Billionaires R Us
Fall is inequality season. Every autumn, as the leaves change color, we get a vivid new picture of the trends that pull us apart as a country.
This year is no different. But after almost three decades of incrementally widening disparities of wealth and income, it's worth noting that we've entered a new version of economic apartheid, American-style. Let's call it Inequality 2.0.
The United States is now the third most unequal industrialized society after Russia and Mexico. This is not a club we want to be part of. Russia is a recovering kleptocracy, with a post-Soviet oligarchy enriched by looting. And Mexico, despite joining the rich-nations club of the Organization for Economic and Community Development, has some of the most glaring poverty in the hemisphere.
In 2004, after three years of economic recovery, the U.S. Census reports that poverty continues to grow, while the real median income for full-time workers has declined. Since 2001, when the economy hit bottom, the ranks of our nation's poor have grown by 4 million, and the number of people without health insurance has swelled by 4.6 million to over 45 million.
Income inequality is now near all-time highs, with over 50 percent of 2004 income going to the top fifth of households, and the biggest gains going to the top 5 percent and 1 percent of households. The average CEO now takes home a paycheck 431 times that of their average worker.
At the pinnacle of U.S. wealth, 2004 saw a dramatic increase in the number of billionaires. According to Forbes Magazine, there are now 374 U.S. billionaires. The growth in billionaires took a dramatic leap since the early 1980s, when the average net worth of the individuals on the Forbes 400 list was $400 million. Today, the average net worth is $2.8 billion. Wal-Mart's Walton family now has 771,287 times more than the median U.S. household.
Does inequality matter? One problem is that concentrations of wealth and power pose a danger to our democratic system. The corruption of politics by big money might explain why for the last five years the President and Congress have been more interested in repealing the federal estate tax, paid only by multi-millionaires, than on reinforcing levees along the Gulf Coast.
Now, to pay for hurricane reconstruction and the war in Iraq, Congress is considering cuts in programs that help poor people, such as Medicaid and Food Stamps. They have not yet considered fairer ways of reducing the deficit by reversing special tax breaks for the rich, such as the recent cuts in capital gains and dividend taxes.
Inequality is non-partisan. The pace of inequality has grown steadily over three decades, under both Republican and Democratic administrations and Congresses. The Gini index, the global measure of inequality, grew as quickly under President Clinton as it has under President George W. Bush. Widening disparities in the U.S. are the result of three decades of bi-partisan public policies that have tilted the rules of the economy to the benefit of major corporations and large asset owners at the expense of people whose security comes from a paycheck.
Public policies in trade, taxes, wages and social spending can make a difference in mitigating national and global trends toward prolonged inequality. But our priorities are moving in the wrong direction.
For example, the failure to raise the minimum wage from its 1997 level of $5.15 an hour guarantees continued income stagnation for the working poor for years to come. The President and Congress's focus on tax cuts for the wealthy and their disinterest in government spending to expand equal opportunity sets the stage for Inequality Version 3.0.
We shouldn't tolerate this drift toward an economic apartheid society.