Welcome to the New 1920s

Here is a nice graph from a post on income inequality in the Washington's Blog:

Click to Enlarge
The 1950s and 1960s were the "golden age" of the US economy. Everybody got richer. But the last decade -- under Bush -- was a return to the 1920s where the rich were fabulously rich and everybody else got to stand outside and look on at the weath the economy was generating. It was horribly inequitable. And it is again thanks to forty years of right wing political pressure with tax cut after tax cut given to the ultra-rich. All this was done with the promise that these cuts would deliver a booming economy. I don't see the boom. I see a handful of extremely wealthy people holding all the money and I see a very large number of cash-strapped people who would love to be out buying to get the economy going, but they don't have the income and they are terrified of losing what tenuous hold they have in the workforce and economy.

The Washington's Blog includes many useful references. One of my favourites is Joseph Stiglitz:

One big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

Sadly Obama has chosen to do nothing about this problem. But you can't have a healthy economy if the bottom 99% are awash in debt with no hope of getting a better income while the rich continue to get ever more incredible incomes