More Riches for the Rich

The rich are getting richer. There is no doubt about that. Whatever statistic or measurement one uses, the rich have gotten much richer in relation to the rest of us over the past 30 years. The only uncertainty is political – is that good for the rest of us?

Between 1960 and 1980 the richest 1% of Americans received about 10% of the total national income. This was not an unusual level of inequality – many of the world’s most advanced countries had similar income distributions.

But since 1980 the share of national income going to the richest Americans has shot upwards: by 2007, the top 1% received 23% of all income. The richest 0.1% of families received 12%, and the richest 0.01%, 1 out of every 10,000 families, received 6% of all income in the US. At this moment we are unique among the world’s leading nations in this income gulf. In the United States the rich get richer.

How has this happened? Why do the rich get richer in the United States? The salaries of our top executives have gone through the roof, while the pay of average workers has stagnated.

In 1965, the average CEO of a large corporation earned about 24 times the salary of an average worker. Now they make over 300 times the pay of average workers. The median pay for CEO’s at 200 big companies in 2010 was $10.8 million, a 23% increase over 2009. The Bureau of Labor Statistics says that compensation of workers in private industry rose 2%.

Highly paid executives can pile it on by serving on the boards of directors of other corporations. This is one way the rich get richer.

Directors at the 200 biggest publicly traded companies received a median $228,000 in 2009, for perhaps 225 hours of work, which is less than 6 weeks (that’s an estimate of Peter Gleason, CFO of the National Association of Corporate Directors, who is not likely to underestimate that workload

Meanwhile the effective tax rates on the wealthiest Americans have fallen dramatically over the same period.

Despite all the propaganda that one hears about how much taxes the rich pay, the richest Americans pay about one-third of their income in federal taxes, not much higher than people who make much less.

The Bush era tax cuts for the wealthiest Americans have played a role in this trend, but it started long before that.

Even more startling numbers represent how much of the growing wealth in the US the wealthiest have taken for themselves. For the whole 20th century up to 1980, the richest 10% of Americans took about 30% of the total growth in income. But since 1980, they have taken 98% of the growth, with only 2% going to the rest of us.

Since 1997, the average income of the bottom 90% of Americans has declined; all the growth went to the top 10%, and the top 1% saw their average incomes grow from about $900,000 to $1.3 million per year. These data can be seen at www.stateofworkingamerica.org in a very clever interactive chart.

No wonder so many Americans are pissed off. When asked directly about wealth inequalities, Americans don’t like them. In a 2007 poll, 72% agreed that income differences in America were “too large”. When asked what the income disparities were, respondents grossly underestimated their size. Many other polls demonstrate this broad American consensus.

But neither party has tried very hard to protect the poorest Americans from the outsized greed of the wealthy. About half of all members of Congress are millionaires, and all of them are beholden to the very wealthy for donations to their constant campaigning.

For decades both parties have pandered to the rich, giving them and their companies tax breaks, such as allowing their sources of income (“capital gains”) to be taxed at lower rates than ordinary income.

Now the parties are sharply split over whether to increase taxes on the wealthy. Republicans are not only firmly against raising the taxes of the rich, they want to cut them even more.

Their arguments never mention the kinds of statistics that I have laid out. Instead Republicans make this claim without evidence: they say that the rich are the ones who create jobs, so taxing the rich will hurt job creation.

What is true is that conservatives have managed to convince many Americans that they should worry about immigrants and public service workers, rather than the wealthy.

Steve HockstadtThe risky behavior of the very rich on Wall St. put millions of Americans out of work in our recent mini-depression. Now the rich bankers at Goldman Sachs, which has made billions in profits since it was bailed out with our tax dollars in 2008, have decided to send thousands of high-paying jobs overseas. The biggest American corporations are sitting on more billions in profits over the past few years, and are unwilling to hire the workers they laid off.

How much richer do the rich need to be before they begin to create jobs? How much more of our national wealth will the rich grab for themselves before the average American taxpayer says “Enough!”?

Steve Hochstadt

About Steve Hochstadt

Steve Hochstadt is professor of history at Illinois College in Jacksonville, Illinois, and author of Sources of the Holocaust (2004) and Exodus to Shanghai: Stories of Escape from the Third Reich (2012), both from Palgrave Macmillan. He writes a weekly column for the Jacksonville (IL) Journal-Courier and blogs for the History News Network. "His latest work is presented at www.stevehochstadt.com."

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