1 Percent zooms, while the rest of us languish

Posted: September 13, 2013

IT TURNS out that the much-ballyhooed economic recovery of 2012 sailed right by the middle class in a golden-hulled mega-yacht, leaving most of us to fight off drowning from its massive, champagne-frothed wake.

A new report from top researchers found that last year was the worst 12 months for U.S. income inequality since 1928 - the year before the Wall Street crash that kicked off the Great Depression.

The millionaires and billionaires of the "1 Percent" saw their earnings spike by roughly 20 percent in 2012, the researchers found, while the other 99 percent of Americans brought home a paltry 1 percent pay hike, on average.

"We've got an economy that serves strictly to benefit the wealthy and not the average working person," said Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, who was aghast at the findings.

The latest income-inequality surge came after protesters - such as the Occupy Wall Street movement - raised public awareness of the wealth gap, and although it was a front-burner issue in the presidential election, Ward said this new report "is going to pour fuel on that flame."

The experts - Emmanuel Saez of the University of California at Berkeley and Thomas Piketty of the Paris School of Economics - have found that 95 percent of all U.S. income gains since the recession officially ended in 2009 have gone to the 1 Percent.

More broadly, the top 10 percent of U.S. households now pull down more than half of all income.

How do they get away with it?

Blame the shareholder economy. American corporations are keeping salaries low for their rank-and-file employees while posting record profits, which in turn has sent Wall Street to all-time highs. And the very wealthy are much more likely to report income from stocks - much of which gets taxed at lower rates than a middle-class paycheck.

Timothy Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin, said "98 percent of income has gone into corporate profits, and that is reflected in stock prices."

Ironically, the end-of-2012 budget deal - which raised marginal federal income-tax rates on the top earners from 35 percent to 39.6 percent - might have caused the wealthy to boost last year's income to avoid the new levies.

Experts like Ward and Smeeding pointed out that there are political moves that could narrow the income gap - closing tax loopholes that benefit the super-rich, as well as a higher minimum wage for those on the bottom of the ladder.

But low-wage earners have an uphill climb against what Smeeding called "the political economy" - powerful lobbyists representing billionaires and corporate interests in Washington and in state capitals - as well as tea-party conservatives who take a punitive stance toward the poor.

While experts bemoan the numbers on rising income inequality, the Republican-led House of Representatives is preparing to vote on a measure to slash food-stamp benefits in half.

At the same time, there are early signs of a political uprising. In New York City, Democrat Bill de Blasio - who has railed against income inequality and proposed higher taxes on the rich - has emerged as the likely replacement for billionaire Mayor Michael Bloomberg in City Hall.

Meanwhile, low-wage workers at fast-food restaurants and at retail giant Wal-Mart have staged a series of one-day strikes, seeking a $15-an-hour wage and the right to unionize.

But Wisconsin's Smeeding said minimum-wage hikes aren't a guarantee of salvation for the working poor. Although some increase - President Obama has proposed $9 an hour over the current $7.25 - would clearly help, Smeeding said a raise to the $10-to-$12 range might lead to layoffs, targeting urban workers struggling to escape poverty.


On Twitter: @Will_Bunch

Blog: ph.ly/Attytood.com

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