There is another round of bad news for most Americans. A study shows the top 1% of America's rich captured 121% of the income gains for the two years after the 2007-2009 recession was declared over. U.C. Berkeley Economist Emmanuel Saez released his study Striking it Richer: The Evolution of Top Incomes in the United States early this month to much press. It truly is astounding. Gone is America's strong middle class where work was rewarded. Replaced is a growing elitist class, where the ticket to enter is $$366,623 a year. Saez's findings:
From 2009 to 2011, average real income per family grew modestly by 1.7% but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery. From 2009 to 2010, top 1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both from 2009 to 2010 and from 2010 to 2011. In 2012, top 1% income will likely surge, due to booming stock-prices, as well as re-timing of income to avoid the higher 2013 top tax rates. Bottom 99% will likely grow much more modestly than top 1% incomes from 2011 to 2012.
We took the liberty of creating some graphs from Saez's calculations. In the first graph below is the bottom 99% real income growth, the gains in real income by the top 1% and then the average real income growth for selected periods between 1993 tol 2011. We can compare this recession to the Clinton era as well as the recession of 2001. What this graph amplifies is the rich are getting richer while the rest of us are simply getting poorer or going nowhere with income. Saez uses a special research CPI to compute real income, the same series used in labor productivity. Real means adjusted for inflation.
We also see the income disparity was getting worse, even under a Democratic administration. In spite of the rhetoric, Clinton was quite good for the rich.   Obama is looking even better for the top 1%.
The next graph shows the haul the rich got as overall real income changed. The rich did take a hit in both recessions, but this is due to stock market declines and temporary. Most shocking is the last two years most people have seen their real income decline by -0.4% while the top 1% grabbed 121% of the income gains made in 2010 and 2011. In other words, the only ones who recovered from the recession are the rich.
As the Saez paper amplifies, it is like most of America is going backwards in time, straight to the idle wealthy and robber barons of a bygone era. Instead of the idle rich living off of inheritance, we have hedge fund managers and overpaid CEOs becoming America's new elite upper crust class.
During the Great Recession, from 2007 to 2009, average real income per family declined dramatically by 17.4%, the largest two year drop since the Great Depression. Average real income for the top percentile fell even faster (36.3 percent decline), which lead to a decrease in the top percentile income share from 23.5 to 18.1 percent. Average real income for the bottom 99% also fell sharply by 11.6%, also by far the largest two year decline since the Great Depression. This drop of 11.6% more than erases the 6.8% income gain from 2002 to 2007 for the bottom 99%.
Beyond the rich making all of the income recovery post the financial crisis, the study also shows we have returned to 1917 in terms of income share going to the rich. Anyway you slice it, with capital gains made from the stock market or not, all of the economic justice of the past century has been wiped out.
Excluding realized capital gains, the top decile income share in 2011 is equal to 46.5%, the highest ever since 1917 when the series started.
Below is Saez's graph of the top 10% percent as a share of total real income in the United States. There are two lines, one with stock market gains and another without capital gains. As we can see, income inequality has turned back the clock an entire century.
We created the below graph from Saez's data showing the income share as a percentage of total real U.S. income of just the top 1% since 1913. Here too, we see income inequality rising as the top income bracket get more and more of total real annual income in the United States. The rich are are not just getting more than their fair share of the income pie, they are eating it, with barely a crumb left for the rest of us.
Saez lays blame for the increasing income inequality in the United States on the attack on so many New Deal and WWII policies, programs and laws made during the FDR administration. The never ending attack on labor, progressive tax policies, social security, wages and low cost education have taken their toll. We could throw into the mix global labor arbitrage, where corporations have an unlimited pool of workers so they consider Americans disposable. Saez seems to believe we could turn this around through government policy. Considering our Congress right at this moment is guaranteeing to harm the economy through sequestration, it does not look like there is much hope of getting real policies passed to return America to her former glory.
We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it.
We cannot decide. Large corporations and very rich people decided for us and it's not good news for economic justice in the United States.