Two days before Christmas, with hardly anyone at all paying much attention, the nonpartisan Congressional Budget Office delivered up a final report card on the Reagan era. The highest grades? They went, almost exclusively, to the super rich.
You won’t, to be sure, find any As, Bs, and Fs in this new Congressional Budget Office report card. And the CBO’s researchers certainly didn’t set out to grade America on the years since Ronald Reagan became President a generation ago. But they’ve done just that. On taxes and income distribution, their new report makes vividly clear, the United States desperately “needs improvement.”
That may or may not be the message Senate Finance Committee chair Max Baucus from Montana had in mind, last year, when he asked the Congressional Budget Office to dig a little deeper into the data on taxes and income than the CBO had dug in a report released late in 2007.
The CBO’s December 2007 study, Historical Effective Tax Rates, 1979 to 2005, had looked at the federal taxes Americans at different income levels have been paying since the year before Ronald Reagan’s election. But the report had a hole. Nothing in it indicated how the really rich have fared in the near three decades that the basic principles of Reaganomics — tax rate cuts, deregulation, and privatization — have set the public policy pace.
Senate Finance Committee chair Baucus asked the CBO to fill that hole — by focusing on the richest of the rich. The CBO’s new report meets that request, with dramatic results.
Americans in the overall top 1 percent, the 2007 CBO data showed, did quite well in the Reagan era’s first quarter-century. Their average incomes, after taking inflation into account, essentially tripled, rising 201 percent.
But these top 1 percent stats, the new CBO data help us understand, hardly tell the full story. The truly stunning income increases over recent decades have gone to the tippy-top of the U.S. income distribution, not the top 1 percent, but the top tenth — and top hundredth — of that top 1 percent.
The higher up you go on the income ladder, in other words, the sweeter the Reagan era.
Between 1979 and 2005, the bottom half of the top 1 percent saw their average incomes only double, after inflation. These incomes increased 105 percent. The next highest four-tenths of the top 1 percent somewhat raised the income bar. Their average incomes, after inflation, rose 161 percent.
That brings us to the top 0.1 percent of Americans. Their incomes, from 1979 to 2005, rose a staggering 294 percent after taking inflation into account. Not bad at all. But the top 0.01 percent did even better. The 11,000 households in this rarified air took home an average $35.5 million in 2005, a 384 percent increase over average top 0.01 percent incomes in 1979.
Need some perspective here? Let’s compare Americans at the top to Americans in the middle. Between 1979 and 2005, the average income of America’s statistical middle class — the 20 percent of Americans in the exact middle of the U.S. income distribution — rose, according to the CBO figures, a mere 15 percent. That’s less than 1 percent a year.
http://www.cbpp.org/cms/index….
Sounds like there has been some serious “redistribution of wealth” going on. Oy vey!
How so? Didn’t national income rise also? I think it did. By a lot. So it IS NOT redistribution when the pie grows and everyone gets a bigger piece than they had before.
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p>Redistribution is what’s going on now. Example: Cash for Clunkers. Federal government takes tax dollars and redistributes them as a $8,500 credit. Redistribution away from taxpayers to new car buyers.
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p>I would also look at the after-tax income gains. They are much less disparate because the top wage earners in the US pay the majority of income tax.
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p>During the Reagan years, is it any wonder why it was productive taxpayers, and not welfare recipients, new entrants to the labor market, or recently-arrived immigrants who showed the greatest income gains?
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p>Furthermore, the study says nothing about mobility across income strata. The fact is many people, hard working people, like entrepreneurs, or recent grads getting their second or third promotion, elevated themselves one or two quintiles. Someone moving up the ladder actually show the biggest income gains of all.
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p>This study proves nothing except that progressive believe all economic histograms should have 5 equal height columns, that until there is no income disparity, our system is “unjust.”
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p>To a progressive, “economic justice” means taking the wealth someone’s earned, and giving it to someone who hasn’t earned it.
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p>I hate that.
The gaming is rigged, so the house always wins. The playing field is never level, but when GOPer freemarketeers go unchecked, the working class can barely stand upright.
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p>Sheperds of your ilk will bring America to the socio-economic equivalency of Brazil.
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p>I’m done talking. We won the election. It is time to roll right over the obstructionists.
because Americans don’t like being rolled. I think there is clearly a difference between opponent and obstructionist. Just because I may not want my son to go to the same high school my wife prefers doesn’t make me an “obstructionist”, I just have a different suggestion for what school he should attend.
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p>2010 and 2012 will be here soon and “steam rollers” will be replaced. Have you seen Obama’s numbers? Can you sense a change in tide of the populace (many who voted for Obama)? I think when you combine this with the “perfect storm” which brought Obama to office it would be wise to try to work together vs. the partisan war you are proposing.
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p>Shepards of our ilk made America what it is today, the #1 economic power of the world.
righteous JohnD.
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they will get the same result as Sen Gregg did… he failed!
Rigged? Only in your mind.
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p>The US is the wealthiest, most vibrant, economically dynamic nation in the world. Entrepreneurs, hard workers, even penniless refugees from around the globe mostly choose to come here, not Brazil, France, or England.
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p>Most Americans understand and believe this. Liberals and progressives do not.
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p>But the rest of the world does. Hard-working Mexicans swim rivers, cross deserts, climb fences, and dodge ICE and USBP to get here. Memo to John — they’re not heading south to Central or South America for jobs.
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p>Vietnamese and Cambodian boat people came here, and not there, because of our freedom, self-determination, and opportunity.
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p>Frankly, it’s EXACTLY because of unchecked freemarketeers like me, serial entrepreneur, that America is not Brazil.
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p>What rules can you devise that will allow the guy in the wheel chair complete with Tiger Woods? This is what you really want … to constrain the Tiger woods of our economy.
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p>As far as rolling over the “obstructionists,” it’s too late for that.
It still bothers me greatly that we have one of, if not the, largest wealth gaps in the developed world.
because the distribution of wealth in the US is not static. People, such as my family, moved up through the levels in the course of 3 generations.
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p>Warren Buffet, too. And, we live in a state famous for An Wang, Ken Olson, and the Egans and the fortunes they made. There’s nothing wrong with that. Christopher, I sense you think there is.
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p>There is something to be said for this income-class mobility. It is just that allure that continues to draw people to the US. The histograms do not show this mobility.
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p>I would rather start over in the US than almost anywhere else. If you had the choice to be plopped down as an infant anywhere, where would you pick, knowing what you know?
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p>I pick here.
Not everyone gets to be Warren Buffet, Bill Gates, or whomever. I took and passed several AP classes in high school, earned a BA with a triple major and a Master’s degree. I also recently pursued and now have a license to teach history in an attempt to diversify my qualifications. I’m also an Eagle Scout, which while I am proud of that for it’s own sake, it has not given me the advantages I was led to believe it would. My current job only requires a high school diploma, I have substitute taught, and in short have always been underemployed. You’ll have to forgive me then if I’ve somewhat soured on the myth that in America as long as you work hard and play by the rules you can get ahead in life.
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p>I absolutely do not begrudge others their success, but I do believe that to whom much is given, much is required and successful people do benefit from things offered here. In answer to your last question, I would probably say Europe as they make sure basics such as health care and education are provided, without the hand-wringing over role of government or whether someone is worthy. (I realize there is some variation of living standards throughout the Continent.) Society as a whole is a lot better off if we all care for each other rather than look out only for ourselves and that is the kind of society I prefer to live in. As it happens though, I was not dropped into Europe. Lest you’re tempted to tell me to move my response is this is home and I want to do anything and everything possible to improve conditions here.
… problems with citing that upward income mobility (which I think is overstated in this conversation) makes income stratification palatable is that it necessarily implies that child poverty can be made palatable. This is doubly a problem since upward mobility is so strongly correlated with parental income. This is because income disparity tends to hit the young the hardest… even when there is upward mobility, it tends to happen chronologically – i.e. we tend to have our ‘suckiest’ jobs when we are young… right when we’re more likely to have kids.
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p>More here and here
“but I do believe that to whom much is given, much is required”
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p>Many would argue that they have not been “given”, but have “earned”, what they possess. Those to whom much has been “given” probably inhabit the lower ranks of the income distribution ladder.
that they “deserve,” regardless of whether they “earned” their wealth. Many would believe, but not say, it’s because the deserving few are “better” than the rest of us. Many are the holes.
* Public schools
* Public infrastructure (roads, elec, teleco, etc)
* Public safety
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p>That’s just for starters. But it gets better. Depending on the business, everything from copyright & patent policy to subsidized parking spaces for customers helps those destined for wealth achieve it.
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p>Nobody is arguing that the self-made wealthy didn’t earn it — they put in the sweat, took the risk, had the great idea. However, to suggest that they can claim 100% of the credit is nonsense. We as a nation have created a framework where people can generate massive amounts of wealth… using everybody’s resources.
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p>So yeah, those who have “earned much” have indeed also been “given much.”
Sounds like you agree, but where did I say 100%. I was responding the the word given in the comment I quoted. I just thought “earned” was a better choice. Especially regarding the two examples sighted in the comment, Warren Buffet and Bill Gates.