Income & Wealth Inequality Will Get Worse

These three charts tell us a lot about what has happened in this country since World War II. Note in the top chart that income grew pretty much equally from the end of that war until about 1980. But then the biggest earners started to leave everyone else behind. The second chart shows why this happened.

Until about 1980, family income rose at about the same rate as productivity did. But then, as productivity kept rising, family income leveled off. Why? The obvious answer is the the rich (the owners and top executives of American companies) stopped sharing the increase in productivity with workers. And as their incomes increased, the worker incomes stagnated (because the rich were hogging all the growth in productivity).

This caused the gap between the rich (the top 1% to 5%) and the rest of America (the bottom 95% to 99%) to grow much wider -- as wide as it had been in 1928 (before the Great Depression). The third chart shows the Gini Coefficient (which is a measure of income/wealth inequality in a country) -- and the higher that coefficient is, the more inequality there is in a country. Note that about 1980 the Gini Coefficient for the United States began to grow above the typical range for developed countries, meaning the inequality of wealth and income began to grow in the U.S. beyond that considered normal (the gap between the rich and the rest of us began to widen abnormally).

The vast inequality of the 1920's was not sustainable, and was perhaps the primary cause of the Great Depression. But the government in the 1930's was smart. They took various actions to bring down that inequality, and because of that this country prospered in the post-war years -- all the way up to the 1980's, when the Republicans tilted the economic playing field to once again favor the rich (through their "trickle-down" economic policies). Now we are back to where we were before the Great Depression.

And these policies have already thrown us into a serious recession (which most Americans are still struggling with). But our current government has taken a different tack (thanks to the obstructionist policies of the Republicans). Instead of instituting policies to close the gap in wealth and income to a reasonable level, they have just bailed out the rich and continued the same policies that created the whole mess (leaving the bottom 95% to struggle for the leftover crumbs).

And now the Congressional Budget Office has issued a new working paper -- and it is bad news for most Americans. That's because it is predicting that the already vast gap in wealth and income will continue to grow even wider -- at least until the year 2034. This is illustrated in the chart below, which shows the Gini Coefficient continuing to rise in the coming years.

This is not good. We are already a more unequal country than any of the developed countries, and some of the third world countries. If our inequality continues to grow for another 20 years, we will be one of the most unequal countries in the world -- worse even than the "banana republics", who are noted for their inequality.

This shouldn't come as any surprise. After all, continuing the failed policies that created the huge inequality could only make things more unequal. We are already losing more of the middle class with each passing year, and unless we take action to change our economic policies, we will be left with a nation of just rich and poor.

The Republicans don't care. This is what they want, since they are the party of the rich. My question is -- how much longer will we let them trash our economy to benefit the rich? How bad is it going to have to get before we wake up and vote them out of power?