While We Were Being
A Deeper Dive into what Happened
Even without the pandemic, it’s pretty obvious to most of us that Americas and American Democracy are in rough shape right now. Wealth inequality is typically a good indicator of an unhealthy nation and ours is extremely bad and getting worse. Wealth inequality is almost always a reflection of government policy and the fact that it has varied greatly over time shows that our government hasn’t always necessarily favored the wealthy. We need to look at wealth inequality over time in order to get a feel for just how long we have been heading in the wrong direction and how bad it has become. Then we need to understand why.
If a picture is worth a thousand words then a graph of economic data is worth a million f-bombs.
You probably hate looking at graphs but keep in mind, that when it comes to economic graphs, you are on them somewhere. Your position on them probably isn’t good and you have probably moved over time – most likely in the wrong direction. If a picture is worth a thousand words then a graph of economic data is worth a million f-bombs. The following graphs give only a hint to what has been going on under the hood of our modern democracy while we were busy being good Americans.
This first graph gives you an idea of how the country’s total wealth shifted toward the wealthy over the past few decades. It shows the change in wealth of the top 1% of the population, the next 9%, and the bottom 90% (the rest of us). In 1989 90% of us had about 33% of the county’s wealthy spread among us one way or another, but 37 years later we were splitting only about 23% of the country’s wealth. In those same 37 years, the chunk of the country’s total wealth that was held by the top 1% increased from 30% to 37%. One interesting thing to note in the graph is that for a while the top 9% saw continued growth along with the 1% but starting around 2010 they too started to get squeezed out.
Now let’s zoom in on the 1% a bit to see just how wealthy are the richest of the rich. When looking at the graph below, which is a snapshot of 2016, we can see two things about the top 1% (where the rightmost bar shows “99-100”): Their share of our overall income was pretty damned impressive and their share of our overall wealth was even more impressive. We also see those numbers flip as we move down the economic ladder with our share of the overall wealth being less than our pathetic share of overall income. This shows what many of you are already painfully aware of: many of us live paycheck-to-paycheck and have little, if any, accumulated wealth for retirement or if we lose our job or if we need medical treatment.
Let’s talk about income vs. wealth. First, they are two different things: Income is basically your paycheck, stock dividends, capital gains and other ways that actual spendable money comes into your house. Wealth is money you have laying around (bank accounts, stocks, houses, properties) minus any debt you owe (college and car loans, mortgages, etc.). A larger point shown by this income/wealth graph is that when you hear about “average income”, “median income”, or “income tax” then you are hearing only the income part of the story, and for the wealthiest among us, that is the smaller part of the story. If someone only mentions income and ignores wealth, stocks, etc. when they talk about the wealth gap then they are sugar-coating the subject. Most Americans get their money from a salary (for working), the wealthy get most of their money through investments – it should not be a surprise to you at this point that salary is taxed the most while investments and other wealth-related money-makers are taxed the least.
Let’s take a break from percentages and look at some actual dollars. The graph below shows how wealthy families somehow accumulated more and more money between 1989 and 2013. One thing to note in the graph below is that as time went on, our economy grew and there was more money to be had – but not by all. As our economy grew, the top 10% was quick to grab pretty much all of it. The bottom half of America (that thin dark blue area at the bottom of the graph that looks like roadkill) shows that we flatlined for our 24 years of hard work. By 2013, the top 10% of families owned 76% of all wealth while the bottom 50% of families owned 1%. Being good Americans didn’t get us anywhere.
The next graph shows how we were doing back in the good ol’ days, starting before the great depression and going up to 2012. It compares the top 0.1% (one tenth of 1%) of the population to the bottom 90% – the rest of the top 10% are left out in this case. If we pretend that the population was 1000 people then we are comparing the single richest family to the bottom 900 families. The graph shows that starting in 1913 the share of wealth bounced around but on average was pretty equal until around 1940 when the bottom 900 families started accumulating more wealth.
Or was it pretty equal? In 1937 about 20% of our total wealth went to that fictitious single richest family while another 20% of our total was spread around 900 poorest families. So if our total wealth was 1 million dollars then that richest family had $200,000.00 for themselves and 900 families had about 222 bucks each – maybe not so equal. The other 9.9% that is not shown in the graph had about 60% of the wealth so those 99 families each had about $6000.00.
Overall, from 1940 to 1985 the overall condition for those 900 families was improving – we were getting a more reasonable chunk of the wealth (the dark blue line creeping up higher on the graph). We had better access to education, we had jobs and better salaries, and folks bought stuff and created demand. New jobs were made, more folks spent money, and businessmen of all types prospered because of it.
But again, we are looking at the percent of the wealth and comparing the top 0.1% of our families to the bottom 90% so looks can be deceiving. When that one richest family was in its worst financial standing, around 1978, they had about $70,000.00 of that 1 million dollar fictitious economy while the bottom 900 each had $367.00 on average. Don’t feel bad for that rich family – they have never looked back since.
Another point about the above graph is that around 2010 we had somehow managed to get our wealth inequality to be as bad as the lead-up to the 1929 Stock Market Crash and the Great Depression. That should grab your attention.
The final and most suspicious observation about the above graph is that things started happening between the late 70’s and the mid 80’s that allowed the wealthiest among us to start taking more while the rest of were getting less. This is where we once again began to lose what was an already lopsided share of our nation’s total wealth. There were many things that led to this change in direction – some subtle, some not so subtle. Worthy of quick mention here is the rise of “wealth-inspired” public policies coming out of a growing number of wealth-funded conservative think tanks that were inspired by the Lewis Powell Memo (a must-read). These think tanks came up with the concept of the “marketplace of ideas” which basically says that they could also consider stuff other than science, data, and facts when determining policy. In other words, they felt that policy should be based on (their) ideologies and agendas. A primary example of that is “trickle down economics” which was forced upon us back in that time. “Trickle down” is a policy that was desired by the wealthy and the made-up facts that justified it came later. Today it continues to shift money into the pockets of the wealthy and corporations with very little trickling down upon the filthy masses (you and me).
Hopefully, the articles (and future articles) in this blog will allow you to explore the various ideologies, lies, manipulation, and other “wealth-inspired” policies that allowed all of the above to happen…
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