There are many Americans who continue to insist that current malaise of the market economy has been caused by too much government regulation, not too little. Left to its own devices, advocates urge, an unfettered economy that is based upon the principles of "free enterprise" as laid down by Adam Smith is the best guarantor of prosperity for everyone. Although this argument has been dismissed by critics as the silly view of the public interest, history shows that it is not possible to defeat a theological proposition with empirical evidence or by an appeal to reason.
As early as October 20, 2002--six years before the economic meltdown of 2008--Princeton economist and Nobel laureate Paul Krugman bemoaned the death of the middle class in America. In an article in the New York Times Sunday Magazine ["The End of Middle-Class America (and the Triumph of the Plutocrats)], October 20, 2002),Krugman observed that, "We are now living in a Gilded Age, as extravagant as the original. Over the past 30 years, most people have seen only modest salary increases: the average annual salary in America, expressed in 1998 dollars rose from $32,552 in 1970 to $35,864 in 1999. That's about a ten percent increase over 29 years....Over the same period, according to Fortune magazine, the average real annual compensation of the top 100 C.E.O.s went from $1.3 million--39 times the pay of the average American--to $37.5 million, more than 1,000 times the pay of the average worker." He further emphasized that, as of that date, the richest families in America possessed almost as much income as the 20 million poorest.
As the wealth of the richest Americans continued to increase, it was not surprising that their share of the corporate wealth of the United States also grew.This disparity between the few who are wealthy and the many who are poor has grown alarmingly in the United States since the advent of the Reagan era and the kind of "trickle-down" economics and de-regulation of the economy to which he and his advisers subscribed.
The net effect of this extraordinary concentration of wealth and power has been that the decisions and predilections of fewer and fewer individuals now determine the outcomes in the American economy while the overwhelming majority of Americans have little ability to influence macro-economic trends or economic and political policies. In 2003 the top 1 percent of households owned 57.7 percent of corporate wealth, up from 53.4 percent the year before.That group's share of corporate wealth had grown by half since 1991, when it was 38.7 percent.
By 2006, as this concentration of wealth accelerated, the richest 1 percent of the American population then enjoyed the highest share of the nation's adjusted gross income as reported during the previous two decades, while the average tax rate of the wealthiest 1 percent fell to its lowest level in at least 18 years. It was also reported that the income of the 400 wealthiest Americans increased in 2006 almost 23 percent from 2005, to an average of $263 million.Further, the top four hundred wealthiest Americans paid slightly more than $18 billion in federal income taxes, or an average of $45 million on a record $105 billion in total income--the lowest effective rate in the 15 years since the IRS began to release such information.
Recently, Robert H. Frank, Cornell University economist reported in a New York Times column ["Income Inequality:Too Big to Ignore," October 16, 2010] that during the decades after World War II, incomes in the United States rose rapidly and at about the same rate - approximately 3 percent a year - for employees at all income levels. As a consequence, America had an economically dynamic middle class;its roads and bridges were well maintained; and Americans as a whole were optimistic as investments in infrastructure and public goods increased. In that era of relative economic equality, Frank noted, that public support for infrastructure - paid for by taxes - enjoyed wide support.
By contrast, Frank notes that, during the past three decades, as the economy has grown much more slowly, America's infrastructure has fallen into grave disrepair. Simultaneously, all significant income growth has been concentrated at the top of the scale with the largest share of total income going to that top 1 percent of earners.
The effect of this trend has been to sour the attitudes of the middle class toward public investments. As the middle class has been confronted with the specter of stagnant wages, its members have continued to finance their life style through increasing indebtedness. Hence, their reduced circumstances, in turn, have made them easy targets for right-wing ideologues and their corporate sponsors who have persuaded many citizens that the cause of their predicament is a result of the taxes that they pay, not an excess of private greed. The mantra of "no new taxes"' has thus led to the increasing impoverishment of the public sector as witnessed by the collapse of infrastructure and the increasing attacks upon the benefits public employees have been able to enjoy because of their unionization and collective-bargaining.
In his best-selling book,The Affluent Society, which was published in 1956, Economist John Kenneth Galbraith worried that the United States had become a nation that tolerated the existence of "private affluence and public squalor." Little could Galbraith imagine that by 2011 the gap between private affluence and public squalor would grow so large that the United States would come to resemble the Victorian England that Charles Dickens chronicled and satirized rather than the Great Society envisioned by Lyndon Johnson.
As early as October 20, 2002--six years before the economic meltdown of 2008--Princeton economist and Nobel laureate Paul Krugman bemoaned the death of the middle class in America. In an article in the New York Times Sunday Magazine ["The End of Middle-Class America (and the Triumph of the Plutocrats)], October 20, 2002),Krugman observed that, "We are now living in a Gilded Age, as extravagant as the original. Over the past 30 years, most people have seen only modest salary increases: the average annual salary in America, expressed in 1998 dollars rose from $32,552 in 1970 to $35,864 in 1999. That's about a ten percent increase over 29 years....Over the same period, according to Fortune magazine, the average real annual compensation of the top 100 C.E.O.s went from $1.3 million--39 times the pay of the average American--to $37.5 million, more than 1,000 times the pay of the average worker." He further emphasized that, as of that date, the richest families in America possessed almost as much income as the 20 million poorest.
As the wealth of the richest Americans continued to increase, it was not surprising that their share of the corporate wealth of the United States also grew.This disparity between the few who are wealthy and the many who are poor has grown alarmingly in the United States since the advent of the Reagan era and the kind of "trickle-down" economics and de-regulation of the economy to which he and his advisers subscribed.
The net effect of this extraordinary concentration of wealth and power has been that the decisions and predilections of fewer and fewer individuals now determine the outcomes in the American economy while the overwhelming majority of Americans have little ability to influence macro-economic trends or economic and political policies. In 2003 the top 1 percent of households owned 57.7 percent of corporate wealth, up from 53.4 percent the year before.That group's share of corporate wealth had grown by half since 1991, when it was 38.7 percent.
By 2006, as this concentration of wealth accelerated, the richest 1 percent of the American population then enjoyed the highest share of the nation's adjusted gross income as reported during the previous two decades, while the average tax rate of the wealthiest 1 percent fell to its lowest level in at least 18 years. It was also reported that the income of the 400 wealthiest Americans increased in 2006 almost 23 percent from 2005, to an average of $263 million.Further, the top four hundred wealthiest Americans paid slightly more than $18 billion in federal income taxes, or an average of $45 million on a record $105 billion in total income--the lowest effective rate in the 15 years since the IRS began to release such information.
Recently, Robert H. Frank, Cornell University economist reported in a New York Times column ["Income Inequality:Too Big to Ignore," October 16, 2010] that during the decades after World War II, incomes in the United States rose rapidly and at about the same rate - approximately 3 percent a year - for employees at all income levels. As a consequence, America had an economically dynamic middle class;its roads and bridges were well maintained; and Americans as a whole were optimistic as investments in infrastructure and public goods increased. In that era of relative economic equality, Frank noted, that public support for infrastructure - paid for by taxes - enjoyed wide support.
By contrast, Frank notes that, during the past three decades, as the economy has grown much more slowly, America's infrastructure has fallen into grave disrepair. Simultaneously, all significant income growth has been concentrated at the top of the scale with the largest share of total income going to that top 1 percent of earners.
The effect of this trend has been to sour the attitudes of the middle class toward public investments. As the middle class has been confronted with the specter of stagnant wages, its members have continued to finance their life style through increasing indebtedness. Hence, their reduced circumstances, in turn, have made them easy targets for right-wing ideologues and their corporate sponsors who have persuaded many citizens that the cause of their predicament is a result of the taxes that they pay, not an excess of private greed. The mantra of "no new taxes"' has thus led to the increasing impoverishment of the public sector as witnessed by the collapse of infrastructure and the increasing attacks upon the benefits public employees have been able to enjoy because of their unionization and collective-bargaining.
In his best-selling book,The Affluent Society, which was published in 1956, Economist John Kenneth Galbraith worried that the United States had become a nation that tolerated the existence of "private affluence and public squalor." Little could Galbraith imagine that by 2011 the gap between private affluence and public squalor would grow so large that the United States would come to resemble the Victorian England that Charles Dickens chronicled and satirized rather than the Great Society envisioned by Lyndon Johnson.