Occupy Wall Street is not known for the precision of its economic analysis, but new research on income distribution in the United States shows that the group’s sloganeering provides a stunningly accurate picture of the economy. In 2010, according to a study published this month by University of California economist Emmanuel Saez, 93 percent of income growth went to the wealthiest 1 percent of American households, while everyone else divvied up the 7 percent that was left over. Put another way: The most fundamental characteristic of the U.S. economy today is the divide between the 1 percent and the 99 percent.
It was not ever thus. In the recovery that followed the downturn of the early 1990s, the wealthiest 1 percent captured 45 percent of the nation’s income growth. In the recovery that followed the dot-com bust 10 years ago, Saez noted, 65 percent of the income growth went to the top 1 percent. This time around, it’s reached 93 percent — a level so high it shakes the foundations of the entire American project.
...Average real incomes of the bottom 99% grew only by 6.4% from 1993 to 2010 (implying an annual growth rate of .37%)...While the bottom 99 percent of incomes grew at a solid pace of 20.3% from 1993 to 2000, these incomes grew only 6.8% percent from 2002 to 2007...bottom 99 percent incomes fell by 11.6% from 2007 to 2009 while they fell only by 6.5 percent from 2000 to 2002.
While never putting a premium on economic equality, America has always prided itself on being the preeminent land of economic opportunity. If all of this nation’s wealth is captured by a narrow stratum of the very rich, however, that claim is relegated to history’s dustbin. Research by Julia Isaacs of the Brookings Institution, as part of the Economic Mobility Project, has shown that intergenerational mobility in the United States has fallen far below the levels in Germany, Finland, Denmark and other more social democratic nations of Northern Europe. Now, Saez’s analysis of income data provides further evidence that mocks America’s self-image as a land where hard work yields rewards.
After failing to prove much of anything, Meyerson then delves into the alleged threat that inequality poses to our democratic system:
The consequences of this concentration of wealth and income extend beyond the purely economic. A middle class enduring prolonged stagnation isn’t likely to fund projects the nation needs to undertake — such as rebuilding our infrastructure or increasing teacher pay — or, ultimately, to retain its faith in the efficacy of democracy. The rise of super PACs, the low rates of taxation on capital gains and hedge fund operators, the ability of the major banks to fend off reform — all testify to the power of a neo-plutocracy beyond democratic control.
Update: Looks like Alan Reynolds already skewered Meyerson for this column, noting his usage of some rather deceptive data regarding income growth of the 99 percent.