This graph from the Congressional Budget Center for Budget and Policy Priorities shows the most recent date on U.S. Income Inequality. This includes new data from 2006. This is pretty astounding. It shows just exactly how much of the country’s income has gone to the richest and poorest Americans and of course the middle classes.
Let’s assume that all U.S. incomes had all increased at the same rate as the lowest quintile.
lowest fifth: $1,639
second fifth: $3,000 to $33,000
middle fifth: $5,000 to $48,000
fourth fifth : $6,000 to $62,000
fifth fifth: $11,000 to $110,000
top fifth: $37,000 to $374,000
Now let’s see what it would look like if we’d all experienced the same increase as the top 1%.
lowest fifth: $38,000 increase to $53,000
2nd fifth: $77,000 increase to $107,156
3rd fifth: $110,000 increase to $152,000
4th fifth: $144,000 increase to $200,00
5th fifth: $253,000 increase to $352,000
Top fifth: $862,000 increase to 1.2m total
This basically makes the income inequality in this country the widest on record. The Center’s release also included this:
Taken together with prior research, the new data suggest greater income concentration at the top than at any time since 1929
If you want to check out how our US income inequality compares to the rest of the world, check out the GINI Index here in the CIA World Fact Book. The GINI index is a measure of income/wealth distribution. The lower the coefficient, the more equal the wealth distribution. So zero would mean perfect equality where everyone has the exact same income. One means there is perfect inequality or one person has all the income and the rest of the folks have none.
In 2007, the US had a GINI coefficient of 45. Denmark had a 24 in 2005. UK had 34 in 2005. Needless to say, we are up there with most of the world’s tin pot dictatorships on income equality. Uganda and Venezuela have ratings similar to ours.
In view of these numbers, I would say the populist rage overtaking the country isn’t about taxes. It may not even be about government spending. It is probably about the fact that most Americans are losing ground. This in itself wouldn’t be a problem, but not only are the majority of us losing ground, we a select few that are gaining hugely. It is also undeniable that this gain has come the political class who becomes wealthy themselves enabling policy that widens the inequality gap.
Filed under: Economy | Tagged: Congressional Budget Center for Budget and Policy Priorities, Gini index, income inequality
But we have American Idol. And Obama, not to be redundant.
Life is good. Isn’t it?
you been smoking those green shoots and seeing those glimmers?
Green shoots are up to $7 a pack and counting. Can’t afford glimmers at the moment.
i gave those up when our state raised the tax by 70 cents a pack
a few years ago.now straight tobacco lil.cigars much cheaper.
The headline in our local paper today read, “Even Billionaires have the Blues”, talk about PR.
That’s just so, I don’t know, Robert Johnson, Otis Redding, BB King.? Breaks the heart, dunnit?
Hey Dak!
An important post, as always. But your numbers are a bit confusing. Given the coefficients that you cite, shouldn’t your explanation read:
The Gini index is a measure of income/wealth distribution. The lower the coefficient, the more equal the wealth distribution. So zero would mean perfect equality where everyone has the exact same income. 100 means there is perfect inequality or one person has all the income and the rest of the folks have none.
well, it’s 100% or 1. The coefficient is a ratio that can take a number between 0 and 1. This explains it pretty simply:
1 person has 100% of the income.
http://en.wikipedia.org/wiki/Gini_coefficient
Yeah, I understood all that. I just wanted to point out that the coefficients that you cited, such as US’s Gini coefficent of 45, were listed as percents rather than as fractions.
But it was a very miniscule point, as my points so often are.
oh, yeah, misunderstood what you were saying. The CIA list drops the % or decimal and just uses the coefficient has a whole number, so yup
Thanks, dak, for acknowledging my somewhat anal-retentive correction.
Cheers!
Does that graph account for inflation?
IIRC the lowest quintiles are falling behind in terms of adjusted income
yes, it’s specified in a base year, so it’s in ‘real’ terms or inflation adjusted. The prices are fixed to 2006 prices.
“In view of these numbers, I would say the populist rage overtaking the country isn’t about taxes. It may not even be about government spending. It is probably about the fact that most Americans are losing ground.”
No, the rage is about taxes.
If you ask what the rage SHOULD be directed against — well, that’s a different question. But you have to deal with what IS.
The citizenry has been inundated with propaganda designed to make Americans believe that taxes and Big Gummint are the problems. Anyone who speaks of income inequality is a damned Bolshie.
The propaganda barrage has been going on for decades. Do not underestimate its effectiveness.
That is why I am fearful of “populism.” Any populist rage response will only benefit the puppetmasters — the folks who exist within the upper fifth.
You are overlooking the many comments to be found on the internet from tea party participants disgusted with both parties for reasons excluding taxes. These people are real. They have valid reasons for their anger. Where’s the leadership willing and able to channel this warranted anger in a genuinely constructive direction? It’s not enough to simply disparage those who are justifiably enraged that we are bailing out Wall Street and the banksters at the expense of the rest of us and of future generations.
No thinking person says the anger isn’t real….what concerns me is the top .999% is playing both sides off each other and the real power brokers ,who pull the strings , remain untouched.
I totally agree. That’s why it’s important that we don’t demonize the Tea Party participants, a la Jeneanne Garfolo, but rather engage with them. Certainly not all of them are merely upset with taxes in general; some are also clearly livid about the bankster bailout and the generational debt that has been incurred by this country in just the past few months. My favorite Tea Party sign was the one Karl Denninger wore:
http://market-ticker.denninger.net/archives/959-Tea-Party-Ticker.html
We cannot always use history to predict the future–if we could, Americans would not have elected an AA, as much as I detested the media manipulation that went into assuring the election of BO. I don’t think it’s helpful to simply assume that populist rage will always and forever continue to to be directed at all the wrong targets. I would rather that we at least tried to direct it at the right targets.
I’m one of them. The cost of these bail outs, and more deceptive funding disguised as helping the “little people” (and yes, both sides use the platitudes) is a cause for serious concern when we are talking trillions of dollars. The media is crowing about Obama’s plan to “cut $100 million in spending.” Well, the interest on the TARP plan is $95 million PER DAY! Big friggin help that $100 mil is. WHO is going to pay for this–the bankers, the investors? I don’t think so. Look at Daki’s chart above, that’s who.
I’ve been hearing we’re overtaxed my whole life, but the anti-tax movement really caught fire when Ronnie Raygun figured out he could cut taxes AND increase spending and get away with it.
can CA has been going to shit ever since his time
Head on correct in my opinion……As a matter of fact I remember how income redistribution was utilized by the GOP as a major talking point(that being said the GOPs major propaganda point is that the income from middle class is being redistriuted to the poor instead of to the rich)
You actually kind of get to the crux of the situation and why the middle class always seems to lose. If the GOP is in charge we end up covering the taxes for the rich. With the Democrats in charge we end up paying for the poor. Evidently both sides don’t want to bite the hand that feeds it. The really wealthy seem to be able to have a separate set of rules they operate under.
Meanwhile, from the Department of He Still Doesn’t Get It:
“Obama worried about ‘confidence gap’ on deficit.
President Barack Obama says he worries the administration is suffering from “a confidence gap” with the public and has told the Cabinet to slice $100 million from federal spending within 90 days.
Obama talked briefly to reporters as he was concluding the first formal meeting of his Cabinet Monday. He acknowledged that $100 million, by itself, wouldn’t put much of a dent in a more than $3 trillion budget.
But he also said that the cumulative effect of putting agencies in a budget-cutting frame of mind would ultimately make a difference and that getting started now would “set the right tone” for families struggling to make ends meet.”
http://seattletimes.nwsource.com/text/2008885506_apobama.html
Gads! Why won’t the public just drink their d@mn Kool-Aid and shut up!
From Greg Mankiw’s blog:
This I think is one of the most important issues that tells the story of our economic situation and the danger that our whole system is in. We’re at the position of the “tin pot” dictatorships as you put it. And when those get very out of balance, they tend to end in tears.
And good point myiq, if those numbers aren’t already in terms of 2006 dollars, then the story is even worse than the graph shows.
Perhaps the big falls we have had in the past, like in 1929, are reasonable corrections to have in that it shakes things up and levels the playing field a bit, and sort of resets the system. What if all the fail safes put in place after ‘29 actually prevent that reset that is vital for the long term and instead keeps us moving in that dangerous unequal direction? Imagine that, the government and banks and wall street would put protections in place that would protect themselves and not us.
So the big question is, where is the line? How far can the greedy government people, banks, wall street, and other big tycoons push things before something snaps?
I think if there were a line, Hillary would not have been stopped. I sometimes think the Upper Crust are simply cashing the system in and there is no floor to thier greed
Hold on, I didn’t even make the lowest fifth? My $7,800 a year is off the charts? My income has become so low even my government doesn’t see me, out of sight, out of mind.
That’s how Obama wants us, but I tell you what, I have a voice a loud voice when it comes to my well being and the well being of my fellow Americans.
I will march, I will yell at the top of my lungs, I will be heard!!!
A couple of points:
The straight numbers reflect a diminishing return, but the value of 42.9 in 1976 has to be worth more than 52.1 in 2006.
I also don’t like comparing us to Europe. Europeans pay substantially more in taxes and are much closer to socialistic governments. I don’t want to go anywhere near there.
During the primary and election, PUMA sites often mentioned that Obama had socialistic beliefs. And not in a good way. Redistribution of wealth is not a virtue found in the constitution. Now that Obama has effectively framed the argument of Wall Street vs Main Street, it appears to me that redistribution is slowly creeping in. It certainly looks like we are testing the waters on nationalizing the banks and auto industry.
I believe in capitialism. Regardless of the numbers, my standard of living is 20 x my parents. As it is with everyone else I know. Growing up we had one tv, one car. One record player and one radio. For 5 kids. Today each of my three children have computers, ipods, tv, dvd, cd players etc. So while numbers may show a disproportionate effect, the actual effect is much different.
We have the highest standard of living of anywhere in the world. How can we possibly complain when someone is making more? Bill Gates is not an evil man because he sold computers for ten times what it cost him to make. That’s capitalism, and everyone found a way to buy one. The amount of money and jobs he brought into the economy is enormous.
In my mind , redistribution of wealth ( and wealth is a subjective term) is not in keeping with the freedoms inherent for the citizens of this country.
Does that include redistribution of wealth upward as well as downward? Because that is what the tax system and the subsidization of corporations is doing. You can see it happening right now with the bail out of Investment bankers and Hedge Funds.
Also, we don’t have the highest standard of living in the world. We are right above Ireland and right below Singapore. This is per capita GDP. You’ll notice that 4 of the top 10 are in Europe.
1 Liechtenstein $ 118,000 2007 est.
2 Qatar $ 103,500 2008 est.
3 Luxembourg $ 81,100 2008 est.
4 Bermuda $ 69,900 2004 est.
5 Kuwait $ 57,400 2008 est.
6 Jersey $ 57,000 2005 est.
7 Norway $ 55,200 2008 est.
8 Brunei $ 53,100 2008 est.
9 Singapore $ 52,000 2008 est.
10 United States $ 47,000 2008 est.
11 Ireland $ 46,200 2008 est.
12 Guernsey $ 44,600 2005
13 Cayman Islands $ 43,800 2004 est.
14 Hong Kong $ 43,800 2008 est.
15 Andorra $ 42,500 2007
16 San Marino $ 41,900 2007
17 Switzerland $ 40,900 2008 est.
18 Netherlands $ 40,300 2008 est.
19 United Arab Emirates $ 40,000 2008 est.
20 Iceland $ 39,900 2008 est
We keep falling on the list every year. We’ve dropped from 7 to 10 in the last year alone.
Here it is:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
We have the 10th highest standard of living in the world.
Oh, and since it’s in real terms, there’s none of the diminishing return you’re talking about. Putting things in constant dollars removes that.
Several of those nations are special cases – low population but high income from oil for instance.
Ireland’s place on that list should be reviewed in consideration of Krugman’s column today.
“We’re all Irish now”
Yeah, i just read that. They’ve borrowed themselves into a rather huge hole. The shamrock miracle may be over.
oh, and my guess is that Iceland will drop this year too
A lot of those countries are also tax havens and have a huge amount of off shore banking operations too.
Norway has a lot of revenue from oil in the North Sea.
You are correct on the per capita GDP. That doesn’t necessarity equate to standard of living. Some of those countries have the wealthiest of the wealthy, and the poorest of the poor.
But my point is, at the end of the day, each succeeding generation has been more economically advantaged than the one preceeding. And children in this country will have the opportunity to achieve beyond children in most of those countries listed.
But for my own edification, several posters have mentioned wealth being redistributed upward. How does that happen?
You have never been to Europe-have you?
There is far less disparity of wealth in Europe, far better health care, and far better public schooling. Things have changed since the 40s.
I have. And I work for an international company, not US, and travel extensively through US, Canada and Mexico. They all complain about their governments just as we do. Particularly Canadians who are very socialistic.
Without looking it up, I would think that much of Europe’s resurgence after WWll was due to the economic stabilization from the US. We poured in tons of money and goods to rebuild Europe and Japan.
I work two jobs so that my kids might have a HOPE of going to college and coming out the other end without mortgage-size student loans. My brother-in-law’s family has kids the same ages as ours, and their parents only have to work one job each. Why? Because they live in Paris and are not staring down six-figure tuition payments for each of their kids — their taxes pay for university. And don’t even get me started on health care. If my husband or I were to get squished by a bus tomorrow, we’d end up living under a bridge. My brother-in-law got into a very serious accident about a month ago (while on VACATION — another concept that is foreign to us), and all they have to worry about is getting him better.
I will note that every time we mention moving “back” (it’s hubby’s home), these same relatives whine and complain about how much they are paying in taxes. But I don’t hear them clamoring to come over here…
Jadzia, I had Dutch and German business partners in my former life
and, while their taxes were higher than the US, none of them wanted to move here. Our benefits were barbaric.
When you add up the Fed, state, and local taxes we actually pay, we’re not that much different. We just get a lot less for it.
RalphB — Exactly. Like many of the folks who post and comment here, I wouldn’t really have a problem with the amount of taxes we pay, if it seemed like we were getting some kind of value for our money. My in-laws seem to do a lot of whining and complaining from various vacation locales, and loudly wonder why we never join them. (At least I think that’s what they’re saying on Skype — my French isn’t all that good.)
With the tax system and with subsidizes. Studies actually show that most government programs actually benefit high income earners. For example, roads, if you don’t own a car, you don’t benefit from a road. Subsidization of universities is another one. Kids from poor families benefit less because they attend less. Same with many subsidized loans for small businesses, houses, and things like that. These tend to go to the upper classes.
The tax system, isn’t as progressive as it used to be. Social Security taxes stop at upper levels. Sales taxes benefit the rich are hurt the poor. A huge number of subsidizes for farms go to huge corporate farms and enrich owners. Actually there are more subsidies to corporations than poor individuals. You can read a number of studies on these things.
I understand that we may fix these tax revenue problems by legalizing mary jane and taxing it. Ummmmm—wonder how many oz we should each consume to pay our 45k share of the debt.
Not everyone has the same standard. Then again you say parents, as in plural. When my parents were together we had far more than my husband and I have now. My mom was a stay at home mom. We had a house in the suburbs with a pool in the backyard. We took vacations. That all changed when my mother had to shoulder the burden alone(and it became evident that my father incurred alot of debt to give us a good life). At that point we became reliant on food pantries. I helped pay bills with babysitting money and had my first job at fifteen. We no longer saw a dentist. I’m trying to remember seeing a doctor, but I don’t.
Our household is better off than my mother was but not better off in terms of the lifestyle my “parents” were able to offer me as a child.
In my household, my husband works. Last year is the first year we could afford a real vacation(or even a car that fit everyone). We own our own home but it is a mobile home. My three boys share a room. That being said, our house will be paid for come next year. None of our things have been bought on credit. Yes, my children have more technology but I don’t necessarily see that as having it better. Then again I don’t equate better to having more “things.” I equate better to having more opportunities to experience things.
Then again I think comparing my kids experience to my own would be comparing apples to oranges. Financially as a young child I had it good. Emotionally, our house was a train wreck waiting to happen. My kids don’t have that to deal with.
Are you sure you don’t mix up Socialism with Communism?
I sometimes get the impression, that some Americans (Ted Kennedy comes to mind) are concerned not to be associated with (European) Socialism, fearing that they will thereby be perceived as Commies.
we have one communist in the Senate and wish we had more like him. Sanders rocks.
Here’s what he had to say about the bailout.
http://www.progressive.org/mag/sanders100208.html
The only redistribution of wealth Barry Inc. is interested in is all of it going to his backers. Everything else is a lie stated to make that goal easier to achieve. IMO
The redistribution of wealth in this country goes is towards the upper classes. I believe you may remember that Warren Buffet said that his effective tax rate was lower than his secretary’s.
i have always paid my taxes..it.s what the gov.wastes it on that gripes my buuuuuuuutttttttttt
excellent post!
If anything, wealth is being redistributed upward not down. That’s hardly socialism. More like corporate facsism.
Exactly ….and well said .
At the end of the day, I ask myself: Am I better off than my parents? And the answer is yes. Were my parents better off than their parents? The answer is still yes. So the trend is positive.
But now, will my children be better off than me? I don’t know the answer to that. With the enormous spending we are incurring, their debt will be astronomical. But I don’t blame Wall Street. When their standards raise, everyone else’s seems to also. Though certainly not to the same extent. But that’s ok with me, because they do not owe me parity.
What is not ok with me is our elected officials playing games that cost me my future and possibly that of my children and grandchildren. And I lay that at the feet of Pelosi, Frank, Dodd and Obama.
Your experience may not be universal. I am not as well off as my parents — their parents paid for their college educations, but chose not to pay it forward. I didn’t finish paying off my educational debt until my late 30s, which put me way behind in terms of retirement savings and all that kind of stuff. (Much less decent housing or other little niceties that make up one’s “standard of living.”) While I am frantically trying to sock away enough money so my kids don’t have to go through that, I feel sick and powerless over the huge amount of generational debt that they will have to shoulder — and they are all under 10! It’s not fair and it’s not right. And the horse has already left the barn — there is nothing I can do about it. Guess we can’t protect them from everything.
“my parents” chose not to pay it forward is what I meant…
Neither am I as well off as my parents, not nearly as well off, and never will be. My father was an electrical contractor in small town IL, my mother a housewife who’s never had a job for pay in her entire life. My father made an extremely good living. My parents chose to keep their money to themselves and I have without doubt been disinherited by my mother somewhere along the way (we’re estranged). For once in my life, I’m glad that my husband and I have no children, because I don’t envy the younger generations their sad inheritance, both economically or environmentally.
I have wondered if it would not have been better to “break the cycle” (our family dysfunctions go far deeper than the economics), but my babies have brought such joy to my life (the only joy, really) that I cannot imagine being without them. But I do feel guilty — they sure as heck didn’t ask for this! (The three year old is asking for something, at least he is today, but crushing debt isn’t it. Ha ha.)
The wage slaves will be in revolt soon.
Empires fall when the slaves get pissed.
mlhath, you’re citing your parents and your children as data. They’re not. That’s one piece of anecdotal evidence. As a persuasive argument against the barrage of facts demonstrating the middle class’s ever-dropping standard of living, t’s useless.
Of course, as an empty Republican trope assuring you that the trickle-down economy works like a charm and that socialism is SCARY, it’s very comforting to you, no doubt.
Yep — data is not the plural of anecdote…
Love it.
“In view of these numbers, I would say the populist rage overtaking the country isn’t about taxes. It may not even be about government spending. It is probably about the fact that most Americans are losing ground.”
You nailed it there! But the thing is, people are going to blame taxes and blame their government for why they are loosing ground. You can show people on paper that their taxes may have actually dropped, but when their money isn’t going as far as it used to, they’re going to get angry. This populist rage that’s building isn’t so much about actual tax numbers as it is about the attitude. Like people being labeled bitter small town folks, or teabaggers, while seeing multi million dollar AIG bonuses or a Treasury Sec who avoided taxes. It’s infuriating. We can see there are two Americas, two different standards. Then people watch Obama go to foreign countries and say something apologetic about America, so people don’t even feel like they can have pride in their country anymore. It’s like being humiliated all the time by your Gov.
Obama is supposed to be America’s advocate, he’s supposed to be speaking for the American people, but between him and the media it’s coming across as if he doesn’t like us very much.
If we could come up with a nice bumper sticker slogan to address the falling std of living, bailouts, corruption, etc I think it would replace “Don’t Tax Me, Bro” as the symbol of rage in about 2 minutes.
I’m SHOCKED!!!!
NYT reports Obama doesn’t plan to reopen NAFTA talks
Who could have predicted?
Heh, everyone?
David Sirota is going to be so bummed. So much for that fair trade stuff.
But before we go off the deep end let’s take a look at those numbers. What I see is that top 1% went up 250+ over 25 years. That is about 10%/per year. The 250+ sounds huge but when you look at 10% per year it’s very good but it is not huge. If you go to the next level 86% and divide that over 25 years that is about 3% and some change in inflation adjusted $$$. And so it goes. It dramatically proves that the rich get richer and the poor, poorer.