What Has Caused Record Inequality (and Greater Recessions)?


Popular Economics Weekly

Economists Lawrence Mishel and Heidi Shierholz of the labor think tank Economic Policy Institute (EPI) have been asking a question in their latest work that is at the root of our various economic crises, “Why did the richest 1 percent of Americans receive 56 percent of all the income growth between 1989 and 2007, before the recession began (compared with 16 percent going to the bottom 90 percent of households)? Why are corporate profits 22 percent above their pre-recession level while total corporate sector employees’ compensation (reflecting lower employment and meager pay increases) is 3 percent below pre-recession levels?”

The answers have become becoming blindingly obvious in the glare of the Great Recession. A concerted effort by business interests in general, and Republicans in particular, instigated a massive transfer of newly created wealth from wage earners to the owners of capital via various measures, including lowering upper…

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One thought on “What Has Caused Record Inequality (and Greater Recessions)?

  1. This is really less than convincing as a model for several reasons. First, something like 48% of Americans pay zero taxes (other than the “hidden” taxes that impact everyone (gasoline taxes, tobacco taxes, airline taxes, etc.) and the top 5% of income earners pay something like 70 % of all taxes paid. The numbers then really indicate that there is no equity of taxation, but in a reverse sense from the supposed common wisdom of a down-trodden population that does not exist. The mathematics can be interpreted to really show that no wealth transfer has occurred from “poor” to “wealthy” and rather has gone the other way, since the “wealthy” support most of government by the taking of their wealth. Of course, they really only support that part of government towards which taxes flow (60%) since borrowing supports the rest (40%), mostly financed by China. Logic would also suggest that the only real source of investment and finance of job growth, lies with those with the capital to invest. Simply holding wealth really results in the loss of wealth by inflation and taxation, and the only way to increase wealth would be investment.

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