middle class admires his wealth.

Trump spoke against Mexican immigrants (and implicitly a broader grouping of Hispanics). He is not seen as having his statements vetted by marketing people. And he says things the way his supporters would say things. Trump made it clear that he heard their cultural concerns. Even his debating style—pugnacious, insulting, unapologetic and frequently preposterously wrong—is not fundamentally different from the lower-middle class style of arguing.

It is the very lack of polish that endears him to his followers (and makes him seem like a man from outer space to the upper-middle class). His occasional cursing and threats are part of the entire package. Trump maneuvered himself into the position of a man who, though he may be rich, thinks and feels like the lower-middle class. More important, he shows that they are not invisible to him—not because he speaks to them, but because he speaks like them.

The fact that Trump had never run for office is also a powerful factor in his favor. To this group, the political class is the problem, not the solution. The Republican establishment did not grasp that a career politician groomed to run for president has become anathema to this class.

That Trump was successful as a builder also helped him. The claim that he built things is essential to a class who sees construction as real business… and hedge funds as legalized fraud. The bottom half of society is hurting, and Trump is not seen as one of those who helped bring the pain, as Romney of Bain Capital was seen.

And Trump is perceived as a tough guy, who is willing to lie, insult, or threaten to get his way. From the lower-middle class point of view, nothing else will get them the solutions they need. The very idea that he might get the Mexicans to pay for a wall or tell the Chinese a thing or two might not be practical. But the thought that he would deal this way with the two nations they see as responsible for their misery is overwhelmingly seductive.

Finally, and in some ways most important, he says the things they all think but are no longer permitted to say. When he accused Fox News anchorwoman Megyn Kelly, implicitly, of being offensive because she was having her period, observers thought the world would end. For the white lower-middle class, this was a common assertion.

When Trump claimed that John McCain was not a hero just because he had been taken prisoner, he was speaking to the class who has served in the military going back to Vietnam… and never been called a hero for it. Observers thought Trump had destroyed himself. To many of these voters, McCain had carried his burden, but many knew men who had chosen to die for their buddies. Nothing taken away from McCain, they’d say, but let me tell you about a real hero. For the lower-middle class, McCain had done his duty and endured great hardship… but their definition of a hero was more demanding. They were not appalled by what Trump had said.

This is Trump’s strength. It is also his weakness.

Can Trump Win?

The Republican Party is complex. It is more than a party of the wealthy. It is also the party of lower-middle class whites who reject the current cultural tendencies that have marginalized them. Trump got the marginalized white lower-middle and middle class out over cultural issues. But it is difficult to see how this translates into the presidency. This class is not large enough to give him a victory, and his running will energize his opponents to go to the polls.

The culture wars have been won in the Democratic Party, so there are few voters to win over on that basis. Any Democratic candidate will counter Trump on the economic issue. And those in the Republican upper-middle class are no friends of the Republican lower-middle class. It is not clear how he bridges the gap.

I don’t think Trump can win the presidency. But he has revealed a serious structural weakness in the American polity. As Americans who earn below the median income are increasingly unable to live the life they could have expected a generation ago, they will join in with resentment against the upper classes. That resentment will be built around cultural issues, as well as economic ones.

The issue is not the gap between rich and poor, but the fact that the lower-middle class is becoming part of the poor, and the middle class is moving that way as well. As in Europe, the inability of the political and financial elite to see that they are presiding over a social and political volcano will produce more and more exotic alternatives.

When those people who have skills and are prepared to work can’t get a job that will allow their families to live reasonably well, this is a problem. When statistics show that vast numbers of people are entering this condition, this is a crisis. When there is a crisis, these people will turn to politicians who speak to them and give them hope. What else should they do?

Whether Donald Trump planned this brilliantly or was simply extraordinarily lucky doesn’t matter. He has found the third rail in American society. The lower-middle class doesn’t make enough to live a decent American life, and the middle class is only a little better off. Whether supporting or opposing Trump, it is essential to understand the foundations of his power and its limits. Trump makes no sense until his appeal to the lower-income white demographic is understood.

George Friedman
Editor, This Week in Geopolitics