Rising inequality: Econ. recovery driven almost entirely by the rich

UPDATE: The comments to this post are interesting. I’ve boosted a graph from this comment by Bill_Perdue and added it, plus some text, to the end of this post. Click here to go right to it. The graph paints a stark picture — not only of the caved-out middle, but the way the wealthy, and those who get the real trickle-down, are feasting on the rest of us.
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I’m going to call this a news item and let you draw the obvious conclusions.

First, the money quote, then the article that contains it. The quote:

In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Even more striking, the current recovery has been driven almost entirely by the upper crust, according to Mr. Fazzari and Mr. Cynamon. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.

More broadly, about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income, according to the study, which was sponsored by the Institute for New Economic Thinking, a research group in New York.

The study mentioned above is fascinating. but reading the report in the New York Times will get you well started. The article is filled with data like this, and thus it’s a must-read in my opinion.

Most consumption now occurs at the top

The section just quoted covered change in consumption. There’s information about consumption itself as well, divided among the various moneyed and de-moneyed classes. Take a look at this chart, especially the three bottom lines:

Share of personal consumption expenditures by income group

Share of personal consumption expenditures by income group

The top 5% of income now accounts for almost 40% of consumption. The top 20% of income now consumes more than 60% of all consumption. Which means that 80% of the nation, by income, accounts for less than 40% of consumption. Again, the trend is widening, as the graphs show.

The “shrinking middle”

The NY Times piece is filled with examples of higher-end products and retailers doing well, along with the very low end (like Dollar Tree). It’s the middle that’s seeing a ton of trouble — dwindling sales, store closings and plummeting stock prices. A taste from the article:

Investors have taken notice of the shrinking middle. Shares of Sears and J. C. Penney have fallen more than 50 percent since the end of 2009, even as upper-end stores like Nordstrom and bargain-basement chains like Dollar Tree and Family Dollar Stores have more than doubled in value over the same period.

The same trend is true for restaurants, where the middle class brands — think Olive Garden and the like — are hurting. At Olive Garden (average bill of about $16 per diner), revenue is falling. At Capital Grille (average bill of about $70 per diner), revenue is up.

Economic growth could be flat at best

Mr. Fazzari, at some point in the article says: “It’s going to be hard to maintain strong economic growth with such a large proportion of the population falling behind.” True on its face.

(Want an added thought? Imagine economic growth when the generation with meager 401k’s and no pension money goes into retirement. They’re waiting in the wing as we speak.)

Update: From the comments, this graph, from the January update of this data at Doug Short’s site (click to enlarge):

household-income-monthly-median-growth-since-2000

Short’s comment on it:

[This] chart is my preferred way to show the nominal and real household income — the percent change over time. Essentially I have taken the monthly series for both the nominal and real household incomes and divided them by their respective values at the beginning of 2000. …

The stunning reality illustrated here is that the real median household income series spent most of the first nine years of the 21st century struggling slightly below its purchasing power at the turn of the century. Real incomes (the blue line) hit an interim peak at a fractional 0.7% in early 2008, far below the nominal illusionary peak (as in money illusion) of 27.2% six months later and now at 27.8%, just fractionally off its new high of 28.7% set in September. In contrast, the real recovery from the trough has been depressingly slight.

Tales of the carved-out middle. Do the rich really need the rest of us? If by “us” you mean middle-class Americans, the answer is likely, “No, not any more.”

GP

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Gaius Publius is a professional writer living on the West Coast of the United States. Click here for more. Follow him on Twitter @Gaius_Publius and Facebook.

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  • jmitterii2 .

    TPP will end the US in some crazy revolt. Sad thing or good thing, the situation most Americans would find themselves in would be worse than in a blood soaked streets and nearly anything put in its place would be better.
    Let’s hope the TPP fails.

  • Bill_Perdue

    That, and Black Agenda Report. http://www.blackagendareport.com/

  • ronbo

    What can we do? Start with an intellectual assault on those who argue that we must OBEY (http://vimeo.com/59002146 ) the RepubOdem party that has engineered this mess FOR the 1%. I’ve gotten more heat and hate from Dembots than anyone else when I say “third-party”.

    The time for being a git-along-to-go-along has long gone passed. But these people argue that if you abandon the Corporatis Dem party you’ll get a Corporatist Repub party. And while I see a slight difference, it’s merely a difference of being stabbed in the back 28 times vs. 29 times.

  • ronbo

    Counterpunch should be on EVERYONE’s daily reading list. Thanks.

  • Bill_Perdue
  • Clevelandchick

    I am continually gobsmacked by the companies who rely on the middle class for their revenue yet spend tens of millions lobbying against living wages, benefits, paying taxes etc…all of the things that allow that same middle class…their market…to buy their products and services. They’re all lobbying themselves out of a job. Stupidity on the grandest scale.

  • ronbo

    The current labor depression baseline (http://data.bls.gov/timeseries/LNS12300000 ), over time and bubble burst, will be knocked down a few points. And like the boiling frog (http://en.wikipedia.org/wiki/Boiling_frog ) Americans will become acclimated and accepting. Media distraction is a powerful tool.

    Today’s social safety net is much, MUCH more cushioning than anything during the French Revolution or the Great Depression. The 1% can extract a lot more blood before the hosts ever die.

  • ronbo

    True to a point. They worked Congress for most of the current prosperity. That’s the only kind of work that pays these days.

  • Bill_Perdue

    “But the left is also becoming even more plutocratic.” Democrats have always been part of the right, they’re right centrists in their program and in the bills they pass and the policies they pursue. That’s not true of all people who vote for them but it is pretty much true for everyone who promotes them.

    The good news is that they’re losing voters to the left. A socialist won election to the Seattle City council, beating out a long term Democrat with over 95,000 votes.

    http://www.labornotes.org/2013/12/howd-seattle-do-it

    http://www.labornotes.org/2013/12/ohioans-elect-two-dozen-city-councilors-independent-labor-ticket

  • Anonymous

    Researchers and scientists are all godless heretics whose studies are irrelevant, therefore we should cut their grants. Until, of course, the CEOs that spend their lives gorging themselves on alcohol and steaks actually need medicine. Let’s just hate anything we don’t understand until we need it. Less people having the funds for college is good too, we don’t need no stinkin’ doctors and intellectuals.

  • Anonymous

    Look at the Forbes billionaires list; a good fraction of billionaires today merely inherited their money. They don’t work for a living and pay less taxes percentagewise. The bulk of profits from any successful company more than a generation old now belongs to the heirs. Everyone is becoming a sycophant for people who do no real work, and it’s preventing economic growth. The rich are sitting on money. It is irksome that people pretend the money “creates jobs” or “goes back to the people.” Saving money + no taxes = out of touch Fauntleroys.

  • Anonymous

    Exactly…people are already calling anyone that complains about work a “Marxist” – it’s hysterical rhetoric from the right. But the left is also becoming even more plutocratic.

  • Anonymous

    If they voters of a certain party abolish workers’ protections, there would be a disaster. They just don’t know it yet, because they’re incredibly naive. Sycophant voters that want something from the rich are asking for disaster. We have seen the lack of compassion from the top time and again. People don’t realize they are just a number to a CEO. These are the people that voted Romney, an obtuse, bullying fatcat with slick business rhetoric.
    America proves that when consumers are so stupid, being rich is meaningless.

  • Anonymous

    Kind of surprised WW2 didn’t repeat itself, considering the hatred of a Pope that supports charity, slandering “leech” minorities, and screaming “people who can’t afford health care deserve to die.” The rich are bailed out of financial disaster and failing health. People like Chris Christie and Cheney are brought back from the dead repeatedly because they have money – money that should go to the people.
    Bottom line, the rich are taking more for themselves and lavishing on frivolous things. The rest of us are left to fight over resources.

  • Ninja0980

    Bottom line, this country is a plutocracy and it will fall in on itself sooner or later.
    What happened in the Great Depression, it’s what will happen here.

  • Ford Prefect

    And we’ve seen similar numbers before. In any case, if nearly half of Americans are only a few missed paydays from disaster, that would magnify the damage done by another downturn or crisis rather a lot. There’s no wiggle room at all for a plurality of Americans, so even a moderate hiccup would take on “let them eat cake” proportions rather quickly. The food banks are already bare, after all.

  • GaiusPublius

    Thanks, Interesting number. I can’t get a handle on the group, but they say their mission is to address poverty.

    GP

  • Ford Prefect

    Don’t worry. They’ll find new ways of extracting blood from turnips. That’s what the Predator State is all about.

  • Ford Prefect

    Seemingly related, GP. I haven’t vetted this, but it looks at the 44% who are living paycheck to paycheck. The org may be Neo-Lib-ish, given the use of language like “economic opportunity” (which is pretty lame, but since we can’t address inequality directly without the usual red baiting…) but that doesn’t mean the data is necessarily bad. YMMV:

    http://cfed.org/blog/inclusiveeconomy/treading_water_in_the_deep_end_cfeds_2014_assets_opportunity_scorecard/

    (via Common Dreams)

  • Indigo

    5% account for 38% of consumption in the US. Is that a cash economy or are they floating on credit? If it’s cash, they might get away with it. If it’s credit . . . hah!

  • Bill_Perdue

    Women march on Versailles, October 1789, Louis the Last is forced to move to Paris

  • Bill_Perdue

    I don’t have a source for the second one but here’s one that’s even better. It’s from http://thinkprogress.org/politics/2011/03/03/147994/unions-income-inequality/

  • pappyvet

    “Our skilled wages are higher than anywhere in the world,” he said. “If we open up a significant window for skilled workers, that would suppress the skilled-wage level and end the concentration of income.”Alan Greenspan
    And the new Dukes and Barons say, “Amen.”

  • cole3244

    the 1% are pushing the 99% to the tipping point then the talk will be over and emotion will make all the decisions, all the money in the world will not protect the 1% from their destiny.

  • GaiusPublius

    These graphs are excellent, as always. If you don’t mind, please post links to the originals if you can. I’m sure many people would like to follow and read more about them. I’m going to boost dshort’s graph into an update for this post. Where did you get the last one? It’s also striking. Nice work, Bill.

    GP

  • hydroursus

    This also fuels debates about healthcare… the selfish class lives in a world of their own. I don’t think healthcare is perfect for the rich, either. We are about to do a social experiment that will most likely cost the human race (if not the earth) dearly.

  • Bill_Perdue

    It’s what working people will do that should alarm the rich.

  • Bill_Perdue

    The stock market bubble, based solely on a frenzy to make money, and not based on real economic growth, which remains flat, is going to burst sooner rather than later, just as it did in 1929 and for the same reasons. More severe economic chaos will follow in it’s wake.

    The central question, then and now, is that the standard of living of working has been looted by the rich, utilizing the Democrat and Republican parties to break unions, export millions of union jobs and create a largely non-union workforce. Wages are so low, and unemployment/underemployment is so high, that working people cannot afford to buy what they produce.

    The criminal history of those two parties in creating the current depression will never be forgotten or forgiven.

    Nixon imposed wage and price controls that benefited corporations and hurt working people.

    Carter deliberately destroyed hundreds of thousands of rail, air, trucking and communications jobs by deregulating those industries with the Staggers Act and the breakup of Ma Bell.

    Reagan busted PATCO and eased the transfer of hundreds of thousands of union heavy industry jobs overseas and continued Carter deregulation frenzy. He help create the Rust Belt.

    Bush 1 continued the policies of Carter Reagan and pushed for the worst job killer act of the century, NAFTA. But he couldn’t get it passed. His replacement could and did.

    Bill Clinton, the worst president since Hoover, elbowed NAFTA through Congress, did the same with the deregulation bills of 1999 (Financial Services Modernization Act of 1999) and 2000 ( Commodity Futures Modernization Act of 2000) Clinton singlehandedly doing more than anyone else to create the current depression and cut the standard of living of working people. Pouring salt on those wounds, Clinton gutted welfare and other social parachutes and hired 200,000 more cops.

    Bush 2 slashed taxes for the rich, busted unions and exported more jobs.

    Obama pushed TARP and other bailouts worth $7.7 trillion dollars. He’s far and away the worst union buster since Carter. He and Congressional Democrats and Republicans are pushing hard for the job killer Trans-Pacific Partnership and has twice insisted on keeping the Bush tax cuts on the rich intact. He and Congress are gunning for Medicare and Social Security. Obama’s medical care ‘reform’ bill is a sham designed to increase the profits of insurance and pharmaceutical companies. It compels patients to give insurance and pharmaceutical companies lots of money for the same terrible coverage.

    From the point of view of working people these attacks on our standard of living are criminal acts. Socialists will put a definitive and robust end to the criminality of the rich and their twin parties, the Democrats and Republicans.

  • Ford Prefect

    I think that’s probably the Number One reason why elites in congress and the WH don’t care about what happens in the country they are allegedly ruling. Almost all their financial gains over the last twenty years have come from the explosion of profits from “globalization.” As such, their fortunes are no longer tied to the nation’s well being. We can thank NAFTA and financial deregulation for that. They care more about keeping wages low (profits!) in China than raising them here.

    TPP and the Atlantic “trade” treaty will only make things unbearably worse.

  • Ford Prefect

    Good catch, GP. No wonder the donor base is enjoying inequality so much.

    Score another win for the Neo-Liberals. So the top 1% gets 95% of all gains during the “recovery,” while the top 5% only posted a spending gain of 17%? That means the rest went to savings and thusly out of economic circulation. I’m curious as to why the ruling elites think building in that kind of deflationary tendency is supposed to be a good thing for anyone long-term.

    Of course, most of those “gains” were the result of the Fed juicing financial assets to the tune of $85 Billion per month, so to call this a “recovery” is rather inaccurate. It’s just another financial bubble. Now they’re tapering, so hot money abroad will now come home in the expectation of higher interest rates, thus throttling those markets (and economies). We’ll see how that goes. I’m expecting turbulence, but to what end?

  • http://heimaey.us/ heimaey

    What will they do when there’s no one left to feast on?

  • TheOriginalLiz

    It must be nice to be rich enough that your well-being isn’t tied to the well-being of your country.

  • http://firefeeder.blogspot.com/ Stratplayer

    So what are we going to do about this? When we have jerks like Kevin O’Leary of “Shark Tank” applauding the fact that 85 people have as much wealth as 3.5 billion of their fellow citizens of the world I despair of real, substantive change coming anytime soon.

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