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The Realonomy versus the Wealthy 1%

Research & Commentary
December 29, 2011

by Salvatore Babones

According to the federal Bureau of Economic Analysis, the economy is growing again.  In fact, it’s been growing since July 2009.  The economy grew in the second half of 2009, all of 2010, and all of 2011.  That makes for two and a half years now.

And for the wealthy 1%, it has been growing.  Corporate profits are up, top incomes are up, and luxury sales are up.  CEO salaries are up 27% or more, depending who you ask and how you count.  America’s Plutonomy is on the march.

Or you might say “on the make.”

Down in the Realonomy things don’t look so rosy.  Employment is flat.  Incomes are flat.  Even holiday sales — adjusted for inflation — are flat.  You know something is wrong when Americans don’t spend for the holidays.

[pullquote]Down in the Realonomy things don’t look so rosy.[/pullquote]

The sad reality is that the Realonomy has been in recession for a dozen years or more.  The minimum wage (adjusted for inflation) has been falling for decades.  Median wages have been stagnant since the mid-1970s.  Many unions are gone, and with them paid sick days, pensions, and health insurance.

Income growth in the 1980s and 1990s was limited to the top third of American workers: the college-educated professionals.  Generations of American high schoolers were told that education was the only route to a good job.  Go to college and everything will be alright.

Student load debt mushroomed, but what about those jobs?  Since the late 1990s salaries for college-educated people have been in decline.  By some measures they’ve declined more than 10%.

Even the well-off have seen their incomes stagnate.  Since 1999 even families at the 95th percentile of the US income distribution have seen no improvement in living standards.  Despite the recession, the economy as a whole has grown 12% since 1999.  Well-off families earning up to $200,000 a year have shown no increase in income.

Where has all the growth of the last ten, twenty, forty years gone?

It’s gone to the rich, super-rich, and ultra-rich.  The wealthy 1%, 0.1%, and 0.01% of the US income distribution have seen massive gains since 1973 — but especially since 1999.  They’re not pulling away.  They’ve pulled away.

[pullquote]Where has all the growth of the last ten, twenty, forty years gone? It’s gone to the rich, super-rich, and ultra-rich.[/pullquote]

The show is over.  The horse has bolted.  The train has left the station.  The flight has reached cruising altitude and you can remove your safety belts and move around the cabin.  The wealthy 1% own the country.

What can the other 99% do about it?  It’s not enough simply to stem the tide.  We need a massive reversal.  If we want to restore sanity to the American economy, we need a century of things moving the other direction.

It’s not enough to limit CEO pay increases to a reasonable level.  CEO pay has to come down — way down.  It’s not enough to index the minimum wage for inflation.  The minimum wage has to go up — way up.  Things have to change, and in a big way.

It’s not just that we’ve lost forty years of progress.  We’ve spend forty years going the wrong direction.  It’ll take us forty more years just to get back to where we were.  It’ll take us a century or more to catch up to where we should have been.

America is a rich county.  America can afford $20 minimum wages, a thirty-hour work week, and free education and healthcare for all.  By now we should have these things.  In the early 1970s we were on the road toward them, but we let the ultra-wealthy seize the national agenda.

Why an oil embargo and hostage-taking should have made America turn to the ultra-wealthy for answers, I don’t know.  America’s biggest problem in 1980 was not high taxes on the wealthy.  But we’re here now.  Let’s not stay here.  It’s time we turned the tide.

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