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O'Brien writes: "Once upon a time, the American economy worked for everybody, and even the middle class got richer."

The poor are getting poorer. (photo: Chan Kwok Hung)
The poor are getting poorer. (photo: Chan Kwok Hung)


The Bottom 90 Percent Are Poorer Today Than They Were in 1987

By Matt O'Brien, The Washington Post

2 October 14

 

nce upon a time, the American economy worked for everybody, and even the middle class got richer. But this story has only been a fairy tale for almost 30 years now. The new, harsh reality is that the bottom 90 percent of households are poorer today than they were in 1987.

This is actually a much more dramatic statement than it sounds. While the Federal Reserve has already told us that the median households is worth less now than it was in 1989 -- that's the household right in the middle -- it turns out that everybody but the richest 10 percent of Americans are worst off. That includes the poor, the entire middle class, and even what we would consider much of the upper class.

You can see this troubling finding in the chart above, based on data from Emmanuel Saez and Gabriel Zucman's new paper on U.S. wealth inequality, which itself is based on tax data. In this chart, I've taken each group's inflation-adjusted net worth from 1945 and indexed that to 100, so we can compare how wealth has grown for people with lots or little of it. The answer, as you can see, is that the bottom 90 percent actually did very well during the first few decades of the postwar period -- adding more wealth, in percentage terms, than those at the top.

But these days of shared prosperity have come to an end, gradually and then suddenly. It started in the 1980s when the top 1 percent awoke from their long postwar slumber, thanks to the combination of lower taxes, financial deregulation, and new technology. It wasn't a total disaster for the bottom 90 percent. Even as most Americans saved much less, accumulating far less wealth, stock markets and housing prices continued to rise. Until they didn't, coming crash down in 2007 and 2008.

The problem was that middle class doesn't own that much in stocks, but went into debt to buy lots of housing. So the housing crash turned their biggest financial asset into an albatross, wiping out their equity but not their debt. And the housing recovery hasn't done much to fix this, since it's struggled to move beyond the "nascent" stage.

Stocks, meanwhile, collapsed during the crisis, but came back soon thereafter. The middle class, in other words, missed out on the big bull market in stocks, but not on the even bigger bear one in housing. That's why the recovery has restored so little of the wealth that the recession destroyed. In fact, the bottom 90 percent have actually kept losing net worth the past few years, in large part, due to rising student loan debt.

It's been a lost 25 years for the bottom 90 percent, but a lost 15 for the next 9 percent, too. That's right: altogether, the bottom 99 percent are worth less today than they were in 1998.

But this isn't a story about the top 1 percent running away from everybody else. It's a story about the top 0.1 — scratch that, the top 0.01 percent — doing so. You can see that in the chart below, again based on data from Saez and Zucman, of each group's share of US wealth. Indeed, since 1980, the top 0.01 percent's piece of the wealth pie has increased by 8.6 percentage points, while the next 0.09 percent's has done so by 5.4. The bottom 99 percent, meanwhile, have seen their wealth share fall an astonishing 18 percentage points.

Here's a bit of historical perspective: the top 1 percent now own over 41 percent of all the wealth in the country. That's the most since 1939. Although it's still well below the all-time high of 51 percent set in 1928.

In other words, this new Gilded Age might get even more Gilded.

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+15 # tswhiskers 2014-10-24 09:21
When and why did the rich become so greedy? Did they really suffer so much thru the 1940's, '50's, '60's and early '70's? They have been trying to steal from the lower and middle classes since the Reagan admin. and when Bush II came into office, their greed agenda became naked for all to see if they only would. Trickle-down didn't work under Reagan and it's not working now; no one makes money under trickle-down economics except yacht builders and others who cater only to the very rich. I fear that until the Dems regain their gumption in a big way, the Reps. will continue to fight successfully Dem policies and hinder Dem. presidents. The Dems. have so many Rep. mistakes and stupid policies to throw at them, e.g., why does no one mention the scandal of the U.S. Post Office? If you don't know what I'm talking about, PLEASE look it up. Reps. have been trying to destroy the U.S. postal service for several years so it can be privatized. DISASTER! Can you imagine mailing a letter via Fed Ex or UPS for 50 cents? Hardly! The Dems are swimming in Rep. stupidity and the DON'T use it. PLEASE EVERYONE, VOTE!
 
 
-21 # Roland 2014-10-24 11:02
As the author said the housing crises (exacerbated by democratic policies, including blocking reform of Freddie and Fannie) and the slow recovery (made worse by democratic policies) along with the Feds actions are creating more inequality. The part in the ()s was added by me and not mentioned in the article. But, it should have been.


Since you brought up the post office. It lost around 2 billion in the 2nd quarter of this year. In fiscal 2012 it lost 15.9 Billion and around 47 billion over the last ten years. A private company would not put these losses on to the backs of the American tax payer. Govt. can’t run efficiently. They can’t cut back in lean times or when, in this case the use of mail decreases. As usual there are more pension cost problems with govt. jobs because they weren’t negotiated properly.

Can UPS or Fed Ex or someone else deliver mail for 50 cents? Maybe, not. But the USPS can’t either. The taxpayers are paying the cost minus what the USPS brings in.
 
 
+14 # Dust 2014-10-24 12:12
"A private company would not put these losses on to the backs of the American tax payer."

BWAHAHAHAHA!!!!

That is EXACTLY what they do! Claim loss, pay fewer taxes, define penalties for illegal behavior as tax deductible, move profits offshore but keep expenses local - all of it shifts the tax burden onto the American tax payer.

It seems to me that you imagine corporations lie awake at night (because, of course, they are people) agonizing that they can't pay workers more money, provide decent health insurance and retirement, and so on, because of all of those terrible laws that get in the way of them being the truly beneficent and magnanimous organizations they are.
 
 
+1 # MidwestDick 2014-10-24 23:03
The numbers you are throwing around are laughable BS.
Reminds me of the riddle; How does a mathematician solve the problem of constipation?
He works it out with pencil and paper.
You seems to be deriving your statistics with a comparable technique.
 
 
-13 # MidwesTom 2014-10-24 13:04
Is one a GREEDY person if he bought a 40 acre farm 25 years ago for $1,200 per acre, and today (thanks to the QE's adding Trillions to the money supply) the farm is worth $13.000 per acre? Just because one is rich does not mean he is Greedy.

If a minimum wage worker saved 10% of every dollar they earned and invested it with interest over a period of 30 years that person would be well off. The trick is to live poor.

In my first job out of college I worked in a department where the lowest paid man literally was the ditch digger. Old Stanley lived in a small apartment with his wife (both were from Poland). Back then as an engineer I was making $9,500 per year. One day Stanley asked if he could use the phone, he called his broker and sold $65,000 with of TWA stock. He lectured me that it is not what you earn, it is what you save.
 
 
+8 # reiverpacific 2014-10-24 13:23
Quoting MidwesTom:
Is one a GREEDY person if he bought a 40 acre farm 25 years ago for $1,200 per acre, and today (thanks to the QE's adding Trillions to the money supply) the farm is worth $13.000 per acre? Just because one is rich does not mean he is Greedy.

If a minimum wage worker saved 10% of every dollar they earned and invested it with interest over a period of 30 years that person would be well off. The trick is to live poor.

In my first job out of college I worked in a department where the lowest paid man literally was the ditch digger. Old Stanley lived in a small apartment with his wife (both were from Poland). Back then as an engineer I was making $9,500 per year. One day Stanley asked if he could use the phone, he called his broker and sold $65,000 with of TWA stock. He lectured me that it is not what you earn, it is what you save.


Unfortunately, if you bought the property you mentioned and it's not paid for -and even if it was, you're still at the mercy of the vagaries unique to the USA (as I've found out to my cost) like Medical Bankruptcy, Divorce ditto -remember Dimwits Bush made it harder for the average punter to file for bankruptcy relief- and the corrupt, merciless and incompetent major credit bureaus, in the Post 2007-8 economy your property might be worth somewhere tilted towards what you originally paid for it or if not, as millions of mortgagees have found out, it's most likely to be "Upside-down" -a rotten nest-egg.
 
 
-12 # Roland 2014-10-24 12:30
Dust You have a strange understanding of business losses. Unless they have profits they can not take a loss. What is your problem with offsetting profits with losses? It encourages investment, which you should want, if you want job creation.

They lie awake at night worrying about how their competition is going to eat them alive, how govt. is going to make them less profitable or unprofitable, how easy it is to go after them legally, how they could lose their investments, etc.
 
 
+9 # reiverpacific 2014-10-24 13:27
Quoting Roland:
Dust You have a strange understanding of business losses. Unless they have profits they can not take a loss. What is your problem with offsetting profits with losses? It encourages investment, which you should want, if you want job creation.

They lie awake at night worrying about how their competition is going to eat them alive, how govt. is going to make them less profitable or unprofitable, how easy it is to go after them legally, how they could lose their investments, etc.


ROLLIE Dahlin'!!
Missed you and y'r erudite wisdom from the planet "R" (React-troll 111)!
Please massah -enlighten we of the Foreheads Villanous Low left on how things SHOULD be -and are in that galaxy far-far away that y'all inhabit so happily.
Love and kisses. Y'r fan anxiously awaiting' thy declamations from on high.
 
 
-4 # MidwesTom 2014-10-24 12:51
The mix we now have is toxic for those who do not own assets that appreciate. The QE's have added billions to the money supply, and therefore made assets worth more in dollar terms. The immigration policies of the country have added 5 to 7 million more hard working people to the labor pool. This has happened as the ability to manufacture things that we buy has been filly developed in countries where wages are far less than here.

The QE's have prevented a deeper recession, while making the assets owners mush richer than the workers. The wars have and QE's have drastically increased our debt. Contrary to popular belief, eventually high debt starts to really hurt a country. The velocity of money has been slowing as people try to pay down their debts, this because they are losing faith in the country's leadership, and are fearful of tomorrow.

Washington politicians keep promising more and more to citizens and non-citizens, and fewer and fewer people actually are paying taxes.

Whoever we elect will face a much rougher environment than almost any of their predecessors. The things that they must do will not be popular.
 
 
+6 # reiverpacific 2014-10-24 13:41
I'm repeating myself which I hate to do but when I came here on a visit, then a distinguished scholarship then later to explore the possibilities here and eventually marry my first wife and work, this -at least to me as an unintended "furrin'" resident from a then-stagnating Europe, was indeed the land of opportunity (unless you were in AIM but I got to know about that later), adventure, creativity in all senses, pride in being working-to-midd le class (even the sitcoms reflected this, were well-acted and funny with often a quiet message) and actually producing something, the atmosphere, especially on the west coast, was one of palpable "Can-do" and "let's try this---"!
I saw this begin to erode on Reagan's assumption of the reins and it's been a steadily-accele rating slide ever since, Clinton's budget-balancin g act notwithstanding , as the omnipresent Corporate/Milit ary, ever-consolidat ing monopolist's commodification , rape, extraction and waste of everything from the airwaves to the very ground we walk (or most likely drive) on, the air we breath, the water we drink and the ideas we used to exchange, with their spy-network, lawyers and militarized police firmly and visibly in place to make sure that the wealthy are exalted, "Protected and Served" and the rest of us become less and less visible.
Now we are beginning to get a taste of what the native peoples got when they were innocently hospitable enough to let our forebears in and move west.
 
 
+7 # jimbo 2014-10-24 13:57
midwestom, our betters don't send jobs off shore because of lower wages, the do if for illicit tax breaks put in place by the greedy whores who make our tax laws. And, off shore jobs are not regulated by those things that keep America clean and free of stupidy like yours, which cost money. The results of this destruction of our economy are plain to see, the middle class is about to disappear, while the trillions in wealth of the pos who corrupt our congress is stashed off shore untaxed, the taxes of which have been stolen from We the People. Republicans created the $17 trillion in debt, almost all the debt is from republican administrations running unpaidfor wars, and while President Obama has drastically reduced the deficit, stupid republicans ignore this truth. get a fookin clue.
 
 
-12 # Roland 2014-10-24 14:44
In regards to you illicit tax breaks for companies overseas, you should know that we are one of the few countries that tax overseas corporate profits. And, as you know we have the highest corporate taxes in the developed world. Obama’s new law preventing inversions will probably mean less money coming back to this country for investment. But, he doesn’t care about that. It is good politically to attack these companies since the uninformed will think it is in our best interests.

Obama often said “We had a surplus when Bill Clinton was president. It was projected to continue to be a surplus.” Many people do not understand that he is referring to annual surpluses. Total debt increased while Clinton was in office and was at 5.7T (trillion) when he left. Bush coming into office during a recession increased the debt 4.9T in eight years to 10.6T. Obama has raised the debt 6.9T to 17.5T in under 6 years.
 
 
+1 # MidwestTom 2014-10-25 11:04
Jobs go offshore because the products are made for less there tha they can made here and Americans are not willing to pay 50% more for underware cell phones and shirts.
 
 
+4 # reiverpacific 2014-10-25 11:35
Quoting MidwestTom:
Jobs go offshore because the products are made for less there tha they can made here and Americans are not willing to pay 50% more for underware cell phones and shirts.


It's called "Sweatshop" or "Maquilarora" labor, in case you haven't heard and Americans aren't the only ones who "Not willing" to pay the ridiculous prices required for a pair of Nike shoes (sadly, may kids in the "projects" will rob or sell dope for the coolness of having a pair); how can they when few of their jobs are secure and as the article points out they are poorer now that in the late 80's.
It's REALLY galling when the likes of Michael Jordan and Tiger Woods (both who should know better) receive millions for allowing their names to be used to inflate the prices of a piece of equipment or apparel that cost a few bucks to cut out from a template and put together by, chattel who work for pennies on the hour in bare-binds conditions.
THAT'S why work is sent offshore -pure simple greed, keeping the shareholders fat'n happy and their CEO's obscenely wealthy!
 
 
-2 # MidwestTom 2014-10-25 12:22
River are you saying that you wod turn down five million to put your name on a product?
 

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