The upper 1% incomes are blamed for our economic troubles, but the upper 0.01% are probably the ones at fault
This was to be an update to the previous post, Overstated Gains. But a new report on The American Prospect’s Balance Sheet brought the issue to the top again. During these last 3 decades, who is the Grinch that has taken Christmas joy (opportunity and jobs) from most of American families?
Many, including the Balance Sheet report, indicate “top 1%.” We call these the elite American earners. How many are in this category? There are 119 M households reporting incomes to the Census Bureau, and 1% of these form a population of 11.9 M families (11,900,000). The elites are a group of this size who take in $1.5M or more each year. “Millionaires” when I was a kid. This is only 30 times the median income, sort of high, but would you call this excessive?
The Balance Sheet quotes JP Morgan Chase CEO Jamie Dimon, and John A. Allison IV, former CEO of BB&T Corp, who have founded a poor-rich-guy’s defense council, the Job Creators Alliance. This group will come out tootling horns for the job creating best of the brightest; the perfect blast of Randian Objectivist triumph. Bernie Marcus discussed the objectors to the upper-ups – “Who gives a crap about some imbecile?” in reference to comments from Occupy leaders. Alliance co-founder Tom Golisano said that if he heard one more politician bad-mouthing the top rich “I’m going to vomit.” The gentlemen appear not so much as Ayn Rand’s John Galt, but as her sociopathic Howard Roark (read end of Gains)
The co-founders of the new Job Creators Alliance are not just elite millionaires, they are billionaires, people who belong to the top 0.01% of the population; our ultras. Refer to our Zero Sum Game: Emmanual Saez’ group reported that income for an ultra household started at $11 M in 2008 with mean income at $17M. The Balance Sheet says Mr Dimon, for example, makes $23M every year. It is not just the income that makes them ultra, their billion dollar net worth counts, too.
Who Has The Dominant Wealth?
In Overstated Gains, we examined whether all the elites benefited equally. The graph (right) summarizes the development done there. Each earning class (20%, 10%, 5% etc) has a large share of the total US income. Each is summed from its starting income ($100k for the top 20%) right up to the final highest reported income. But the next higher class actually accounts for 1/2 to 2/3 of the original’s reported income.
The 20% class earns 1/2 of the total US income, and this sounds as though everyone earning $100k and above added equally. Actually, the top 10% (starting at $138k) makes 2/3 of the total in the 20% group. In fact, the mean income for the upper 20% lies deep in the 10% territory. The top-most classes are taking excess money from the pool, but this needs better explanation.
How the Income Portions Were Looted From Lower Groups.
We use “looted” in the basic Ayn Rand sense, of course.
Census Bureau data (Table, right) shows that the gains (of US income share) by upper incomes are straight from the lower 4/5-ths of the working classes. The “baseline” period is from Professor Saez’ data. This was the 30 years just after WW-II when the economy rose on the average and no class took income fraction from any other class. Census records started in 1967 and I averaged the baseline with this interval … but Saez’ data covers the time since 1917. The last 30 years is when our lifeblood was sucked from our veins. More on that in the Discussion
Although much attention has been given to the 11.9M elite households, the real damage in our immediate past (3 decades) and foreseeable future are from the 11,900 ultra households. To repeat prior comments, the full 2011 data set for the elite 1% are not available, but probably 50% of their reported success is actually due to the ultras.
To reinforce the point: here are the growth-in-share data from Zero Sum. This is Saez’ data replotted in a different way.
The elites merely doubled their income share (100% relative gain) but the ultras‘ share went up 5 times (400% gain). This post shows that the majority of elite gain in total share probably are due to the ultras.
1980-today has been a key period, from my personal technology-based perspective. We backed away from private R&D, shut down much of our research capabilities, closed manufacturing capabilities and made ourselves extremely vulnerable to external attack. Technology developers are the canaries in the economic mine shaft. In the decade prior to 1980, we terminated the Saturn line of heavy lift rockets, the likes of which have not been duplicated. In the 1990’s, for example, Sylvania eliminated their engineers who knew display phosphors better than anyone, anywhere. I had a long chat with a Phillips engineer who had just been laid off. Osram Sylvania still makes lights etc, but not here within our borders; ditto Phillips. Try finding high quality American steel. (ref: Pittsburgh in the 1980’s). These 3 decades account for the main period of decline from our pre-WWII industrial power. In these posts, I have barely commented on our withdrawal from fusion energy research, the field I am most bound to.
In future posts I plan to discuss the institutions that were set up during the baseline years to accomplish this income looting and power accumulation into so few hands.
Charles J. Armentrout, Ann Arbor
2011 Dec 20
Listed under Economics ..thread Economics > inequality
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