How the Wealthy Organized to Rip Everyone Else off -- And What You Can Do to Stop It

For years, wealth has been increasingly concentrated at the very top of the income pyramid with the super-rich owning a larger and larger share of wealth, benefits and power. But while much attention has been focused on fixing a flawed economy, other experts suggest the problem would be better addressed by examining the politics and policies behind the phenomenon. Those policies that continue to benefit a tiny fraction of Americans resulted from a long-concerted effort by the very wealthy who organized campaigns to thwart those laws that might give the rest of Americans a chance. The history and policies are detailed in a book by professors Jacob Hacker and Paul Pierson titled Winner Take All Politics: How Washington Made the Rich Richer and Turned its Back on the Middle Class.

Maria Armoudian: Let’s start with the numbers. You note in Winner Take All Politics that the numbers have been historically hard to get but that now they have been tracked by some economists. What do the numbers tell us?

Jacob Hacker: You’re absolutely right. It’s difficult to look at what’s happening at the very top of the income pyramid because most of the evidence we have had was based on surveys, and because there is not a huge number of rich people in the United States who respond to phone interviews. In the last ten years or so, people have started to really home in on a unique source of evidence, namely income tax statistics, which give us a clearer picture about the rewards of economic growth. What we find is that the wealth is going not just to the top 10 percent of Americans, but really to the tiny slice at the very top, the top one tenth of one percent, even the top one hundredth of one percent. The Congressional Budget Office, using these income tax statistics, calculated that in 2005, the top 100th of one percent, the richest 11,000 households -- had an after-tax income that averaged $24 million a year. That was up from a $4 million average for this group back in 1979. That’s a remarkable change. In contrast, the middle fifth, the middle 20 percent of Americans, saw their incomes over this 1979-2005 period go from $41,000 a year to $50,000 a year. The concentration of income at the top is remarkable and sustained, and over the last 30 or 40 years, it has resulted in relatively little trickle-down to those lower on the economic ladder.

Paul Pierson: People have talked about inequality for a long time, but the fact that the winner’s circle is so small really raises troubling questions about how the American economy is working and how American democracy is working or isn’t working.

MA: Did you look also look at changes in real income?

PP: No but we looked in quite a bit of detail at all the different kinds of income, both what people earn and what they get from government programs, private health insurance and so on. All of that is calculated into these distributions. Some conservatives argue about benefits like healthcare balance out the inequality, even when you take all those things into account, you still see the same results.

JH: We looked at whether or not the middle-class has gotten ahead on other indicators but it’s still clear that most of the economic gains have gone to the richest of the rich. For the first time we have definitive evidence on this point. For example, we looked at social mobility, the degree to which people move up the income ladder, health insurance, pension coverage, debt, foreclosures, bankruptcies and the hours that people are working. Running down the list on all those indicators, the picture looks even worse than merely looking at income. I think this is really why it’s so puzzling. We asked two questions in this book: Why did this occur? And how did this occur? We argue that policy and what government did and didn’t do played an important role. In a democracy, we would expect the middle-class to have tremendous political sway, is where these trends have taken place over a 30 or 40 year period.