The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%

Article summary by Wayne Caswell

This recent article in TIME caught my attention and should appeal to nearly all voters, Republican and Democrat alike.

The article is about extreme inequality, and while I too have written about that topic, I highly recommend the TIME article and offer selected highlights below. It begins with a must-watch 3.5-min.

According to a groundbreaking new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, American workers had the more equitable income distributions during the three decades following World War II (1945 through 1974). If they continued to prosper at that rate, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. That would have been enough to pay every single working American in the bottom nine deciles [90% of income] an additional $1,144 a month. Every month. Every single year. …

Whatever your race, gender, educational attainment, urbanicity, or income, the data show, if you earn below the 90th percentile, the relentlessly upward redistribution of income since 1975 is coming out of your pocket.

As Price and Edwards explain, from 1947 through 1974, real incomes grew close to the rate of per capita economic growth across all income levels. That means that for three decades, those at the bottom and middle of the distribution saw their incomes grow at about the same rate as those at the top. But around 1975, this extraordinary era of broadly shared prosperity came to an end. Since then, the wealthiest Americans, particularly those in the top 1 percent and 0.1 percent, have managed to capture an ever-larger share of our nation’s economic growth—in fact, almost all of it—their real incomes skyrocketing as the vast majority of Americans saw little if any gains.

The iron rule of market economies is that we all do better when we all do better: when workers have more money, businesses have more customers, and hire more workers. … This is the virtuous cycle through which workers and businesses prospered together in the decades immediately following World War II. But as wages stagnated after 1975, so too did consumer demand; and as demand slowed, so did the economy.

There are some who blame the current plight of working Americans on structural changes in the underlying economy—on automation, and especially on globalization. According to this popular narrative, the lower wages of the past 40 years were the unfortunate but necessary price of keeping American businesses competitive in an increasingly cutthroat global market. But in fact, the $50 trillion transfer of wealth the RAND report documents has occurred entirely within the American economy, not between it and its trading partners. No, this upward redistribution of income, wealth, and power wasn’t inevitable; it was a choice—a direct result of the trickle-down policies we chose to implement since 1975.

We chose to cut taxes on billionaires and to deregulate the financial industry. We chose to allow CEOs to manipulate share prices through stock buybacks, and to lavishly reward themselves with the proceeds. We chose to permit giant corporations, through mergers and acquisitions, to accumulate the vast monopoly power necessary to dictate both prices charged and wages paid. We chose to erode the minimum wage and the overtime threshold and the bargaining power of labor. For four decades, we chose to elect political leaders who put the material interests of the rich and powerful above those of the American people.