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Middle-class servants to the wealthy
January 31, 2008 by afp
Column by Sam Rasoul
In a free society, inequality of income in inevitable. But inequality of income, if not moderated, becomes a force which both destabilizes and disables a society.
Not only is excessive inequality morally offensive; it is dangerous.
We have concrete data from 2005 delineating the severity of the income gap in the United States. In that year, the top 1 percent of Americans, those earning in excess of $348,000, pulled in a larger proportion of the national income than at any time since 1928. To be exact, those at the top took in 21.8 percent of all income, almost reaching the 1928 level of 23.9 percent. To offer some comparison, in 1980, the top 1 percent earned 8 percent of the country’s income, a far cry from the 2005 21.8 percent. Those receiving more than $100,000 in 2005, the top 10 percent, also reached pre-Depression levels.
Reported income rose 9 percent in 2005, but for the bottom 90 percent, incomes dropped 0.6 percent. Meanwhile, the top 1 percent saw income increases of about 14 percent. In other words, the gap continues to widen with a few becoming wealthier and the vast majority poorer.
In another way to look at the income disparity, the bottom 150 million Americans’ total income roughly equaled that of the top 300,000. To break that down to the individual, an average person from the top group receives 440 times as much income as someone from the the bottom group. If most of us multiply our income 440 times, the moral offense becomes obvious.
However, the ethics of income inequality is only part of the picture. Historically, when the share of pre-tax income has risen above 20 percent for only the top 1 percent, those economic systems have crashed. As a reminder, we are dangerously close to pre-Depression levels. But such danger existed long before the last century. Plato warned that “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” More recently even Alan Greenspan admitted “income equality is where the capitalist system is most vulnerable.”
The good news is that extreme inequality of income is a choice. Even if a society has slipped into that danger zone, the choice to adopt a remedy exists. I don’t suggest trying to abolish inequality of income, but only returning to moderate inequality, such as the 1970s when executives made 30 times more than the average worker. Today the executive makes 400 times more than the average employee in his company, obviously an immoderate inequality.
Is it any surprise we no longer do better than our own parents? A recent study said that, adjusting for inflation, men in their 30s make 12 percent less than their fathers did in 1974. We work more hours with fewer benefits and find saving almost impossible.
We have moved closer to that place where economic systems collapse, and to move us away from that danger zone, the middle class must have a voice our leaders and elected representatives cannot ignore. Today, the voices of the bottom 90 percent have been drowned out by the special interests and lobbyists who have a disproportionate influence in Congress. The lobbyists are the paid representatives of the top 10 percent influencing the representatives we elected. There are twice as many registered lobbyists in D.C. now than there were in 1980; as the income disparity widens so does the influence disparity. We must get the special interests out of our system before we can move on to other reforms, before we can assure that we can save ourselves from collapse. Doing so is our moral and economic responsibility
Sam Rasoul is a candidate for the Sixth District Democratic Party congressional nomination.
Mr. Rasoul,
You state: “In that year, the top 1 percent of Americans, those earning in excess of $348,000, pulled in a larger proportion of the national income than at any time since 1928“.
But data from a Wall Street Journal article shows that many have moved up into that top tier: “The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile“.
And then there is data showing those who moved up into the middle class: “Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years“.
http://online.wsj.com/article/SB119492157951090886.html?mod=opinion_main_review_and_outlooks
You also stated: ”I don’t suggest trying to abolish inequality of income, but only returning to moderate inequality, such as the 1970s when executives made 30 times more than the average worker“.
So what is your solution?
Is it tax the rich even more?
Is it another form of wealth redistribution you favor?
What program would you establish to keep the executives from making so much money?
Taxing the “Rich” or making them pay their fair share is always a good line to get some people’s attention, but what do you consider a “fair share” for the rich to pay?
“Last week the Congressional Budget Office joined the IRS in releasing tax numbers for 2005, and part of the news is that the richest 1% paid about 39% of all income taxes that year. The richest 5% paid a tad less than 60%, and the richest 10% paid 70%. These tax shares are all up substantially since 1990, and even somewhat since 2000. Meanwhile, Americans with an income below the median — half of all households — paid a mere 3% of all income taxes in 2005. The richest 1.3 million tax-filers — those Americans with adjusted gross incomes of more than $365,000 in 2005 — paid more income tax than all of the 66 million American tax filers below the median in income. Ten times more”.
http://online.wsj.com/article/SB119786208643933077.html
I am by no means in that “evil top-tier” but I am working hard, improving my skills, seeking out and taking advantage of opportunities, and sacrificing now to improve my lot in life. Opportunities that come from a system that rewards risks in investments and hard work. If your plan is to make the “Rich pay their fair share” in the form of increased taxes and they then take their investment money elsewhere where does that leave me? And by the way a growing amount of that “Investment” money is coming from mutual funds and 401k’s that the majority of Americans are now in…
Math question - how can there be that many more people in the top 1 percent? That’s what Sam was writing about, from what I can tell. The population has grown some since 1996, sure, but 1 percent is 1 percent.
Chris,
Good point and it would be interesting to see who now makes up the top 1% and at what dollar value.
“the top 1 percent of Americans, those earning in excess of $348,000,”
It is obvious that more then the top 1% of the population now makes more than $348,000 from the result of a strong economy and free market that presents opportunities that were not available in the past…
And I think your points about upward mobility are strong, Steve. I think the picture that Sam was offering us here needs to be a little bit more complete.
Well, within that time period of the survey I took a 28% pay cut because my job was outsourced in a merger deal that made the CEO of my company 150million. How is that fair to the working class? That CEO is certainly not investing his gains back in the community. In fact he held a press conference with the mayor where they donated 50K to a local charity and then restated the manufacturing center’s regular proposed operating budget for the next 2 years as a re-investment in local jobs. Most of us are not entrepeneurs and the education and training I invested in my career have been negated by the shift in my industry to outsource and redefine layoffs as cost savings. Most people I know live check to check and do not have the resources or savvy to start a business. The lesson is that the worker is no longer a valued asset of productivity… they are a cost to be minimized. Why hire fulltime and provide benefits and if that parttime worker is sick and cant afford a doctor… oh well. So where should the burden to help our citizens fall? Business has shed that responsibility in the name of profit and charity only goes so far. Besides 96,000 returns over 9 years of data does not sound like a huge sample. I think this might be skewed to prove somebody’s point.