Income inequality plummets
E. Thomas McClanahan
If you worry about income inequality (I don’t) then you could call this the upside of an economy seemingly stuck on the downside. Income inequality has plummeted, thanks to the great recession, which hammered major sources of income for the rich, namely capital-gains realizations.
Don’t think diminished inequality this will curb the debate on the subject; we often tend to yammer about things long after the trend has stopped worsening. Illegal immigration, for example, has plummeted, but it still keeps a lot of people up at night and continued worry about immigration still sways a lot of votes.
Resentment over income inequality tends to rise when the economy is doing poorly. Many people persist in believing there’s a set amount of money out there and if some guy gets more it’s because he’s taken it from others, rather than gotten it adding value or creating wealth.
For the record, inequality is falling rapidly. The Tax Foundation notes that the share of income attributable to the top 1 percent of income earners peaked in 2007 at 22.8 percent, after which it dropped like a rock to 16.9 percent after only two years — about where it was in the middle of the Clinton years.
This will make no one feel better since no one will shed a tear for the top 1 percent. At any rate, what matters for a healthy economy isn’t the income share of the top 1 percent, but whether there’s still movement up and down the income scales.
The evidence suggests that there is. As James Q. Wilson writes:
“The ‘rich’ in America are not a monolithic, unchanging class. A study by Thomas A. Garrett, economist at the Federal Reserve Bank of St. Louis, found that less than half of people in the top 1 percent in 1996 were still there in 2005. … Mobility is not limited to the top-earning households. A study by economists at the Federal Reserve Bank of Minneapolis found that nearly half of the families in the lowest fifth of income earners in 2001 had moved up within six years. Over the same period, more than a third of those in the highest fifth of income-earners had moved down. Certainly, there are people such as Warren Buffett and Bill Gates who are ensconced in the top tier, but far more common are people who are rich for short periods.”
Perhaps this explains why political appeals to wealth-envy have had so little success. Al Gore ran a “people versus the powerful” campaign in 2000 and garnered only a slight edge in the popular vote and not enough to win the Electoral College. As Michael Barone wrote several years ago in The Almanac of American politics, “… as always in American history, most voters care much less about punishing the rich than about rewarding the middle class and strengthening the economy. Support for redistributive economics has never rallied a majority …”
As always, the imperative is don’t worry about who’s getting what. Just get the economy moving again.
Matt Henry
1 year, 3 months agoLove it. LOVE IT.
Steve Alleman
Kansas City
1 year, 3 months agoDo you really expect us to ignore the fact that the long-term trend is upward? Won’t the line go right back up when the economy revives?
Mark Hastert
1 year, 3 months agoThe graph doesn’t show the trend line for middle and lower class earners. Hint, we all got poorer but the top 1% are still extremely rich. They can lose 25% or more of their income and still be extremely rich. Most of the rest of us would be losing our homes. Tsk tsk, tsk
George Hunsucker
Northland
1 year, 3 months agoYou understand ET, that the goal of the left is for the rich to have all their money taken from them. I think it is a case of jealousy…
Of course, then the left will bitch there are no jobs, but they will find another “demon”. As Thatcher said, socialism works until there is no more money. That is the libs’ dream….
Steven Fetter
66223
1 year, 3 months agoMany of the people (most?) towards the bottom of the 99% have 500 cable channels, smart phones, I Pods, hi speed internet connections, A/C and apparently are well fed.
The Spring Break resorts, high school parking lots, and airplanes are full. There appear to be 10x the number of banks than 30 years ago. We live longer, are more likely to attend college, and cosmetic surgery (not covered by health insurance) is exponentially higher than in years past.
I currently reside in the lower quadrant of the 99% but have hopes of moving back up. If not, life is still good.
Mark Hastert
1 year, 3 months agoI currently reside in the lower quadrant of the 99% but have hopes of moving back up. If not, life is still good.
Read more here: http://voices.kansascity.com/entries/income-inequality-plummets/#storylink=cpy
Indeed life IS good but id the trends are not reversed your chances of moving back up will (statistically at least)be less than they were when you grew up. As to your other points American life expectancy has decreased, personal wealth does not increase with the number of banks, college affordability has decreased dramatically, and I have not yet had cosmetic surgery and know few who have or can afford it.
If you have these things and are in the bottom 25th percentile you need to become a financial consultant. I’ll be your first client!
George Hunsucker
Northland
1 year, 3 months agoOnce more our resident “economist” throws out “facts”….
Americans, despite the hard work of the big 0, still have a chance to move-up in economic class. The fewer chances Mark is so worried about are caused by jimmy ii and his Chicago buddies with their anti-business rhetoric and regulations. This means nothing to hard-core libs who like to see govt. running the economy into the ground…
Kent Mueller
1 year, 3 months agoMark, should I presume your statement that life expectancy has decreased in this country came from the 2012 Statistical Abstract published by the US Census Bureau? Or, do you have a better source of information?
Having been just published, I presume they included the most recent data available. The last year of actual numbers is for 2008, which showed a one tenth of a year reduction in the overall average American’s life expectancy from that of the prior year. Other than the same reduction of one tenth of a year between 1992 and 1993, that is the only reduction since the chart begins in 1960. The recent drop can be attributed to both white males and white females, as their life expectancies decreased, unlike that of black men and black women. And since blacks proportionately are poorer than whites, something other than economic class must be at play here. So, Mark, what do you suppose the cause was? It doesn’t look like it is class.
What more, again according to the US Census Bureau, the Bureau expects the overall life expectancy to surge buy four tenths of a year when the 2010 numbers are finalized. That is in just two years.
Mark, was that the decrease in life expectancy you referenced?
George Hunsucker
Northland
1 year, 3 months agoWhat MO needs to do to give more people a chance at climbing the economic ladder….
http://www.indystar.com/article/20120201/NEWS05/120201020/Daniels-signs-hard-fought-right-work-measure?odyssey=tab|topnews|text|IndyStar.com
Home of the Super Bowl and the 23rd state to give workers a CHOICE vs. being required to join a non-representative union and pay dues they have no control over…. Come of MO, get with the program.
Steve Alleman
Kansas City
1 year, 3 months agoDid you know that that is going to be the last Statistical Abstract published by the government?
http://www.census.gov/compendia/statab/
Mark Hastert
1 year, 3 months agoYou are correct Kent, I meant to write that is declining in relationship to other developed countries. While indeed we are incrementally living longer other nations improvements have outpaced us despite our spending more than any other country in the world on health care. Depending on the table you consult we are either tied for 36th or in 42nd place behind the likes of Puerto Rico, Cyprus, Luxembourg, even poor impoverished Greece and falling.
As to the point I was making the acquisition of things like Ipods and the number of banks or other things itemized in Steven’s post are not indicators of a healthy economy or improvements in civil society. So what if the uber rich are a little less uber rich. We are all poorer and the effects are far more serious for us worker bees. The Romneys of the world could loos 75% of their annual income and still make over $1.5million/year. That’s the point, that’s why E. Thomas’s chart is a meaningless obfuscation.
Kent Mueller
1 year, 3 months agoMark, Thomas may not have submitted that for your benefit, depending on how you feel. However, it does address, and refute, those on the left who continue to say the super wealthy are usurping more and more of the pie. To refute the lie that the uber wealthy is gathering an ever increasing share is a good thing.
And I wonder why you use Romney as your example….why not Kerry or a Kennedy? Al Gore? Why always Romney?
You refer our ranking as being in the 30’s and 40’s….but you don’t say what is being ranked. What stat? Life expectancy? If that is the stat you are looking at, then you need to know you are looking at apples and oranges. The reporting of those numbers are not universal. The US has the most aggressive neo-natal medicine anywhere. We save premies that most countries don’t even attempt to save. However, when we are unsuccessful, those are counted against us. Some countries don’t report a birth as being a live birth until the baby is a year old. Those numbers are ranked for political purposes only, because they are not the same numbers.
And if we have such terrible health care, then why did the Yemeni Shiek come to the US instead of Havana? Our left praises Cuba’s healthcare system.
Steve Alleman
Kansas City
1 year, 3 months agoKent Mueller: “And if we have such terrible health care, then why did the Yemeni Shiek come to the US instead of Havana?”
Your argument is that the US has great healthcare if you’re a zillionaire? Seriously?
Mark Hastert
1 year, 3 months ago“You refer our ranking as being in the 30’s and 40’s….but you don’t say what is being ranked.” Read more here: http://voices.kansascity.com/entries/income-inequality-plummets/#storylink=cpy That was a reference to the average life expectancy rankings. We, the #1 spender on health care are way down the list but that’s not the point. The Tax Foundation chart is a red herring. So what if the rich are less rich, cry me a river. The middle class and poor are poorer and the impact on them is far greater. I used Romney as an example because his income is fresh is everybody’s mind but it’s true of any of the 1%ers He made $21million and does not have a job! The table is merely an attempt to obfuscate the issue of highly skewed wealth (and opportunity) inequality. The table doesn’t show the share of the 95th-99th percentiles or the top ten relative to the 90% It’s merely a case of parsing the numbers.
Kent Mueller
1 year, 3 months agoMark…the red herring isn’t Thomas’ chart. The red herring is you incessant repeating of your line that Romney made a lot of money, but has not job. That, is undeniably class warfare. Do you begrudge a lot of people because they no longer have to work?
You also failed to even mention the data that show how mobile people are in and out of both the lowest and highest classes. The the bottom 5% and the top 5% were always made up of the same people, then we would have the issues you decry. But that is not the case. There are some permanent residents in both classes. The Kerry’s and Kennedy’s come to mind, along with Buffet. But many if not most of the rest in those classes are mobile. They move up and down the ladder.
And you ignored my critique of your putting great efficacy on the raw data of world life expectancies. Life styles affect those numbers greatly, as does the level of violent crime and drug dependency. We are among the most obese countries. That greatly affects life expectancy. Obesity has little to do with health care. Obesity is almost entirely a personal choice, as is smoking. And of course all of that in addition as I said before that the US includes many short term lives (premies who are lost, etc.)in our numbers that other countries do not. Your list of life expectancies might be nice to look at, but it shouldn’t be used to derive any meaning.