Monday, October 31, 2011

Wealth Distribution in the U.S. and the End of the American Dream.

As I was listening to NPR over the week-end, I heard even more disturbing numbers coming from the Congressional Budget Office, which is anything but partisan and proves, once again, the failure of the  trickle-down economic theory.

Between 1979 and 2007, INCOME grew by:
  • 275 % for the top 1% of households,
  • 65 % for the next 19 %
  • Just under 40 % for the next 60 %, and
  • 18 % for the bottom 20 %

The share of income going to higher-income households rose, while the share going to lower-income households fell.The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.

Most of that growth went to the top 1 % of the population.All other groups saw their shares decline by 2 to 3 percentage points.
More concentrated sources of income (such as business income and capital gains) grew faster than less concentrated sources (such as labor income).


Government transfers and federal taxes both help to even out the income distribution. Transfers boost income the most for lower-income households, while taxes claim a larger share of income as people's income rises. In 2007, federal taxes and transfers reduced the dispersion of income by 20 %, but that equalizing effect was larger in 1979.The share of transfer payments to the lowest-income households declined.
The overall average federal tax rate fell.

These numbers show that the American Dream is definitely over. And while the "Occupy Wall Street"  makes plenty of sense, the "Tea-Party" movement against taxation is not just economically wrong, it is a moral outrage, and the Republican ideology of tax-cuts for the rich is not only bad for the Americans, it is also un-American.

As James Fallows commented, "the result has been a more polarized American income distribution than any time in modern American history."

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