The Very Top of the U.S. Income Distribution (Brad DeLong)

[On the Road]

---snip

"Thoma reproduces what are by far the most interesting figures in Piketty and Saez, which show that the pretax income share of the top 1% of the American income distribution jumped from 8% in 1980 to 9% in 1985 to 13% in 1990 to 17% in 2000 to 14% today. Over the same period the income share of the next 4% has risen from 13% to 15%, and the income share of the still next 5% has stayed at 12%. The top tenth of the American income distribution increased its share from 33% in 1980 to 41% today--with three-quarters of that increase going to the top 1% and fully one-quarter of that increase going to the top 0.01%.

What skills and assets do the top 1% of America's pretax income distribution have today that lead the market to grant them 14% of total income, when their counterparts back in 1980 were granted only 8% of total income? What skills and assets do the top 0.01% of the American pretax income distribution--that's 12,000 tax units--that led the market to grant them 100 times average income in 1980, and 300 times average income today?"



http://delong.typepad.com/sdj/2006/01/dist112506.html

Those lines for the top 1-5% and 5-10% show a growing economy and growing affluence. The top 1% line is completely out of whack.

For all those overpaid CEOs, pension funds should consider that there are thousands of successful CEOs in China, India, Singapore, and Korea who would do the same job for a small fraction of what the incumbent makes.

[DaveJ]

1. thanks

My interpretation of this chart, based on the top 1% line, is that we freed ourselves from financial elitists during WWII and lost our freedom to them at the beginning of the Reagan administration. The 50-70's were the greatest times in American history.

[Warpy]

2. One can certainly tell why they all loathed FDR

and why as soon as Kennedy lowered the top marginal rate to 70% and gave them all extra cash, they turned it to establishing stink tanks to develop first neoclassical economics and then a strategy for marketing it to the witless in the guise of "trickle down, a rising tide lifts all boats, when did a poor man ever give you a job? blah blah blah."

The other chart would show a massive increase in the wealth of the working class and a huge growth of the middle class, which became the largest class until the oil shocks of the 1970s jacked up their taxes and killed their purchasing power.

What should be noted in the bottom chart, however, is that only the top 1% "suffered" a flat or slightly declining income. Both the top 5%-1% and top 10%-5% groups showed a gradual rise in income, a demonstration that the modestly rich did indeed still become richer, even when their top tax rate was above 90%.

Money only works when it's moving. Allowing it to stratify at the top with no mechanism to siphon some of it off and recirculate it back at the bottom will slow and then stop the consumer money pump, which is 2/3 of the US economy. They've about managed to kill their own golden goose with their greed. All that's left is the final crash as the whole unsustainable edifice of looting the workers to fatten the rich comes crashing down.

[fasttense]

3. The top 1% income is going back to figures we haven't seen since the 1920s

Let's see what happened after the 1920s? Oh I remember, we had the Great Depression.