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Income disparity widening to chasm |
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Written by Xiuhcoatl
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Nov 11, 2006 at 11:17 AM |
Income disparity widening to chasmStudy finds not only are U.S. rich getting richer, they're doing it fasterBy KEVIN G. HALL
McCLATCHY NEWSPAPERS
Last Updated: November 5, 2006, 05:13:26 AM PST
Source: Modesto Bee
WASHINGTON — Over the past quarter-century, and especially in the past 10 years, America's very rich have grown much richer. No one else fared as well.
From 2003 to 2004, the average incomes of the top 1 percent of households jumped more than 18 percent, after adjusting for inflation. These households, which had annual incomes above about $315,000 in 2004, garnered 53 percent of the income gains in that year. In contrast, the average incomes of the bottom 99 percent of households grew by less than 3 percent, after adjusting for inflation.
The figures are from a Center on Budget and Policy Priorities analysis of a study by University of California at Berkeley economist Emmanuel Saez.
Between 2001 and 2004, however, median family income rose 1.6 percent when adjusted for inflation, according to the Federal Reserve. Median family real net worth — a family's gross assets minus liabilities — rose 1.5 percent during those four years.
Those are very sluggish income-growth rates compared with the four years from 1998 to 2001, when median family income grew by 9.5 percent and median family real net worth grew by 10.3 percent.
Experts disagree on the causes, but they're in near agreement that this trend threatens to erode a fundamental American belief about fairness.
"It's not the actual getting ahead in America that's so important — it's been Americans' deep belief that they have the opportunity to get ahead. And if you lose that, there's damage to our society," said Douglas Holtz-Eakin, who until last year was the director of the nonpartisan Congressional Budget Office and before that was chief economist for President Bush.
In coming years, income inequality is sure to be a rallying cry in political debates over everything from raising the minimum wage to federal spending on education to overhauling the tax code.
Most theories on why the rich are getting richer focus on why everyone else isn't: the declining power of labor, the influx of illegal immigrants, the movement of jobs overseas and global competition that holds down wage growth.
Education has widened income inequality, too. Americans with college degrees earn nearly twice as much as those without them. But education hasn't been a ticket to income growth lately.
Between 2000 and 2005, workers with four-year college degrees saw their wages fall 3.1 percent, adjusted for inflation. Only two groups, who together make up just 3.4 percent of the work force, saw inflation-adjusted wages rise. They were workers with doctoral degrees or specialty degrees, such as medicine or law, according to the U.S. Census Bureau.
With more, the rich get more
The soaring pay enjoyed by top chief executive officers, athletes and entertainers also has added to the widening income divide.
"I'm thinking Tiger Woods causes some income inequality," Holtz-Eakin said. "All of that seems to be part of this, but it still leaves you with a sense of not knowing exactly what it is."
There's a simpler explanation. The very wealthy simply own more assets than the rest of us. That means they benefit more from the booming stock market, which is reaching record highs.
Since 1926, stocks have given investors an average annual return of about 10 percent (with large fluctuations, depending on the years). In 2004, the wealthiest 10 percent of Americans were almost three times more likely to own stock than the broad universe of U.S. families, according to the Federal Reserve.
The median value of stock holdings for the wealthiest 10 percent of Americans was $110,000 per household in 2004, according to banking giant Morgan Stanley. The value of stocks held by the other 90 percent of Americans averaged $8,350.
Those numbers lead some to question the fairness of Bush's 2003 tax cuts, which lowered the top rate at which capital gains and dividends are taxed. Individual income tax rates in the top four income brackets also were lowered to 25, 28, 33 and 35 percent.
"We've had a 30-year trend of income inequality. What's new in the last five years is the degree to which tax policy has made that worse, rather than leaned against that trend," said Jason Furman, a fellow for the liberal Center for Budget and Policy Priorities and an economist at New York University.
If Democrats capture the House of Representatives on Tuesday, they won't immediately set about trying to reverse the Bush-era tax cuts.
Rep. Charles Rangel of New York would head the tax-writing Ways and Means Committee, and he has said he won't seek a rollback but will oppose extending the cuts beyond 2010, the year they are set to expire.
Some conservatives fear that Democrats will seek to redistribute wealth by revamping the tax code to address income inequality. They defend the status quo by pointing to tax data showing that the rich contribute the greatest share of taxes.
In 2003, the wealthiest 10 percent held 37.2 percent of national income, a 50.2 percent share of all federal tax liabilities and a 69.6 percent share of individual income tax liabilities, according to a Congressional Budget Office tax study.
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Last Updated ( Nov 13, 2006 at 09:47 PM )
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