45 Years of Progress?

The following is from an analysis by David Cay Johnston entitled "Is Our Tax System Helping Us Create Wealth?":

...by looking at the bottom 90 percent of taxpayers in 1961 and 2006, we can compare the very top with the rest of taxpayers.

The vast majority of Americans saw their incomes rise only modestly in those 45 years. Measured in 2006 dollars, the average income of the bottom 90 percent grew from $22,366 in 1961 to $31,642 in 2006. That is a real increase of $9,276 in average income. But it was also after 45 years, longer than the careers of most workers. ...

...

That tiny increase in pay does not represent a real increase in wages, only total income. That is because in the middle of that 45-year era, a profound transformation took place in America. In 1961 most families lived on one income, maybe supplemented by some part-time work by the wife... Now two-income households are the norm.

...

And at the top? Now, that’s a different story. The average income for the top 400 taxpayers rose over the 45 years from $13.7 million to $263.3 million. That is 19.3 times more.

The income tax bill went up too, but only 7.8 times as much because tax rates plunged. Income tax rates at the top fell 60 percent, three times the percentage rate drop for the vast majority. ...

So, while the bottom 90% treaded water by going from single-breadwinner households to two or more breadwinners and got rewarded with a 50% increase in real income, the rich zoomed past with a 19-fold increase in real income. And all the while, the media was spewing Republican propaganda about "trickle down" economics and how taxes were onerous and how if you simply let the rich keep more then the economy would explode and everybody would be in pig heaven.

Well... the pigs may be happy from the trickle down effect off the tables of the rich, the human population didn't get any satisfaction. The political process was highjacked by the rich to feather their nests while whispering sweet nothings into the ears of ordinary Americans to get them to sleep with dreams of a better tomorrow. But the Republicans delivered nothing. In fact, in 2008 they blew up the US economy (and pretty much the rest of the world).

Here's how David Cay Johnston ends his analysis:

Under the overwhelmingly dominant economic theory of today, this is all good. Pareto argued that if no one was harmed, then all gain was good. Carried to an extreme, neoclassical economics would say that if the bottom 99.9999997 percent had the same income in 1961 and 2006, and all of the gain went to the one other person in America, that would be a good. ...

Is our tax system helping us create wealth and build a stable society? Or is it breeding deep problems by redistributing benefits to the top while maintaining burdens for the rest of Americans?

Think about that in terms of this stunning fact teased from the latest Federal Reserve data by Barry Bosworth and Rosanna Smart for the Brookings Institution: The average net worth of middle-income families with children whose head is age 50 or younger, is smaller today than it was in 1983.