Rise of the ultra-rich?

From the New York Times via Truthout:

But in the United States today, there’s a new twist to the familiar plot. Income inequality used to be about rich versus poor, but now it’s increasingly a matter of the ultra rich and everyone else. The curious effect of the new divide is an economy that appears to be charging ahead, until you realize that the most of the people in it are being left in the dust. President Bush has yet to acknowledge the true state of affairs, though it’s at the root of his failure to convince Americans that the good times are rolling.

…it goes to say

The new figures show that from 2003 to 2004, the latest year for which there is data, the richest Americans pulled far ahead of everyone else. In the space of that one year, real average income for the top 1 percent of households - those making more than $315,000 in 2004 - grew by nearly 17 percent. For the remaining 99 percent, the average gain was less than 3 percent, and that probably makes things look better than they really are, since other data, most notably from the Census Bureau, indicate that the average is bolstered by large gains among the top 20 percent of households. In all, the top 1 percent of households enjoyed 36 percent of all income gains in 2004, on top of an already stunning 30 percent in 2003.

and even more…A recent study done for the Business Roundtable (pdf), a lobbying group for chief executives, shows that median executive pay at 350 large public companies was $6.8 million in 2005. According to the Wall Street Journal, that’s 179 times the pay of the average American worker. The study is intended to rebut much higher estimates made by other researchers, but it does little to quell the sense that executive pay is out of whack….and continuing on

These disparities seem large, and they are. (Though the latest available data is from 2004, there are virtually no signs that the basic trend has changed since then.) The top 1 percent held a bigger share of total income than at any time since 1929, except for 1999 and 2000 during the tech stock bubble. But what makes today’s disparities particularly brutal is that unlike the last bull market of the late 1990’s - when a proverbial rising tide was lifting all boats - the rich have been the only winners lately. According to an analysis by Goldman Sachs, for most American households - the bottom 60 percent - average income grew by less than 20 percent from 1979 to 2004, with virtually all of those gains occurring from the mid- to late 1990’s. Before and since, real incomes for that group have basically flatlined.

In the past, growing economic productivity meant that the rising tide lifted all boats, though obviously not at the same speed:

The trend toward increasing inequality was interrupted, briefly, in the late 1990’s. Productivity growth rebounded, and for a half decade, all income groups participated in the prosperity. Even then, the richest Americans had the best run, propelled largely by stock market gains. In fact, when the stock market hit its all time high in 2000, post-war income concentration also peaked.

and the moral of the story is:

Neither will growth alone. As the post-World War II history of income inequality illustrates, productivity improvement is only one piece of the prosperity puzzle. The economic health of most American families also depends greatly on what government does. If it merely “gets out of the way,” inequality is bound to persist and - if recent results are any indication of future performance - worsen.

Then there’s what the Republicans do…

The president and the Republican Congress have also done harm to the finances of the poorest Americans - and to the notion of basic fairness - by not increasing the federal minimum wage - it has been $5.15 since 1997 While C.E.O. salaries have been soaring, the take-home pay of waitresses and janitors has been hit hard by inflation.

The article ends with this eloquent quote from Berstein of the Economic Policy Insitute:

“Economics, once an elegant and sensible set of ideas and principles devoted to shaping outcomes for the betterment of society, has been reduced to a restrictive set of ideologically inspired rules devoted to an explanation of why we cannot take the necessary steps to meet the challenges we face.” ote>