The Top 1% of Americans Have Taken $60 Trillion From the Bottom 90%. By Nick Hanauer at Time, from 2020.
The elephant in the room is extreme income inequality.
How big is this elephant? A staggering $50 trillion. That is how much the upward redistribution of income has cost American workers over the past several decades.
This figure comes from a new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation.
Had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone.
That is an amount equal to nearly 12 percent of GDP — enough to more than double median income — enough to pay every single working American in the bottom nine deciles an additional $1,144 a month. Every month. Every single year. …
At the recent pace of $2.5 trillion a year, that number from 1975 to 2024 is $50 trillion, and $60 trillion from 1975 to 2024:
A rising tide most definitely did not lift all boats. …
Imagine how much safer, healthier, and empowered all American workers might be if that $50 trillion had been paid out in wages instead of being funneled into corporate profits and the offshore accounts of the super-rich. Imagine how much richer and more resilient the American people would be. Imagine how many more lives would have been saved had our people been more resilient. …
How it used to be:
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. This was the era in which America built the world’s largest and most prosperous middle class, an era in which inequality between income groups steadily shrank…
But around 1975, this extraordinary era of broadly shared prosperity came to an end.
Losers and deplorables:
Price and Edwards look at real taxable income from 1975 to 2018. They then compare actual income distributions in 2018 to a counterfactual that assumes incomes had continued to keep pace with growth in per capita Gross Domestic Product (GDP) — a 118% increase over the 1975 income numbers … At the median individual income of $36,000, workers are being shortchanged by $21,000 a year — $28,000 when using the CPI — an amount equivalent to an additional $10.10 to $13.50 an hour.
But according to Price and Edwards, this actually understates the impact of rising inequality on low- and middle-income workers, because much of the gains at the bottom of the distribution were largely “driven by an increase in hours not an increase in wages.”To adjust for this, along with changing patterns of workforce participation, the researchers repeat their analysis for full-year, full-time, prime-aged workers (age 25 to 54). These results are even more stark: …
Half of all full-time workers (those at or below the median income of $50,000 a year) now earn less than half what they would have had incomes across the distribution continued to keep pace with economic growth. …
This dramatic redistribution of income from the majority of workers to those at the very top is so complete that even at the 95th percentile, most workers are still earning less than they would have had inequality held constant. It is only at the 99th percentile that we see incomes growing faster than economic growth …
This represents a direct transfer of income — and over time, wealth — from the vast majority of working Americans to a handful at the very top. …
Excuse 1:
A dominant narrative that has argued that rising inequality is largely a consequence of a majority of American workers failing to acquire the higher skills necessary to compete in our modern global economy. If workers were better educated, this narrative argues, they would earn more money. Problem solved.
Indeed, at every income distribution, the education premium has increased since 1975, with the income of college graduates rising faster than their less educated counterparts. But this growing gap is more a consequence of falling incomes for workers without a college degree than it is of rising real incomes for most workers with one …
The reality is that American workers have never been more highly educated.
Excuse 2:
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. …
The economy is smaller as well as less equitable:
As wages stagnated after 1975, so too did consumer demand; and as demand slowed, so did the economy. A 2014 report from the OECD estimated that rising income inequality knocked as much 9 points off U.S. GDP growth over the previous two decades — a deficit that has surely grown over the past six years as inequality continued to climb. That’s about $2 trillion worth of GDP that’s being frittered away, year after year, through policy choices that intentionally constrain the earning power of American workers.
This is about the biggest political news there is, but it is scarcely ever mentioned. Could that be because the ruling class doesn’t want you to know about it? It makes them uncomfortable? There’d be a revolution?
What huge financial event occurred in 1971? The world stopped using gold. The last link between money and gold was broken. That freed up the financial industry and governments to manufacture ever more money, which went disproportionally to their favorite people. Not taking away your money, or paying you any less, you understand, but just giving more new money to a bunch of other people.
Gold constrains money creation, because you can demand the gold instead of the money that it supposedly represents. Money can be created by the click of a button, but gold is hard to obtain — you must mine it. Bitcoin? Also requires mining, but there are a lot of cryptocurrencies.
Both US and Australian Constitutions insist that their states use gold as money. If they still used gold we wouldn’t be in this mess, and society would be much more equitable and wealthy.