Incomes Rise for Bottom 99 Pct.; US Inequality Still Worsens

30 Jun 2015 | Author: | No comments yet »

Finally, US incomes rise for the 99 per cent, even as top 1 per cent earn even more.

Incomes for the bottom 99 per cent of American families rose 3.3 per cent last year to $47,213, the biggest annual gain in the past 15 years, according to data compiled by economist Emmanuel Saez and released Monday by the Washington Center for Equitable Growth. “For the bottom 99 per cent of income earners, this marks the first year of real recovery from the income losses sparked by the Great Recession,” Saez, a professor at the University of California-Berkeley, said in a summary of his findings. As of 2014, the top 1 percent of Americans have seen 58 percent of the gains in the economic recovery, while the average real income of the bottom 90 percent has grown just 1.6 percent since the recovery began in 2009.* These findings coincide with new data from the IRS showing that the top 0.01 percent received 5.6 percent of adjusted gross income in 2012. The top 10 percent of American earners, or those making more than $121,000 a year, got an even larger slice of the economic pie in 2014, capturing 49.9 percent of total income. PORT WASHINGTON, Wis. (AP) — Dustin Diamond, who played Screech on the 1990s TV show “Saved by the Bell,” was sentenced Thursday to 4 months in jail for a stabbing in a Wisconsin bar. Between 1981 and 1990, overall income grew 1 percent per year—not quickly but nonetheless a welcome change from the negative real income growth of the late 1970s.

From 2001 to 2007, overall incomes continued to grow at the same rate as they did in the 1990s, but middle-class incomes grew at less than one-sixteenth of the overall rate. He said he then accidentally stabbed a man during an altercation. “I sincerely apologize to everyone involved,” Diamond said at the hearing Thursday. “This was the single most terrifying experience of my life … This is all I’ve been able to think about for the last six months.” Witnesses testified that Diamond’s girlfriend, Amanda Schutz, pushed one woman at the bar and grabbed another woman’s hand, initiating the bar fight.

The economy could withstand far higher tax rates on the wealthiest, and a 90 percent rate would both reduce inequality and also boost government tax revenue. These developments have been a natural experiment in trickle-down economics—the theory that tax cuts, deregulation, and the destruction of basic labor protections would unleash a wave of economic growth. The nation has 3.3 million more jobs than before the recession and the overall economy is larger than it was in December 2007, when the downturn began. Income certainly has shifted upward, but its benefits have failed to materialize for everyone else; middle-class incomes after 1980 only displayed strong positive growth in the late 1990s.

Saez’s figures are compiled from IRS tax data, using pre-tax income that excludes government transfer payments, such as Social Security retirement income. The only period that boasted overall income growth above 1 percent without strong middle-class income growth was the 2000s, and this growth was the result of an unsustainable housing bubble that greatly reduced overall income when it could no longer continue. International organizations such as the International Monetary Fund and the Organisation for Economic Co-operation and Development, or OECD, have concluded that high levels of income inequality reduce economic growth.

When the middle class has no money, businesses have no customers: As shown in a 2014 Center for American Progress report, more than two-thirds of retailers cited stagnant or shrinking disposable incomes as a risk factor for their stock prices. The wealthy tend to save their money, which helps finance investment, but 0 percent interest rates prove that financial markets have more savings than they can invest. Healthy economic growth requires a healthy middle class, and a pro-growth policy agenda needs to focus squarely on everyday Americans. * Saez’s data use tax returns to measure “cash market income”—income received from wages, business, and capital.

This definition of income is useful for evaluating how the market distributes rewards, though it does not reflect the total amount of resources available to tax units. However, there are clear advantages to using Saez’s data to study and compare the current business cycle to past business cycles: They are more recent and go much further back, allowing comparison of post-1980 business cycles with other business cycles after World War II.

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