Read the Quantum Leap

G This prologue is better than a Ouija board. It is an eye-opening map showingde the past, present and likely future health and wealth position of everyday American households. Seeing these charts helps us to more clearly recognize what is needed by way of specific coordinated actions to succeed in addressing everyday households’ urgent economic, health and learning needs, as 78% of U.S. workers are living paycheck to paycheck.i 71 G “Everyday American Households Need a Quantum Leap” (Executives: your confidential summary is on pages 39 – 72 • 2019 – Pre-Quantum Leap America p ii, Fig. 1 • 400 Richest Americans Own More Than Do 150 Million Of The Nation's Poorest 400 richest people in the nation — just .00025 percent of the population — own more than the 150 million adults in the bottom 60 percent, according to an analysis by The Washington Post. The share of the nation’s wealth held by the adults in the bottom 60 percent, meanwhile, dropped from 5.7 percent in 1987, to 2.1 percent in 2014, the Post reported, citing the World Inequality Database that’s maintained by Zucman and other economists. “U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties,” Zucman wrote. And as “wealth begets power” the political system is impacted, he noted. Zucman’s study compared net worth — not income — which is the value of everything that a family owns, minus debt. Homes, land, rental properties, stock, bank accounts and any business holdings are all included. Personal possessions, like cars, were not included. iii Median income in the United States fell by more than 12% between 2000 and 2012, according to the Center for Budget and Policy Prioritiesiv but college tuition nationwide has more than doubled since 1980.v 72 G Fig. 2a vi Distribution of Our Household’s Incomes in 2016 – U.S. Census Bureau vii Fig. 2b Wolf Street • “Some observations For the bottom 40% on the income scale of the households (the bottom two lines in the chart above): Household income adjusted for inflation for the lowest quintile has dropped 9.5% since 1999; and for the second lowest quintile, household income dropped 2.4% since 2000. 12% live below the poverty line but in Puerto Rico, 40%. Although 13 percent of the U.S. population is Black, only 2 percent of 73 G U.S. businesses employing more than one person are Black-owned. Hispanics are 17 percent of the population but own just 6 percent of these businesses. Households in the third lowest quintile (40% to 60% on the income scale, purple line) have now finally squeaked past their prior income peak in 2000, but by less than 0.5%. Households in the fourth quintile (60% to 80% on the income scale, green line) have done reasonably well, gaining $33,000 in annual household income (53%) over the past 50 years, and $4,000 since their prior income peak in 2000. The top 20% of households (dark blue line) have gained $101,000 in annual household income (91%) since 1967 and are up $15,000 from their prior peak in 2000. This group includes the top 5%, “where the music plays”. Their prior income peak was in 2001 at $353,000. In 2016, they booked $375,000. These households now make nearly $200K more on an inflation adjusted basis than they did in 1967, a 112% jump. Wealth is managed in havens. viii Also note how household income in this top 5% category fell sharply during the Financial Crisis, and how the Fed's monetary policies, designed to create what Bernanke called the "Wealth Effect," effectively created wealth and income for them, benefiting the most those households with the most assets. Hence, incomes from their investments began to surge in 2010. For them, the Fed, personified by Bernanke, was the guardian angel — while the middle class was getting further hollowed out, with the bottom 60% getting shafted. Thankfully, the Census Bureau did not provide data on the top 1% or the top 0.1%. It would have made that chart look absurd. ix And on second thought, for an economy based on consumer spending, strangling the incomes of 80% of those very consumers on whom the economy relies for growth, while bailing out and enriching a tiny group at the top, doesn't quite appear to be an effective economic model over the longer term. Buried in the annual income data from the Census Bureau are some facts that the media silenced to death. Men, sit down. Read… The Terrible Facts about Real Earnings of Men Read the original article on Wolf Street. Copyright 2018. Follow Wolf Street on Twitter.” Many charts about inequality, like the Piketty/Saez one showing growth in the top 0.1 percent’s share of income, use data from IRS tax returns. That’s great in some ways (you get more data than if you just take a survey, and tax records are more accurate than people’s self-reported incomes), but it necessarily leaves out nontaxable benefits that people get from their employers, like health insurance or pension contributions. A tax return can also come from a single person, a couple with no kids, or a couple with many kids. Because of declining fertility, the number of people in each “tax unit” has declined over the years, meaning more income growth per person than tax data on its own implies. x When you put those factors together, the conservatives’ contention is things aren’t all that bad — the standard of living of middle-class families has grown quite a bit from the 1970s to the present. Now, Americans (USA) throw away nearly one million tons of clothes every week. 74 G Most liberals and leftists concerned with inequality have argued with this not by disputing the underlying numbers but by pointing out that it’s a rather odd conservative defense of the way the economy works. “So the argument (of the right) has to be: cash market income of the bottom 99 percent of adults has stagnated but the bottom 99 percent get much more expensive private and government provided health care benefits, some more government transfers, and they have fewer kids,” Saez, who pioneered the use of tax data to study inequality, told the New York Times’s Thomas Edsall in 2012. “This does not seem like a great situation, especially from a conservative point of view.” But the new research by Saez, Piketty, and Zucman suggests that might have been conceding too much. They attempt to track down where all the income in the United States from 1913 to the present has gone: how much has gone to the bottom 20 percent, how much to the top 1 percent, how much to everyone in between. With the results, called “distributional national accounts,” researchers can see exactly where economic growth is going, and how much each group is seeing its income rise relative to the overall economy. Crucially, the way that Saez, Piketty, and Zucman calculated the numbers answers basically all of the conservative critiques. They use tax data on incomes as their base, but then fold in the cost of employer-provided health care, pensions, and other benefits, as measured by survey data. They also add in the effect of all taxes and government transfer programs like food stamps or Medicaid. They measure changes in income among adults, rather than households or tax units, meaning changes in family size don’t matter. And they use the slower-growing inflation metric, rather than CPI. And what do they find? This: Piketty/Saez/Zucman 2017 75 G The chart above shows how much the incomes of each group grew, on average, every year from 1980 to 2014. The two lines show both pre- and post-tax incomes. The implication is clear. People at or below the median income saw their incomes rise by 1 percent or less every year during that period. That isn’t nothing, but it’s hardly great. At the very bottom, some people have seen incomes fall pre-tax; while most poor households get government assistance to help with that, programs like food stamps or the earned income tax credit fail to reach about 20 to 25 percent of the people they’re meant to help. But the rich? Boy, the rich made out like bandits. The top 1 percent, but really the top 0.1, top 0.01, and even top 0.001 percent (that last group included only 2,344 adults in 2014) saw really fast, dramatic growth in their incomes after 1980. Contrary to some recent commentary, the large increase in inequality isn’t due to the top 20 percent; affluent, educated professionals wth low-six-figure salaries and nice homes in good suburbs aren’t driving this. Their incomes are growing about 1.5 percent a year — not bad, but not that much better than the middle class either. The major spike is in the top 1 percent (adults receiving an average of $1.31 million per year each out of national income) and above, where annual income grew by 3, 4, 5, even 6 percent. [The offshore trust ½ of the top 1%’s earning assets aren’t counted.] This doesn’t appear to have been the way the economy worked from, say, 1946 to 1980. On the request of the New York Times’s David Leonhardt (who Naderhas a knack for smart suggestions for research from empirically minded economists), Piketty, Saez, and Zucman reproduced the same graph for every 34-year period from 1946 to the present.

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