Why Income Inequality Is Going to Get Catastrophically Worse
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More recently, their results show that between 2009 and 2011, not only did income inequality grow in all 50 states, but all income growth went to the top 1 percent in 26 states. New York and Connecticut led the pack in terms of income inequality by virtue of their disproportionate share of financial industry millionaires and billionaires, whose fortunes were in turn bolstered by federal and Fed policies that championed the banks that had first access to cheap money and a place to dump their toxic assets. In these states, the average income gap in 2011 had the top 1 percent making 40 times more than the bottom 99 percent. (The gap in California was 26.8 times, confirming that on average Wall Street money trumps tech and entertainment money. The smallest average gap was in Hawaii at 12.1 times.)
Not only are current income inequality levels near the 1928 peak, but the systemic risk posed by this inequality is worse now. There is no counterbalance to the banking elite who possess no imbedded public spirit underlying their political influence and command more instruments of leverage capital than ever before. There’s no strong labor force, no large swaths of the population demanding reform by any means necessary, no revolution. Instead, we have an overhang of debt, stagnant wages and inferior jobs, all exacerbating income inequality.
Risk inequality means that those who have less to begin with have more to lose in adverse circumstances, whereas those with more have less to lose. This extra inequality dynamic is as dangerous to individuals as it is to the greater economy. It is particularly damaging in the wake of the epic Wall Street bailouts and ongoing zero-interest rate monetary policy and quantitative easing of the Federal Reserve policy, which helps the same banks whose family legacies worked with the Washington leaders who were their friends to create the Fed to back their bets and preserve their wealth a century ago.
Inequality has been given nothing but pithy lip service by the political-financial elite, elected or selected, or those aspiring to more of it. Last fall, Hillary Clinton was paid $400,000 to tell two Goldman Sachs gatherings that the financial crisis was a shared responsibility, implying that Wall Street had been unfairly demonized in its wake.
The Economic Policy Institute report authors conclude, “In the next decade, something must give. Either Americans must accept that the American dream of widespread mobility is dead or new policies must emerge that will restore broadly shared prosperity.” But the cards have already been dealt — and the verdict is in. Not only will the American dream remain dead, but also income and wealth and risk inequality will escalate by virtue of the government-supported consolidation of banking family and firm power.