What’s the 99%, the 1%, and the 53% All About?

The OccupyWallStreet movement has helped push the meme of the “99%”.  But to what are they referring? And what’s the remaining 1%?  The 99% reference refers to income distribution in the U.S.  Income distribution is when we line up all the households in order according to their income from lowest to highest.  Obviously with somewhere around 150-200 million households in the U.S. we can’t deal with each individually.  Instead we group them into percentiles.

The 99% refers to the 99% of all households that have the lowest incomes.  Obviously this means nearly everybody – 99% of us to be exact.  What is not in the 99% is the 1% with the highest household incomes – the really rich.  What has the OccupyWallStreet movement so energized and angry though isn’t just the idea that the 99% make less money than the 1%.  It’s the idea that the rich, the 1% are getting richer faster than the 99%.  In fact, the 99% aren’t really getting richer at all.  Instead they (we) have been losing both relative to the rich (the gap is growing) and in absolute terms.  Let’s check out a few graphs to illustrate.

First, economix at the New York Times reported on the basic income distribution data recently:

The graph below shows how much income is earned by a household at any given percentile in the income distribution, based on these new numbers for 2011:

DESCRIPTIONTax Policy Center

Incomes grow much, much faster at the top end of the income distribution than in the middle or at the bottom end. That is, the disparity in income between one percentile and a consecutive percentile is bigger among the very rich.

For example, the difference in income between a household at the 50th percentile and a household at the 51st percentile is $1,237 ($42,327 versus $43,564). But the difference in incomes between a household at the 98th percentile and the 99th percentile is $146,118 ($360,435 jumps up to $506,553).

The gaps become even wider at the extreme top of the income ladder: A family at the 99.5th percentile makes $815,868; its neighbor at the 99.9th percentile makes more than double that, at $2,075,574 a year.

In fact much of the rise in inequality over the last few decades has been because of the increasing inequality isolated among the very top members of the income distribution, as America’s wealthiest have pulled further and further away from their slightly less wealthy peers.

This leads us to another similar graphic (graphic from occupydesign.org, but the data is from standard U.S. economic reports). This one reports not income, but wealth (income is what you $ you receive this year, wealth is how much you own).

 

The disturbing part of the income distribution is that it is getting much worse.  Since the recession/depression started in 2007, the median income for Americans, a number that fairly represents what’s happening to the typical member of the 99% show that incomes have decreased.  CalculatedRisk blog reports:

Recession Officially Over, U.S. Incomes Kept Falling. A few excerpts:

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent.

So the inflation-adjusted median household income has continued to decline even after the recession ended.

And for people who lost their jobs – and were lucky enough to find a new job:

In a separate study, Henry S. Farber, an economics professor at Princeton, found that people who lost jobs in the recession and later found work again made an average of 17.5 percent less than they had in their old jobs.

And on education:

Median annual income declined most for households headed by someone with an associate’s degree, dropping 14 percent, to $53,195, in the four-year period that ended in June 2011, the report said.

For households headed by people who had not completed high school, median income declined by 7.9 percent, to $25,157. For those with a bachelor’s degree or more, income declined by 6.8 percent, to $82,846.

Grim numbers. This is no surprise given the high level of unemployment and underemployment.

If we look at hourly wage rates by income groups over the last couple decades we the same story: the rich are getting richer and the vast majority of Americans aren’t improving at all.  From the Congressional Budget Office via EconomistsView’s Mark Thoma:

Essentially, since around 1980 whatever increases in national income (GDP) have occurred have all gone to the top 1% or so of Americans.  The rest, the 99% have not enjoyed the growth but they are the ones who worked and produced it. See my post on that here.  The inequality in the income distribution in the U.S. is at a highest (most unequal) that it has ever been since the 1920’s and the era of Robber Barons and the Gilded Age.  That period didn’t end well resulting in the Great Depression.

 

Finally, when the OccupyWallStreet movement began, some right-wing opponents tried to counter the whole 99% meme.  They attempted to create an identification with the moniker “the 53%”.  What they were referring to is the fact that of all U.S. households, only 53% pay any U.S. federal income tax after accounting for deductions and tax credits.  The implication or suggestion was that the “53%” are the ones who are paying to carry some freeloading 47% of households who supposedly aren’t working and definitely aren’t paying income tax.  The problem with this idea is two-fold.  First, it’s absolutely not true that 47% of households don’t pay any taxes.  They most certainly do pay taxes – a lot of taxes and at nearly the same rates as other households.  The 47% just don’t pay federal income tax.  They do pay Social Security and Medicare payroll taxes, sales taxes, property taxes, state taxes, and other taxes. Second, a lot of those households don’t pay federal income tax because they are retirees who are living on either tax-exempt pension income or Social Security benefits. Others are simply too low-income despite working to incur federal income tax.  A few are very-high income earners in the top 1% who avoid income taxes through deductions and special tax breaks.

 

 

 

On the Occupy Wall Street (and Everywhere Else) Movement

I’ve been asked what I think of the Occupy Wall Street Movements.  I say it’s about d*** time.  The anger and discontentment that the movement has tapped into is real and has been building for a long time.  The mass numbers of people – like say the 99%  – have good reasons to be angry. The  U.S. economy is very sick and it’s not really recovering.  For at least three decades now the rules in the economy have gradually been changed.  The overwhelming net effect of all these institutional and structural changes has been to transfer income and wealth from the bottom 80% of the income scale (odds are that means you!) to the upper 1%.  What about the other 19%, the ones in the top 20% but not the top 1%?  They haven’t really lost in number terms but they’ve struggled to hold on.  Their security is greatly reduced.  And now, the politicians that have been bought by the top 1% are coming for everybody’s Social Security and Medicare.

The American poor, working, and middle classes have been like the proverbial frog put into tepid water and then heated to boiling (note, yes, I know there’s evidence that frogs don’t behave that way in real life – it’s a metaphor, folks).  Gradually the rules were changed.  The banking and finance industries were deregulated – not all at once, but in a series of steps.  Despite massive (for that time) bailouts and bank rescues in the 1980’s savings and loan crash, we continued.  Union power was reduced.  Antitrust enforcement languished under a philosophy of “markets will self-enforce”.  The tax codes were changed to favor hedge fund managers and bankers.  Median household incomes began to stagnate while incomes at the top continued to grow and even accelerate.  A loud chorus of anti-“liberal” media, politicians, and think tanks constantly pounded an anti-government theme.  Meanwhile economic growth gradually slowed.  We lowered our expectations. Instead of demanding the growth rates of the 1950’s, 1960’s, and even much of the 1970’s, we began to settle for less but pretended it was more.  We shifted more and more of the cost of a  college education away from government and to students in the form of student loans.  For a long time, the working and middle classes were distracted from what was really happening.  The leaders blamed the people themselves.  It was getting harder and harder to keep up, let alone get ahead economically. We were distracted for a while by dreams of riches in an Internet dot-com bubble (“just pick the right start up and get rich”) or later in a housing bubble (“your house will make you rich ‘cuz home prices never drop”) or by endless wars and obsessions with terrrorism.

Then the crunch came in 2008.  The economy collapsed. But it wasn’t workers that crashed the economy – it was largely the banking and finance sector.  But the fall out hit just about everybody.  For 5-6 months we were on a trajectory to repeat the Great Crash and Great Depression of the 1930’s.  The same depression that conservative ideologue economists like Robert Lucas had claimed in 2003 was permanently “solved for all practical purposes” .  President Obama promised change and entered office in the midst of the collapse.  He wasn’t really prepared for this situation. The change Obama had originally envisioned was a more conservative, polite cutting back of social programs like Social Security.  The change we needed wasn’t the change that originally motivated him to run.

In response to the crisis and collapsing economy, the government responded – both the Bush and Obama administrations.  And they both pursued rather similar policies:   bailout the banks without even requiring sacrifice by the bank managers or the bank share and bond holders, and meanwhile offering some mild (relative to the problem) stimulus with much of the stimulus being in the form of tax cuts.  It hasn’t worked.  Well, I should be more precise.  It worked for the top 1% – the really, really wealthy and for Wall Street and the banks.  For the rest of us, it’s grim.  The economy stopped it’s free fall.  That was good. But it has never substantially begun a real recovery.  Unemployment is stuck at over 9%. The reality is worse than that number, though since large numbers have dropped out of the labor force and simply abandoned the hope of finding a job for now.  It’s been over 3 years since the crunch on Wall Street and there’s no recovery. Instead, politicians, both Democrat and Republican, have been spent the past year trying to cut spending, cut social programs, and make things worse for the 99% while cutting taxes further for the 1%.  It makes for anger and confusion. We are now in a workers depression.

The Tea Party movement of the last couple years had initially tapped into some of that populist anger.  But the Tea Party wasn’t/isn’t really a broad-based populist grass-roots movement.  It’s more of an Astroturf, faux populist movement with a lot of funding from very, very rich sources like the Koch brothers.  What’s more, it has become clear in the last year in Congress that the Tea Party doesn’t really have any solutions.  Last summer it was clear that some Tea Party people in Congress would rather have the U.S. default reach any kind of do-able compromises.  The vast majority of the 99% do not think a default by the U.S. government is a good thing.  The anger and frustration remains.

To make things worse, recent years have seen an increase in the power of large corporations.  The Supreme Court has ruled that corporations are “people” and that we the people cannot put any limit on political speech or spending by corporations.  Campaigns have become extraordinarily expensive.  The result is that politicians, even more so than ever, basically listen to and do the bidding of people on Wall Street and large corporations.  The average American has been frozen out of their own political processes.

I observed last winter during the uprisings in Tunisia and Eqypt that two ingredients of revolution are an educated population that learns or knows that a better condition is possible, and a political economy where there is no prospect for improved living standards.  Hopelessness turns to frustration which turns to anger.  That produces protest and demands for change.  As John F. Kennedy famously said, “Those who make peaceful revolution impossible will make violent revolution inevitable.”  I also observed last  winter that the inequality in income is worse in the U.S. than it was in Tunisia, Eqypt, or the other Arab spring nations.  I also noted that for now demography was keeping the U.S. from breaking out in mass protest.  Basically the U.S. population is older and revolutionary protest is usually a young people’s phenomenon.  But there are limits.  The U.S. also has a very extensive history of protest-driven social and political change.  It’s really the last few decades of quiet between the civil rights & Vietnam protests of the 1960’s-70’s until recently that have been the unusual phenomenon.  The longer the U.S. persists in pursuing austerity policies that keep the economy from growing and transfer more wealth and power to the top 1%, the more the nation is playing with fire.

As it stands now, I stand with the Occupy Wall Street movement.  The lack of clear “leaders” and “demands” is a good thing.  I will contribute my help in the coming weeks by trying to further illuminate the issues involved.