Dismissing the plots of income inequality in previous posts [0] (related posts [1] [2]), an Econbrowser reader asks:
“Do you concur that measures of the wealth distribution have been mostly quiescent since the 1970s and that the distribution of wealth is more even today than it was in the 1940s (the peak for the US modern era)?”
Well, I think that this is an interesting question, and so I went a-searching for data. This is what I found, which led to my answer of “no”.
Figure 1: Wealth share of the top one percentile, from Kopczuk and Saez (2004) (blue +), and from Kennickell (2009) (red squares). Source: Kopczuk and Saez [xls] and Kennickell (2009), tables A3a-g.
I don’t see the peak in wealth associated with the top 1% in the 1940’s as the reader asserts (looks like around 1930 to me), but I’ll leave that aside. As far as I can tell, inequality in 2007 exceeds that over most of the 1940’s. A caveat is necessary, because we have a 2007 estimate by Kennickell based on Survey of Consumer Finances, and 1940’s estimates by Kopczuk and Saez based on Estate tax return data. Nonetheless, similar movements and levels over the overlapping time periods suggests that the series are not completely non-comparable.
The last two red squares are at 2004 and 2007, respectively. Note the big jump going from 2001 to 2004, and the plateau to 2007.
It’s interesting to see what the authors concluded from their studies. From the abstract to Wojciech Kopczuk and Emmanuel Saez, “Top Wealth Shares in the United States, 1916–2000: Evidence from Estate Tax Returns,” National Tax Journal 57(2) part 2:
This paper presents new homogeneous series on top
wealth shares from 1916 to 2000 in the United States using estate
tax return data. Top wealth shares were very high at the beginning
of the period but have been hit sharply by the Great Depression, the
New Deal, and World War II shocks. Those shocks have had permanent
effects. Following a decline in the 1970s, top wealth shares
recovered in the early 1980s, but they are still much lower in 2000
than in the early decades of the century. Most of the changes we
document are concentrated among the very top wealth holders with
much smaller movements for groups below the top 0.1 percent. Consistent with the Survey of Consumer Finances results, top wealth
shares estimated from Estate Tax Returns display no significant
increase since 1995. Evidence from the Forbes 400 richest Americans
suggests that only the super–rich have experienced significant
gains relative to the average over the last decade. Our results are
consistent with the decreased importance of capital incomes at the
top of the income distribution documented by Piketty and Saez
(2003), and suggest that the rentier class of the early century is not
yet reconstituted. The paper proposes several tentative explanations
to account for the facts.
Piketty and Saez’s data sample ends in 2000, before the last boom. What do we glean from more recent data? From Arthur Kennickell, “Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007,” Finance and Economics Discussion Series paper No. 2009-13:
Much discussion treats the working definitions of wealth and income as if they were self-evident, but definitional
choices can make substantial differences in the overall picture. To provide a clear basis on which to examine family
wealth and income their interrelationship, this paper begins with a basic discussion of a range of possible measures
of those concepts. Using the measures developed, the paper examines the distributions of wealth and income and
their joint properties using data from the 1989–2007 waves of the Survey of Consumer Finances (SCF). Among
other things, the data show a complicated pattern of shifts in the wealth distribution, with clear gains across the
broad middle and at the top. For income, there is a more straightforward picture of rising inequality. Over this
period, wealth as a fraction of income moved up across both the distributions of wealth and income. Nonetheless,
their joint copula distributions (a type of distribution with uniform margins) do not show noticeable changes over
this time. The consistent pattern is that very high wealth and income and very low wealth and income go together,
but in between these poles, the relationship is fairly diffuse. The paper also presents information on the composition
of wealth and income over the 18-year period; the general patterns of holdings across the distributions did not
change markedly, but there were some important shifts. For wealth, debt increased as a share of assets across the
wealth distribution, the share of principal residences rose mainly below the median of net worth, the share of taxdeferred
retirement accounts rose and the share of other financial assets declined. For income, the clearest change
was a general decline in the relative importance of capital income other than that from businesses.
For completeness’s sake, I reprise this graph of income accruing to the top 1% and 5%, calculated in a manner comparable over the period 1913-2008:
Figure 2: Pretax income shares (including realized capital gains) accruing to top 5% of households (blue line) and to top 1% (red line). Source: updated version of Piketty and Saez (2007).
Looks like the inflection point is right around the time Nixon closed the gold window and things really go nuts during Easy Al’s free money party.
Which is exactly what I’ve long said easy money does: asset inflation for the rich, food and energy inflation for the poor.
It continues to amaze me that those most obsessed with the Gini coefficient have so little to say about the Fed’s role in it.
The later Kenickell series also looks a lot like deficit/GDP.
General Smedley Butler wrote, “War is a Racket,” about how corporations and the rich always profit from the killing. Perhaps he was being to narrow: “Government is a Racket.”
The apparent result of ATM growth.
The shift of manual labor from agriculture to manufacturing caused some displacement to blue collar incomes, but largely increased incomes significantly.
The shift from manual labor manufacturing to robotic manufacturing has left a void in that blue collar strata. So far, there is nothing in the foreseeable future to replace blue collar wealth creation.
so, is this a case of the better-educated being heartless and scooping up all of the goodies, or is it a case of the under-skilled and under-educated being replaced by more efficient and effective means of production?
President Obama’s strategy of creating make-work jobs doesn’t solve the basic issue of blue collar workers simply being less needed… at the high-cost wages they had been earning.
chart 1 is eloquent when reduced from the corporate equities the wealth distribution is showing a less steepened slope.It is worth remembering that trough the same time frame, Pigou replacement cost did not drive much gross capital formation and neither did the increased corporate profits, since financial did represent an abnormal share of the total corporate profits 30%.
The other remark is that financial corporate profits are fallacious predicated on the evaluation of the assets prices and profit and loss forgery for the banking industry.The corollary remark is the positive carry on the yield curve is and has been nurtured by robbing the savers accounts not willing to gamble on the equities markets or making an assessment of the worthiness of sovereign risk bonds.
It is worth as well to underline the continuation of the comedia dell arte when dealing with the banks stress test.An official publication of their 60 90 180 days interest rates and commissions unpaid,together with the publication of the loans restructured in amounts and duration would easily convince any literate reader.
The publication of their contingent liabilities for contracts open that means not squared and market prices could satisfy the curious numerate reader.
In essence one may notice an increasing wealth in absolute value when the net value should include the debts private,corporate,municipal.In substance the ongoing moral hazard is self perpetuating.
Nothing against wealth when it is earned.
At the chapter Pareto distribution Wikepedia is showing a charming outdated information 80% of the assets are owned by 20%.
I suspect that a lot of wealth has gone up in smoke for the upper 1% in the past few years.
Could we see this for earned income, please, as opposed to pre-tax income. Clearly, the share of pre-tax income tracks pretty well with share prices, no?
Also, let’s see what happened here to 2010. The world is not what it was in 2008.
W.C.:
You’ve been saying this for a long time, and I’ve been saying for a long time that your argument seems contrary to any actual evidence. The gold window was closed in 1971. The graphs above show a continued decline from that point for nearly a decade. You seem to see what you want to see.
The only “inflection point” there seems to be about 1979, the beginning of what everyone but you would consider to be an era of very tight monetary policy. The increase in inequality occurs almost entirely in the 1980s and 1990s.
By what measure on earth could one claim that money was loose in the 1980s and 1990s? Certainly not M1, M2, M3, currency, etc.
As for the relationship with deficit/GDP, note that this is also driven by asset prices. Increasing asset prices caused some of the move to surpluses in the 1990s, and falling asset prices have caused much of the recent economic weakness and deficits. And asset prices should also influence top tier incomes.
Note also that the Fed generally ignores asset prices, and excludes food and energy as well in it’s preferred inflation measures. If pushing for too low “official inflation” is somehow contributing to increases in the ignored areas (call it the whack-a-mole theory), then the solution might actually be a higher “official inflation” target: i.e., looser money.
Dear Professor Chinn,
What is your point in worrying about income or wealth inequality? Most of us are not Olympic athletes or “A list” movie stars. Most of us are also not in high income or wealth groups. It seems unfair to me that I am not in the exulted league of star athletes or star actors or in the league of star IQs such as yours. I assume that you want to tax the “unfairness” out of our society and redistribute wealth. Perhaps we should tax high IQ since high IQ is the most unfair attribute in human existence being a total accident of birth. High IQ people are the ones who have truly won the lottery of life.
Richard, the Federal Reserve’s survey of household financial condition was performed in 2010 using the same households as the 2007 survey (they had never done this before.) This study found that there was no decline in the net-worth of the top 1%, all other groups showed a decline. This was widely covered on serious econ websites like Fark and Reddit, not so much elsewhere.
On the one hand: Much of this “wealth” has never been properly marked-to-market. The 1% may be in for a rude awakening as more of the embedded bubble-era bezzle is exposed.
On the other hand: Other measures show far greater wealth and income inequality. And for those of working age, one should really look at the distribution of income excluding transfer payments. A lot of deficit spending is currently shoring up the lower quartile of the income distribution…
“What is your point in worrying about income or wealth inequality? Most of us are not Olympic athletes or “A list” movie stars.”
The reason to care is that it is highly unlikely that the proportion of the population that is exceptional changes much in a period measured in decades. Most of the exceptional people in any given decade, indeed, are also present in the next decade.
So, changes in wealth distribution reflect not changes in relative ability but in something about the economic structure of the country independent of the people who a factors of production within it.
Wealth distribution is a powerful non-parametric measure of whole economy level structural economic changes that is relatively easy to measure.
While there is no a priori reason to say that one wealth distribution is better than another, it is worth looking at what drives changes in wealth distribution to determine if it involves changes in the means of production that have some neutral source like technology, or market failure. We would expect to see rising inequality in wealth in the event of a market failure, and high levels of wealth inequality may also be associated with things like asset bubbles, risk of a major economic collapse, and economic growth rates – all theories which can be tested empirically if you collect the data and analyze it.
AS:
That is foolish, higher IQ people are more productive in whatever they have chosen to do and should be compensated for it. What is wrong is compensation above and beyond their greater productive capacity. Finance is a great example, about a third (I’m recalling from Lost Decades and could be mistaken on the portion) of their income was siphoned off from the rest of the economy rather than from increased productivity.
Let’s also not forget about externalities, I believe more mechanical engineers would be a greater benefit to society than more financial engineers. And an society with less income inequality must have benefits beyond aggregate happiness.
Dave:
I think some of the tax the rich mentality is for punitive reasons due to some sense that it is unfair that people have high incomes or high net worth. Why not take punitive measures on an increasing scale (similar to income taxe rates) based upon how high one’s IQ is. It seems unfair that high IQ people have a better chance to make high incomes and get into the best schools much easier than others.
Though I’m not really an Ayn Rand fan, this is all playing out exactly like an Ayn Rand novel. We’re currently in the “demonize the entrepreneurs” chapter, soon to move on to the “be John Galt” chapter.
It is obscene for anyone to demonize “the rich” without addressing the revolving door between Wall Street and Washington.
We don’t have a capitalism problem. We have a crony capitalism (elsewhere called corporatism, or, less charitably, fascism) problem.
…”get into the best schools much easier than others.” Yeah. high Iq. or children of the rich. same difference, because as all good Americans we are Calvinists who believe god already chose the winners and losers and its just poor sport to complain about the rich, after all they are morally superior!
AS, you seem to be the one who doesn’t like high IQ people. The rest of us are just bothered by the people who are picking our pockets to get rich.
W.C. Varones: I’m in agreement with you (!). We had much too much crony capitalism in the eight years leading up to the crisis, and still do. Thus, we need many more restrictions on lobbying, on the revolving door into and out of government from the business sector, and more sunshine laws, such as those that are being dis-assembled in Wisconsin.
“Thus, we need many more restrictions on lobbying, on the revolving door into and out of government from the business sector,”
I don’t disagree (working for Goldman Sachs should preclude one from a government job from now on). However, it’s awfully self serving, isn’t it, Menzie? If they can’t get folks from Goldman Sachs, they’re going to get them from Academia, right?
Just sayin’.
Menzie you wrote to W. C. V.;
“I’m in agreement with you (!). We had much too much crony capitalism in the eight years leading up to the crisis, and still do. Thus, we need many more restrictions on lobbying, on the revolving door into and out of government from the business sector, and more sunshine laws, such as those that are being dis-assembled in Wisconsin.”
Why is so hard for you to say that crony capitalism has been a growing problem not for 8 years and still do, (the time span is much longer) but the “still do” part is even larger, just some of the names have changed.
No, we do not need more restrictions on free speech and petitioning government, we need a much smaller federal government which will naturally reduce the nature of the lobbying effects.
Finally, sunshine laws are fine, but you neglected to mention their more important partner, sunset laws.
Walt,
My comments have nothing to do with like or dislike, just “IQ Justice”. It seems like I’ve heard the phrase “justice” used to justify all manner of redistribution. Just seems like fair play. Since we can’t redistribute IQ, we can hobble it just as we seem to want to hobble the economy with other lam brained restrictions.
Menzie you wrote to W. C. V.;
“I’m in agreement with you (!). We had much too much crony capitalism in the eight years leading up to the crisis, and still do. Thus, we need many more restrictions on lobbying, on the revolving door into and out of government from the business sector, and more sunshine laws, such as those that are being dis-assembled in Wisconsin.”
Why is so hard for you to say that crony capitalism has been a growing problem not for 8 years and still do, (the time span is much longer) but the “still do” part is even larger, just some of the names have changed.
No, we do not need more restrictions on free speech and petitioning government, we need a much smaller federal government which will naturally reduce the nature of the lobbying effects.
Finally, sunshine laws are fine, but you neglected to mention their more important partner, sunset laws.
Blame wall street or blame Pennsylvania Avenue?
Today Rajaratnam gets 11 years for insider trading, Madoff will die in prison, even Martha Stewart got 5 months in jail.
Rangel – tax evasion – censured.
Geithner – tax evasion – gets a do over.
Libby, Rove, and many others – nothing.
It should be obvious that the ruling class, on both sides of the aisle, is the larger problem.
I attribute the breakdown of the relationship between productivity and income increases to conditions in the marketplace of ideas. The failure of communism has allowed the remaining competitors to modify their offering. The capitalists are attempting to withdrawal all the goodies they had given the workforce not to go commie. Also as a commie fighting tactic, currency pegs have been tolerated to facilitate providing asian workers good manufacturing jobs. Now we have taken the fight to their homeland. Of course, the trade deficit in goods/services has been absolutely great for Investment Banking, so silk-stocking workers have fared much better.
AS:
Of course, just one, brief glance around the intarwebz will suffice to educate you on the deeply problematic nature of IQ testing. And I’m not talking about criticisms focused on its “unfairness” to minority groups or whatever. Just as a matter of pure psychometrics, IQ as a measure is riddled with issues.
Anyway, you seem like an Adam Smith kind of guy/gal. Let’s open our hymnals to Wealth of Nations, I.ii.4 [Glasgow Edition ¶ numbering]:
“The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came into the world, and for the first six or eight years of their existence, they were, perhaps, very much alike, and neither their parents nor play-fellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance.”
Shorter Adam Smith: the socioeconomic conditions into which you’re born matter a whole hell of a lot more than any presumed “natural” superiorities or inferiorities.
And it turns out that wealth inequality matters in terms of what kinds of socioeconomic conditions people are born into. Hoocoodanode.
Ed Hanson,
Good points. You beat me to it.
Menzie apparently does not recognize that the increase in lobbyists is in direct proportion to the number of regulations.
We have to recognize that lobbyists have two purposes: 1) gain a special advantage for their client, 2) protect their client from the government. Both of these flow from government regulation. Either the government is regulating in favor of their favorite crony capitalist buddy or they are regulating against their favorite crony capitalist buddy’s competition.
Ricardo
Cronyism is certainly a problem at the level of the federal government; but it’s an even bigger problem at the level of state government and bigger still at the county and municipal levels. It’s just a law of nature that the influence of lobbyists and cronies increases as you move down the political food chain. That is, I think, the proper way to interpret Madison’s #10. Who do you trust more, the FBI or some local sheriff in Boondocks County, Alabama?
What we really need are smarter voters. It’s crazy when I hear people yammer about cronyism and then walk into the voting booth and pull the lever for idiots like Sen. Richard “Name Every Project in the State After Myself” Shelby or Sen. Mitch “let’s build another bridge” McConnell. Vote smarter.
2slugs,
Include yourself in the box marked “idiot” if you think cronyism is specific to republicans.
Our broken government is not a partisan issue. If you can’t see that, then you are part of the problem.
tj: I do not believe 2slugbaits stated cronyism was specific to Republicans. Apparently you are sensitive because it just seems so, and because the examples are so easy to find.
I found Acerimusdux’s response to W.C. Varones’s comment intriguing because I have long had the theory that there is a relationship between monetary stance and inequality. In explaining the rise in wealth and income inequality since the 1970s the traditional explanation has been Skills Based Technological Change. But as many have noted, it fails to explain the explosive growth accruing to the top 1%. I believe Levy and Temin’s list of institutional factors (deregulation, floating exchange rates, international capital mobility, low minimum wages and taxes, the destruction of labour unions etc.) helps explain this growth much better through the capital income channel. But little research seems to have been done on the impact of monetary policy on inequality.
The period since the late 1970s has been marked by a series of progressive disinflations. In particular the recoveries from the last three recessions have all been marked by apparent opportunistic disinflation and consequently very slow labor market recoveries. The last two recoveries have also been marked by record setting shares of income growth accruing to corporate profits. (The last I checked over 60% of aggregate income growth this recovery has gone to corporate profits when the postwar 20th century average was closer to 20%.) It doesn’t take much imagination to figure out how that might impact wealth and income inequality.
And going further back we see this pattern repeated over and over again. The 1960s and 1970s were a period of accelerating inflation and declining wealth and income inequality. The price level in 1929 was approximately 20% lower than in 1920 and the 1920s were marked by soaring income inequality. Data from before 1913 is wanting but the Gilded Age, a period also noted for its great income and wealth inequality was a period of sustained deflation. Historically it appears that the Rentier class always benefits from tight money relative to the rest of the population, and that the rest of the population seems to do much better during periods of accelerating inflation, most likely due to tighter labor market conditions. (I’m amazed that seemingly so little research has been done on this subject.)
Moreover, politically, the Rentiers cheerfully exploit the rest of the population’s fears of inflation by calling exagerated attention to increases in commodity prices which are always volatile, but in real terms have fallen sharply overall over the last 165 years. They use this irrational fear to force a tighter monetary policy that ironically is of great detriment to the interests of the rest of the population. (Who cares what the price of a loaf of bread or a gallon of gas is when you can’t find a decent job?)
Finally, those who think that current monetary policy is loose are befuddled by nominal interest rates which are of course meaningless. As Milton Friedman said:
“After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.”
Where is the iq correlated with wealth? Many of the rich i know are decidedly average in iq and/or skills.
menzie,
Look at my post prior to 2slugs. I identified specific examples from both parties. They were easy to find. There were dozens from both parties.
2slugs cites 2 congressmen from one party and calls people who support them idiots. All I am saying is that a person who thinks that this is a party specfic problem is an idiot. If that’s what 2slugs thinks, then IMO he is in the idiot camp. If he thinks otherwise, then he isn’t.
My fear is that the OWS crowd was organized as an attempt to create the public perception that the status quo of spend and borrow is the middle ground, with tea party and OWS on the extremes.
Why is that important?
Indpendent voters will determine the outcome of the next election. If the big spenders/borrowers in both parties can persuade independent voters that spend and borrow is the middle ground, then we end up with the same spend and borrow ideology that has produced the variety of fiscal/social problems we face today. Party affiliation won’t matter because the spend and borrow ideology permeates much of the leadership on both sides of the aisle. There is a lot of posturing for the press, but the status quo compromise tends to be more spending and borrowing.
tj I agree that there’s plenty of cronyism on both sides of the aisle, but the floor pretty clearly leans towards the GOP. But I grew up in Chicago back in the days of the Daley machine, so I’m well acquainted with Democratic Party cronyism. But “Hizzoner” Mayor Daley never pretended that he was opposed to government involvement with the economy. I picked Sen. Shelby and Sen. McConnell because their hypocrisy on this issue is so outrageous given their constant blathering about BIG GOVERNMENT. But more to the point, my real criticism was with those voters who bitch and whine about big government and then go about voting for two of the worst offenders in Congress. Similar story with Newt Gingrich back when he was in Congress and before he was even Speaker. He was always carping about government spending, but yet his Congressional district consistently ranked third in the country (behind northern Virginia and Cape Canerval, Florida) in receipts of federal government largesse.
As to how this relates to the Occupy Wall Street story, this is clearly a case of one party versus another. The GOP is bound and determined to unwind Dodd-Frank; the Democrats are not. It’s the GOP that blocked Elizabeth Warren (and anyone else) from filling the job of consumer czar. It’s the GOP (and Sen. Shelby & Sen. McConnell) in particular that blocked a Nobel Prize winning economist from an appointment to the Federal Reserve. Cronyism has a GOP bias.
2slugs,
I always appreciate your viewpoint. However, I don’t care if you cite 100 republican examples of cronyism and 25 examples of democrat cronyism. The point is that they should all be thrown out on their arse. If congress and the president apply a different set of laws to themselves, then they cannot be trusted to legislate solutions that represent their consituents.
All the examples you cite at the end of your post demonstrate your bias. We need solutions that represent the political middle. Dodd-Frank is flawed, Warren is an extremist, Nobel Prize winning economists nearly brought down the financial system with the Longterm Capital fiasco.
I am not saying that republicans are offering better solutions. I am saying both sides are playing us.
tj
they should all be thrown out on their arse.
So I take it that you are now in agreement with me that the real blame lies with idiot voters. At the end of the day voters get the kind of governance they deserve.
they cannot be trusted to legislate solutions that represent their consituents.
But you’re overlooking the central question: Just who are their constituents? It seems pretty clear to me that the GOP leadership sees its constituency as Wall Street and the Koch brothers.
As to solutions representing the middle, I don’t see how the relative positions of views is at all helpful. How about solutions that make sense? I agree that Dodd-Frank is flawed in many ways, but the solution is to fix the flaws rather than going back to the status ante, which is what Wall Street and its GOP apologists want. As to Elizabeth Warren being an extremist, allow me to quote a conservative icon: “Extremism in the defense of liberty is no vice.” In any event, Wall Street’s concern wasn’t with Warren’s personal views; they were concerned about her vigilance in pursuing the law. I think it’s more accurate to say that Wall Street wanted to apply a different set of laws to themselves. Wall Street was concerned that Warren would in fact apply the law. As to the dangers of Nobel Prize winning economists, I think the lesson here is to beware of freshwater economists associated with a certain midwestern school. To update Barry Goldwater: “Extremism in mathematics is not economics.”
It seems pretty clear to me that the GOP leadership sees its constituency as Wall Street and the Koch brothers.
Seeing as how Wall Street gave so much money to Obama, and how many Goldman Sachs alumni are in this administration, I have to say you are being willfully ignorant.
BTW, what do the Koch brothers get for their “investment” in the Tea Party? Less energy regulation? Lower taxes? What is the business case, because I don’t see it.
Buzzcut So are you saying that Goldman Sachs supports Dodd-Frank and supported the Warren nomination? Now who is being willfully ignorant. Look, everyone knows that Wall Street likes to put its money on the side of a winner and in 2008 it was clear McCain was not going to win. Wall Street hoped to get its nose under the tent. They ended up getting half a nose under the tent…they got Timothy Geithner.
Buzzcut Well, the Koch brothers did get less energy regulation. In case you hadn’t heard, cap & trade is dead. Even very mild EPA regulations already on the books are being watered down. And of course the Koch brothers get their phone calls answered when they call the governor of Menzie’s state and want to talk about union busting. The Koch brothers have also been quite successful in their efforts to suppress voting rights. Good to know that in some GOP states an ID from a state university does not qualify as identification for voting, but a gun license does. That’s a Koch brothers idea. So apparently owning a gun makes for better citizenship virtues than getting a college education.
And speaking of the Koch brothers, what’s their solution to wealth inequality? Making money the old fashioned way the way they did? Oh wait, they inherited their moneybags from daddy.
There’s nothing wrong with wealth inequality in a market system where wealth is earned.
Wealth inequality that comes from political pull, i.e. the muzzle of a gun, is outrageous.
I suspect that much of the middle class feels that its wealth is being stolen in two directions, above and below: to bail out rich bankers, and to subsidize an unproductive and unenterprising “underclass” that lives on their extorted wealth via government handouts.
I suspect that a lot of wealth has gone up in smoke for the upper 1% in the past few years.
No it was the wealth of the bottom 90% that largely went up in smoke. The key store of wealth for the middle class was housing equity. The middle class owns relatively little in the way of equities or long term bonds. After all who can you name that has $500 million worth of equity in their house? None. How many people can you name that have $500 million in equities? Well start with the list of 400 that Forbes publishes each year and then go considerably futher than that.
Re: Steven Kopits at October 13, 2011 06:19 AM
Hardly anybody is likely to see this now – perhaps JDH should put a recent comments bar on the front page. The CBO has a tabulation of after-tax income here:
http://www.scribd.com/doc/70531424/10-25-HouseholdIncome
The conclusion being that the top 1% is the only bracket that has had after-tax share of income increase since 1979. The bottom 80% has seen its share decrease.