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Income Distribution

The Koch Brothers Cue the Music

A slick new ad campaign from America’s most notorious billionaires is tugging at our heartstrings — and distorting the debate over inequality. The good news? We have a new antidote.

Blogging Our Great Divide
June 16, 2016

by Sam Pizzigati

In this year’s first quarter, the Federal Reserve reported last week, the total amount of wealth in the United States nudged over $88 trillion, an all-time record high.

So do you feel wealthier than ever? Probably not. Economic insecurity remains the norm for tens of millions of Americans. In fact, as the Federal Reserve reminded us last month in another report, nearly half of all Americans — 46 percent — don’t have enough cash on hand to cover a $400 emergency expense.

How can so many Americans be having such a rough time when the nation’s overall wealth is soaring? No big mystery there. Wealth is only soaring for some. The United States continues to be an exceptionally unequal society.

Yet huge chunks of the nation’s policy elite and chattering class are still rolling their eyes whenever anyone suggests that maybe we ought to start confronting that inequality, either by getting serious about taxing the rich or changing the economic rules that keep the rich getting richer.

Stop fixating on the really rich, these pols and pundits advise us. Help “grow” the economy instead. Restore “business confidence.” Free our “job creators” from nasty government regulations. Cut taxes to give our innovators more of an “incentive” to innovate.

This chill-out-about-the-rich message now has some powerful new wind behind it. Koch Industries, the money-making engine of the billionaire Koch-brother empire, has just begun a nationwide TV ad campaign that more or less urges us to “end the divide” by giving billionaires everything they want.

The new Koch “end the divide” ads feature swelling music and fetching images of hard-working average Americans of all races and creeds. About the only thing noble missing from these incredibly slick and polished ad spots: the truth.

For that truth, for an explanation of what’s really gone wrong with the American economy, we need to turn to an another new contribution to America’s political discourse, a just-published study from the Washington, D.C.-based Economic Policy Institute.

This new paper by EPI research director John Bivens has, unfortunately, no mega-million ad campaign behind it. But this EPI paper — Progressive redistribution without guilt — does have plenty of eye-opening evidence that directly links concentrating wealth and income at America’s economic summit and the relentless economic squeeze at America’s economic base.

Much of that evidence rests on what Bivens calls “simple arithmetic.” The numbers show clearly, as his paper puts it, that “the gains at the very top of the income distribution in recent decades have come essentially straight out of potential gains at the bottom and middle.”

What sort of numbers? Try these. Between 1947 and 1979, the years that made up America’s most equal modern-day era, the nation’s most affluent 1 percent accounted for 7.8 percent of the nation’s average income growth. The bottom 90 percent accounted for 65.9 percent.

Since 1979, an entirely different story. Over the last three-and-a-half decades, the top 1 percent has grabbed 70.5 percent of all income growth.

And if we look at just the years 1997 through 2014, the figures turn even starker. The top 1 percent in these years accounted for 92.4 percent of all average income growth.

The bottom 90 percent? Since 1997, the real incomes of this vast majority of Americans have fallen by an average 0.3 percent a year.

Average Americans, notes EPI’s Bivens, have been paying what amounts to an “inequality tax.” Rising inequality since 1979 has cost households in the bottom 90 percent roughly a fifth of what their incomes would be today had inequality remained at pre-Ronald Reagan levels.But Bivens doesn’t share these numbers to depress us. He wants to see the silver lining his stark stats suggest.

We owe our current economic reality, Bivens points out, to the redistribution of income up that the United States has experienced over recent decades. We can bring average Americans a substantially better reality simply by undoing that upward redistribution.

And how do we that? Bivens outlines a series of concrete steps, everything from a financial transactions tax on Wall Street speculation to labor law reform that shifts bargaining leverage from CEOs to workers.

“If we want to ensure that the living standards of the vast majority rise in the next decade,” the EPI analyst concludes, “we need to embrace policies explicitly aimed at progressively redistributing income.”

Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970 (Seven Stories Press). Follow him on Twitter @Too_Much_Online.

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