This decade has been the one in which the American mainstream finally realized we have a profound economic inequality problem. It is only now becoming clear just how far we are from turning this around.
Three of the world’s leading economists who study inequality have published new research that they say provides the first truly comprehensive picture of not just how much inequality has surged since the Reagan era, but also how completely our system of taxes and wealth transfers has failed to stop the rise of inequality.
According to the study, about 30% of our national income goes to taxes. Some of those taxes are redistributed in various forms to the poor, spending that obviously affects levels of inequality—but until now, we have not had a clear picture of just how bit that affect is. In short, we can now definitively say that our system of taxes is not up to the task we are facing.
First, the scope of the problem: in the past 40 years, none of our nation’s economic gains have gone to the bottom half of earners. The researchers find that since 1980, the average national income per adult grew by almost zero for the bottom 50 percent; “In contrast, income skyrocketed at the top of the income distribution, rising 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent.”
Another way to look at how unequal we have become: “In 1980, adults in the top 1 percent earned on average 27 times more than bottom 50 percent of adults. Today they earn 81 times more. This ratio of 1 to 81 is similar to the gap between the average income in the United States and the average income in the world’s poorest countries, among them the war-torn Democratic Republic of Congo, Central African Republic, and Burundi.”
Whatever Reagan did, he did not Make America Great.
And what does the picture look like after we factor in taxes and redistribution? By adding in the impact of taxes, the researchers find that the bottom half of earners have seen their incomes grow by 21% since 1980—while average national income for all earners grew by more than 60%. The clear conclusion is that all of that “taxing and spending” you hear so many complaints about has not only failed to improve the relative position of the poor; their position has gotten much, much worse.
Inequality has been getting worse since the 1970s. Inequality is now warping our society and our politics in unpredictable ways. Unfortunately, the tax plan of Donald Trump will make inequality worse, not better. The government, for at least the next four years, is out of the economic equality business.
If you want to do something to fight economic inequality before then, unionize your workplace.