Alarming New Stats: Poverty Rate, Income Inequality Surging
This post first appeared on Daily Kos. An alarming finding from the Census:
The poverty rate surged to 14.3 percent last year as the recession took its toll on incomes, the Census Bureau said Thursday. A record 43.6 million people were in poverty in 2009. The poverty rate was up from 13.2 percent in 2008 and was the highest rate since 1994. The number of people in poverty was up from 39.8 million in 2008 and was the third consecutive increase. "The number of people in poverty in 2009 is the largest number in the 51 years for which poverty estimates have been published," the Census Bureau said.That many people moving into poverty means a shrinking middle class and a massive widening of income inequality. Based on the preliminary data from the Census, Democrats on the U.S. Congress Joint Economic Committee (JEC) have issued a report based on the Census data, showing that "income inequality skyrocketed in the past three decades, peaked under President Bush just before the Great Recession began, and may have been a root cause of the worst recession since the Great Depression."
The report, entitled "Income Inequality and the Great Recession," finds that middle class incomes, which had grown at a healthy pace during the Clinton Administration, declined under President Bush and never regained their highs reached before the 2001 recession. After President Bush’s eight years in office, middle class families had seen their annual incomes fall by more than $2,600. Stagnant incomes led to an increased demand for credit, with the household debt-to-income ratio growing dramatically from 2001-2007. The unsustainable spending sparked the housing bubble, and subsequent collapse, and ultimately helped to trigger the Great Recession. The JEC report also found: * In the past three decades, the share of income going to the wealthiest 10 percent of households has increased significantly, from 34.6 percent in 1980 to 48.2 percent in 2008. * Annual income for middle class Americans – those in the middle income quintile – increased by more than $6,700 during the Clinton Administration. During the eight years of the Bush Administration, this middle quintile saw their annual incomes fall by more than $2,600. * Americans across all five income quintiles saw income gains during the Clinton Administration, while, by contrast, incomes fell for each quintile during the Bush Administration. * The increase in marginal tax rates for the wealthiest one percent of households during the Clinton Administration did not lower these households’ income. Real income of the top 1 percent grew at an average annual rate of 10.3 percent during the Clinton years. * From 1948 to 2005, incomes for Americans in the 60th percentile grew at an average of 2.5 percent under Democratic Presidents, compared to an average growth rate of just 1.1 percent under Republicans.The report talks about how increasing income inequality has been compounded by financial deregulation, resulting in easier access to credit and more and more American families getting deeper and deeper into debt just to make ends meet. At The Washington Independent, Annie Lowery pulls out several of the key graphics from the report. Among them, these that are particularly striking: (Click on the image to view it in large format.) Those four lines on the bottom are people making below roughly $70,000 a year in 2008 dollars since 1967. The line souring way above them? The people making over $100,000. Notice how the bottom three quintiles haven't really budged in 43 years? This is middle class income during the previous for presidencies. Note the drop starting in 2001? This one is the share of the nation's income held by the wealthiest 0.1% of Americans (the blue line) with the top marginal tax rates. As tax rates fall, the share of their income goes up. The JEC comments:
Tax policy is an important lever that allows policymakers to ensure fairness and reign in runaway inequality. The lowering of the top marginal tax rate from 1981 through 2000 coincided with the dramatic rise in the share of income going to the very wealthiest American households (See Figure 6). In response to growing income inequality stemming from decades of cuts in the top marginal tax rates, the Clinton administration instituted policy changes that required the ever‐richer rich to pay a small additional slice of their income in taxes. The upward movement in the top marginal tax rate in the Clinton era was relatively minimal; the top rate remained lower than they were during the Reagan administration. Moreover, higher marginal tax rates for the richest households did not lower these households’ income. Indeed, the real income of the wealthiest 1 percent grew at an annual rate of 10.3 percent during the Clinton administration, when the top marginal tax rate rose from 31.0 percent to 39.6 percent.... Policymakers today have the opportunity to continue the work begun by President Clinton, and help steer America back onto a course of economic growth where rising tides lift all boats, rather than just the wealthiest American’s yachts. Retaining the Bush tax cuts for all households, instead of letting them expire for the top two income brackets, would make the income tax system less progressive and could further exacerbate income inequality and economic fragility.The choice in the current debate over taxes is an easy one, if Dems want to start close the gap in income inequality.