We had the Great Depression and the Great Recession and now we have the Great Divide. The Wealth Gap as some have called this economic divide between the rich and the rest of the population.
America is facing the greatest divide between the haves and have nots since 1929. At the present time it is estimated that 190 million Americans are one paycheck away from financial disaster and the middle class shrinks into poverty.
Since 1970, the American people have seen their personal economy come to a standstill. The middle class has seen the American dream slipping away and the poor are trapped in a system of neglect and corporate greed, keeping them from moving out of poverty and into a life of despair and isolation.
The income gap between rich and the middle class is at the greatest level since 1929. In the first year of The Great Recession’s recovery (2010) 93% of wealth went to the top 1% of Americans. The bottom 99% of Americans saw their wealth increase by .2% compared to 33.1% for the top 1%.
In 1929 the top 1% share of total wealth was more than 23%. This declined for the next five decades to a low of 8-9% in the 1970. As the total percent of wealth shifted from the top 1% to the masses, the personal economies of Americans started to grow, creating the greatest middle class in the history of the world.
The concentration of wealth at the top is a direct cause for the economic stagnation. As the purchasing power of the 99% declines so goes the American economy. When the middle class does not or cannot spend money the American economy comes to a halt. Rich Americans do not spend their wealth.
The daily buying and selling of products is conducted by the middle class, and that is what keeps the American economy humming and what generates the American Dream. “When the purchasing power of the masses increases their demand for a higher standard of living does as well,” stated Marriner Eccles, Chairman of the Federal Reserve from 1934-1948.
Chairman Eccles understood that America was driven by a strong middle class — and as the middle class grew, the country’s total wealth would also grow. This growth continued until the 1970s and the first attacks on the institutions, such as trade unions and public education, that helped the middle class expand.
The expansion of the Middle Class and the American economy was in direct relationship to the American tax code. As the top tax rate dropped so did Middle Class wealth and as Middle Class wealth decreased more people fell into poverty. The top tax rate fell from 70% in the 1970s to 39% in 2010. Over this same time the Middle Classes income grew by .6% compared to 10.9% for the top 1%.
As the income inequality grows the economy of the country decreases, and as the economy decreases so does the American Dream come to a screeching end. The evidence is very clear that if America is to grow the middle class to yesterday’s levels, the income gap has to be closed.
Mike Scourby is pretty normal for a guy who grew up in Brooklyn. Well, it’s true, and that’s also the name of his blog. He’s a Yellow Dog Democrat currently living deep in a Red State but, as he told his kids, he’s moving back to Brooklyn at the first sign of a twang. Mike spends his time educating young minds to a Bluer state of mind.