The American Income Pump matters to us

The Income Pump that started in 1981 has had huge impact on American Society, and not good.

Our Page, The American Income Pump, summarizes a strange process that started about 1980 or 1981 and has continued through today. Consider all the income made by American families as forming a great pool (like a swimming pool). After WW-II and before this pump started up, the income depth (fraction of the total pool) at the low earning end was pretty constant and the depth at the highest earning end was also pretty constant, no group grabbed a larger fraction of the income “water” than what they had been enjoying.

Now think of a pump which efficiently takes income from the shallow end of the pool and pumps it to the deepest end, thereby making that end even deeper.   This is what has happened in our “total income pool.”  The pump effectively pulls income from the lower earning families and transfers it to the wealthiest families of our society.  Because there are so many fewer ultra rich families, the effects up there really stand out.

The interval when the pool was pretty calm is called the baseline period and extended from 1945 to about 1980.

We look at some of the effects on society after the pump started up.  The conclusion is that yes, the shift in income to the ultra rich did, in fact, have a huge impact on just about everyone.

click for our discussions on economic inequality

Were there effects after the baseline time?
Those baseline years, 1945–1980, were not any kind of golden age (sorry Newt). There were plenty of failed expectations, lost or damaged hopes, frustrated ambitions, and huge social and financial inequalities. But they were exciting times of change, in both social growth and towering technical achievement. We had reasonable expectations for our future. As one of the cohort who lived during this time, I assert that current times are qualitatively and quantitatively different.

Here are a few observations

  • Then, US government was corruptible but was under continuous scrutiny at all levels. Every community had independent newspapers that people read to discover what their officials were doing.
    Now, few community papers survive to shine information spotlights into dark corners and illuminate creepy local corruption.
  • The income of a worker with median or less earnings (≤ $50,000/yr) has dropped dramatically while our few ultras have net worth of small countries.
  • Then, one person (the standard male) could earn enough to support a family.
    Now, the median household needs two full time earners to make ends meet.
  • Then, most people did not think about attending college, they did not need a degree for a reasonable job.
    Now, student loan debt top $50k-100k, and higher for the better universities. Our uncaring political leadership says that a high school graduate must get a college degree to stay alive. How can someone from a family at median or below
    [A] qualify for a loan, [B] pay back this kind of cruel debt?
    Does the income pump cause people lose control over their lives due to massive debt?
  • Then, we invented and commercialized the transistor, started up Palomar observatory, and made huge strides in astronomic understanding. We systematized aircraft development with x-series of test craft, tested and built rockets that took humans to the moon, and commercialized satellites to the point that we could not do with out the communication and GPS platforms that are up there (GPS development started in the late 1960s). We developed atomic power, and commercialized it (even though we followed the wrong path). About when the Income Pump that changed our reality started, we developed fusion power concepts to the point that we were ready to build true prototype power plant.
    All the technical things we did and were proud of would cover many pages.
    Now we watch the programs started before 1980 die from loss of economic oxygen. The Hubble may be deorbited in less than 5 years, our new-technology telescopes are closing down revolutionary capabilities. The last of our fusion development people are continuously threatened with closure, as are our high energy research labs are threatened.  Easy to justify, now, no money! New spacecraft seem like dreams. Actually, American space presence depends the willingness of foreign nations;  or on the participation by several of our ultras, each one with economic power of small nations, to direct and fund the ventures. Instead of a national program with nationally built rockets and spacecraft, we are now hoping that the privately developed ICBMs, carrier vehicles, and orbiting platforms will be successful and take Americans back to space. (Interesting to note: the Atlas-V started life as an H-bomb delivery system, the Falcon-9 and Heavy would make ‘great’ delivery systems)

So, yes, the pump that is pushing our classes ever farther apart does matter, even at this late date.  We could stop it yet, but with huge effort.


Charles J. Armentrout, Ann Arbor
2012 May 14
Listed under   Economics   …thread   Economics >   Inequality
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About LastTechAge

I am a physicist with years of work in fusion labs, industry labs, and teaching (physics and math). I have watched the tech scene, watched societal trends and am alarmed. My interest is to help us all improve or maintain that which we worked so hard to achieve.
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