It was almost 30 years ago that the American economy was said to have been operating in a manner that was beneficial for everybody -as even those who were identified as the middle class were perceivably getting richer. But now, there’s a new actuality: 90% of US households are poorer than they were in 1987, according to both a new study and the head of the Federal Reserve.
In fact, this reality is much more dramatic than it sounds. Today, many consider that Reaganomics is becoming a disproved and discredited lie, and that the American economy is ravaged by the crippling consequences it inherently features.
Matt O’Brien reported about a new study in the Washington Post, making reference to a new National Bureau of Economic Research (NBER) paper on US wealth inequality. The paper was made by Emmanuel Saez and Gabriel Zucman.
The paper is built on tax information. Matt O’Brien wrote:
“The new, harsh reality is that the bottoms 90 percent of households are poorer today than they were in 1987. 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.”
The chart below, shows that since 1980, the top 0.01%’s piece of the wealth pie has increased by 8.6 percentage points, while the next 0.09%’s has done so by 5.4.
Janet Yellen, the Federal Reserve Board Chairwoman was able to get more through the reviewing of the statistics at the Federal Reserve Bank of Boston Economic Conference on Inequality of Economic Opportunity. She remarked:
“The wealthiest five percent of American households held 54 percent of all wealth reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent in 2013,” she said. “By contrast, the rest of those in the top half of the wealth distribution ‒ families that in 2013 had a net worth between $81,000 and $1.9 million ‒ held 43 percent of wealth in 1989 and only 36 percent in 2013.
The extent and continuing increase in inequality in the United States greatly concern me. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.”
According to Matt O’Brien’s report, the “recovery” from the Great Recession of 2008 hasn’t fully benefited the majority of Americans, at least not the way it has for the wealthiest 10 percent. During the crisis, stocks collapsed. Those who are in the middle class were in debt from buying houses, not stocks, when the markets for both crashed.
“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.”
Education debt was also a part of the problem as Janet Yellen wrote. She said:
“Rising college costs, the greater numbers of students pursuing higher education, and the recent trends in income and wealth have led to a dramatic increase in student loan debt. Outstanding student loan debt quadrupled from $260 billion in 2004 to $1.1 trillion this year,” she noted. “The relative burden of education debt has long been higher for families with lower net worth and that this disparity has grown much wider in the past couple decades.”
In the US, the top one percent now own over 41 percent of all the wealth in the country, O’Brien also mentioned that that percentage is the most since 1939. He wrote:
“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.”
In an article titled “We’re Being Mislead About Wealth Inequality; No One Knows If It Is Rising Or Falling,” Tim Worstall argued many ideas about “wealth inequality.” He said:
“What we do know about is what is happening to the inequality of marketable, financial wealth: That is rising. But, that is a subset of all wealth and depending upon how you want to think about it that’s not an important part of that total wealth either.”
The United States was listed in seventh place when it comes to wealth inequality around the world, according to a report made by Credit Suisse, with 74.6 percent of its wealth held by the top 10 percent. Russia was the most unequal country, with the 84.8 percent of its national wealth held by its top 10 percent.
(2) National Bureau of Economic Research (NBER)
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