January 22, 2019
A Taste of How the 1 Percent Lives
The dramatic increase in U.S. inequality is due almost entirely to the expanding fortunes of the
1 percent. They have tripled their share of the nation’s total wealth to 21 percent since the 1970s.
Such extreme concentrations of wealth are of growing concern to economists and even one Wall Street firm. They argue that it hurts the economy for everyone.
The public’s reaction couldn’t be more different. Their preferred solution to barely coping financially is to become rich themselves. Two out of three Americans told Gallup they aspire to being rich and say that the super-wealthy are good for the country. Democrats and Republicans are equally enamored of the rich.
What it means to be in the top 1 percent is, for most of us, an abstraction since the wealthy largely keep to their own. But the crew of the Double Sunshine tour boat are happy to show tourists the lifestyles of Florida’s rich and famous during daily tours of the dolphins and multimillion-dollar mansions on Naples Bay.
During my Christmastime tour of the bay, the crew pointed out one property where the new owner had demolished a $49 million house to build a new one. “Tear-downs are on a tear,” says The Naples Daily News, which closely follows the real estate transactions of celebrities and chief executives.
In property after property, royal palms sway over lawns that tumble into the bay. Every house has a yacht or an empty boat slip with a full crew awaiting the owner’s return, said Greg Dyer, the tour boat company’s assistant operations director. One homeowner pays nearly $600,000 a year in property taxes. No wonder Naples has such great bike paths. …Learn More
November 1, 2018
US Inequality is Feeding on Itself
The fact that the richest Americans are grabbing such a big slice of the pie isn’t exactly breaking news.
What is news is that Wall Street is getting nervous about it. Moody’s Investors Service, a private watchdog for the federal government’s fiscal soundness, has concluded that inequality has reached the point that it threatens a system already being strained by increases in the federal debt. But Moody’s also noted that inequality is contributing to slower economic growth, which further aggravates inequality.
The high level of U.S. inequality today “sets us apart” from Canada, Australia, and several European countries, Moody’s said in an October report, “Widening Income Inequality Will Weigh on U.S. Credit Profile.”
Moody’s central concern is how inequality will affect the federal budget. When the economy slows in periods of high inequality, there are more lower-income households requiring support from costly programs like Medicaid. Federal tax revenues also decline during any downturn, leaving less money to pay for these means-tested programs and for social insurance programs like Social Security and Medicare.
The firm’s second concern is that inequality is a drag on the economy. When the middle-class is squeezed, for example, they have less money to buy consumer goods. And when the economy slows down, inequality can increase, as it did in the years after the 2008-2009 recession.
This has played out in a widening wealth gap, Moody’s said. The typical lower and middle-income worker’s net worth – assets minus liabilities – has shrunk since the recession, while net worth rose sharply for the people at the top.
One big reason for widening inequality is the stock market. Even though the market declined sharply this month, the post-recession bull market has beefed up investment portfolios – but only for the 50 percent of Americans who own company shares or stock mutual funds.
A second contribution to a widening wealth gap, post-recession, has been housing. A home is often the most valuable asset people own, so the steep drop in house prices and the spike in foreclosures were big setbacks for people who aspired to build wealth through homeownership. …Learn More