[Vision2020] The Rich Get Even Richer

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>


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March 25, 2012
The Rich Get Even Richer By STEVEN RATTNER

NEW statistics show an ever-more-startling divergence between the fortunes
of the wealthy and everybody else — and the desperate need to address this
wrenching problem. Even in a country that sometimes seems inured to income
inequality<http://topics.nytimes.com/top/reference/timestopics/subjects/i/income/income_inequality/index.html?inline=nyt-classifier>,
these takeaways are truly stunning.

In 2010, as the nation continued to recover from the
recession<http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier>,
a dizzying 93 percent of the additional income created in the country that
year, compared to 2009 — $288 billion — went to the top 1 percent of
taxpayers, those with at least $352,000 in income. That delivered an
average single-year pay increase of 11.6 percent to each of these
households.

Still more astonishing was the extent to which the super rich got rich
faster than the merely rich. In 2010, 37 percent of these additional
earnings went to just the top 0.01 percent, a teaspoon-size collection of
about 15,000 households with average incomes of $23.8 million. These
fortunate few saw their incomes rise by 21.5 percent.

The bottom 99 percent received a microscopic $80 increase in pay per person
in 2010, after adjusting for inflation. The top 1 percent, whose average
income is $1,019,089, had an 11.6 percent increase in income.

This new data, derived by the French economists Thomas Piketty and Emmanuel
Saez from American tax returns, also suggests that those at the top were
more likely to earn than inherit their riches. That’s not completely
surprising: the rapid growth of new American industries — from technology
to financial services — has increased the need for highly educated and
skilled workers. At the same time, old industries like manufacturing are
employing fewer blue-collar workers.

The result? Pay for college graduates has risen by 15.7 percent over the
past 32 years (after adjustment for inflation) while the income of a worker
without a high school diploma has plummeted by 25.7 percent over the same
period.

Government has also played a role, particularly the George W. Bush tax
cuts, which, among other things, gave the wealthy a 15 percent tax on
capital gains and dividends. That’s the provision that caused Warren E.
Buffett’s secretary to have a higher tax rate than he does.

As a result, the top 1 percent has done progressively better in each
economic recovery of the past two decades. In the Clinton era expansion, 45
percent of the total income gains went to the top 1 percent; in the Bush
recovery, the figure was 65 percent; now it is 93 percent.

Just as the causes of the growing inequality are becoming better known, so
have the contours of solving the problem: better education and training, a
fairer tax system, more aid programs for the disadvantaged to encourage the
social mobility needed for them escape the bottom rung, and so on.

Government, of course, can’t fully address some of the challenges, like
globalization, but it can help.

By the end of the year, deadlines built into several pieces of complex
legislation will force a gridlocked Congress’s hand. Most significantly,
all of the Bush tax
cuts<http://topics.nytimes.com/top/reference/timestopics/subjects/t/taxation/bush_tax_cuts/index.html?inline=nyt-classifier>will
expire. If Congress does not act, tax rates will return to the higher,
pre-2000, Clinton-era levels. In addition, $1.2 trillion of automatic
spending cuts that were set in motion by the failure of the last attempt at
a deficit reduction deal will take effect.

So far, the prospects for progress are at best worrisome, at worst
terrifying. Earlier this week, House Republicans unveiled an unsavory stew
of highly regressive tax cuts, large but unspecified reductions in
discretionary spending (a category that importantly includes education,
infrastructure and research and development), and an evisceration of
programs devoted to lifting those at the bottom, including unemployment
insurance, food stamps, earned income tax credits and many more.

Policies of this sort would exacerbate the very problem of income
inequality that most needs fixing. Next week’s package from House Democrats
will almost certainly be more appealing. And to his credit, President Obama
has spoken eloquently about the need to address this problem. But with
Democrats in the minority in the House and an election looming, passage is
unlikely.

The only way to redress the income imbalance is by implementing policies
that are oriented toward reversing the forces that caused it. That means
letting the Bush tax cuts expire for the wealthy and adding money to some
of the programs that House Republicans seek to cut. Allowing this disparity
to continue is both bad economic policy and bad social policy. We owe those
at the bottom a fairer shot at moving up.

Steven Rattner <http://stevenrattner.com/> is a contributing writer for
Op-Ed and a longtime Wall Street executive.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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