photo courtesy of Google
The Rise and Consequences of Inequality:
Alan Krueger, Presidential Economist, Addresses CAP
The Center for American Progress (CAP) today welcomed Alan Krueger, chairman of the President's Council of Economic Advisers and former Assistant Secretary for Economic Policy and Chief Economist of the U.S. Department of Treasury.
Welcoming him was the new president of CAP, Neera Tanden, who let us know that the middle class as the most important ingredient in the economy is a distinctly American phenomenon. currently under attack by the trickle-down economic policy Reagan bequeathed us (but how many times did he raise taxes?). Fully 40 percent of the national income now accrues to the upper class.
That means, in our case, that only one-third of the children of this generation have a shot at the American dream, continued Tanden. It must be for everyone, though. They must have the same opportunities that we did. The middle class, which contributed so much to the success of the American economy, is no longer benefiting from it.
Alan Krueger wrestles with these issues every day, she said, yielding the podium to him.
Krueger said that his specialty was labor economics, appropriate in this day and age for the dialogue on growth and his attempts to understand inequality relative to the job market. Reaganomics over the last three decades has contributed to the decline of the economy, he said.
Using nine Powerpoint graphs to illustrate his talking points, Krueger told us that 1) the growth rate of income distribution steadily increased between World War II and the 1970s; after that it shrank and the economic classes grew apart;
2) An exception to the Reaganomic trend halted its effect during the Clinton administration; the economic classes grew together again; Bush 41's tax increase benefited the decade;
3) In the first decade of the new millennium the median income dropped;
4) As to after-tax income adjusted for inflation, the top one percent's grew 278 percent between 1979 and 2007; that of the middle class grew by 40 percent;
5) The top one percent's growth was equal to that of their peers in the 1920s--in today's terms the amount translates to $1.1 trillion, more than the income of the bottom 40 percent of the population;
6) The percentage of people whose incomes fall at the median point is shrinking, a phenomenon called "polarization." There are fewer in the middle, called "kurtosis," and more on either end.
As inequality has increased, economic mobility has decreased--that is, it has been stable as a whole because women entered the labor market and their incomes have increased since the seventies, while men's haven't. Parents' income is a good predictor of their children's, relevant, surprisingly, to the height of the father. I hope I have this right. The chance for the child's income to rise is equal to the probability of a short father engendering a tall son. If the parents' income is above average, the chance of the children's to reach that level is 20 percent
Countries with lower income equality experience less growth.
7) Since the 1980s there has been a sharp rise in inequality; we expect this inequality to increase but won't know until our children grow old enough to be measured in this regard.
8) Since the 1980s again, income mobility has risen about 25 percent as a result of the inequality of the preceding thirty years; the fortunes of the parents predict those of their children; inequality will increase in the future unless the middle and lower classes gain access to success; the disparity of wages is key, but this is a focal point of disagreement.