8-29-06, 9:28 am
Wealth, or the lack of it (and debt), plays an obvious role in people's ability to purchase basic necessities, higher education, retirement security, and to cope with financial emergencies (like major illness or unemployment). And because existing wealth (or debt) is a major factor in having access (or lack of access) to opportunities to accumulate more wealth, measuring how wealth is distributed is an important means of calculating the standard of living as well as more abstract principles like democracy and equality.
In its soon-to-be-released volume 'The State of Working America, 2006/2007,' EPI estimates that the top 1% of households controlled about 34.4% of all net worth in the economy with each household averaging about $15 million in wealth in 2004. Between 2001 and 2004, the average wealth of the top 1% grew by about $1.25 million, and that group of people hold an average of $3.3 million in stocks. By 2004, the top 1% of households owned 190 times what the typical, middle-income household owns.
By contrast, the bottom 90% controlled a mere 19% of all financial assets. Nearly 1/3 of US households own $10,000 or less in wealth, with slightly more than half of that group in the red. In fact the average wealth of the bottom 20% shrank between 2001 and 2004 by almost $3,000 to -$11.400. That's right, negative $11,400.
Racial divisions further complicate the wealth gap. According to EPI's findings, one important source of wealth ownership for most middle income families is home ownership. Seventy-three percent of white households own their home, while only 48.2% of African American households and 49.5% of Latino households do. This difference plays a significant role in contributing to the fact that the median white household was worth $118,000, while, in contrast, the median Black household was worth only $11,800 in 2004, according to the latest available figures.
The growing wealth gap in the US says something about US society, especially under the Bush administration, says Lawrence Mishel, president of EPI and co-author of 'The State of Working America, 2006/2007.' 'They talk about the vast democratization of wealth,' Mishel remarked at a recent news conference, 'which turns out not to be so much the case.'
Mishel cites the Bush administration's tax policies as the main culprit in the increase in the wealth gap. Bush's tax policies essentially shifted the burden to finance the federal government from the wealthy and the capital they own to the wages of the working class. Specifically, reductions in capital gains taxes and other taxes on wealth producing assets have benefited the richest sections of society, freeing capital for more capital accumulation (rather than circulation of more money in the economy as is pretended by pro-tax cut pundits).
Meanwhile, tax cuts have shown little direct benefit to middle- and lower-income households as they own few, if any, wealth producing assets. Instead, the bulk of the tax burden is shifted to taxes on wages, usually the main source of income for working families. The effect is that on top of rising medical and educational costs, high gas prices, higher rates of debt, and other financial emergencies that inevitably arise, working families are finding few extra resources for wealth accumulation let alone savings.
In the midst of increased costs of necessities, the New York Times reports, wages and salaries as a percentage of GDP has fallen from 50 percent in 2001 to 45 percent in the first quarter of this year. This decline disproportionately affects lower and middle-income households as the very richest Americans only earn about two-thirds of their income through wages and salaries, while working families, as has been shown earn very little income outside of wage income.
What measures might be adopted to reverse this trend and protect a good standard of living for working families?
First, strengthen the collective bargaining power of workers for better pay and benefits by guaranteeing their right to organize labor unions.
Second, a universal health care program, like the Medicare-for-all plan proposed by H.R. 676 introduced by Rep. John Conyers (D-MI), could control the cost of medical care and prescription drugs, allowing working families more disposable income available for savings and other necessities.
Third, repeal the Bush tax cuts for the richest households, capital gains, and estates.
Fourth, strengthen Social Security by ensuring a guaranteed livable income tied to rises in the cost of living with full benefits for retired and retiring workers.
Fifth, provide subsidies to working families to encourage savings. Ideally, these would take the form of direct payments to working families to start savings accounts – much like the billions of dollars the Republican-controlled Congress gave to oil companies in 2005 simply for existing, but with broader social benefits.
Sixth, use carefully developed affirmative action policies to stimulate job growth, government investment, and infrastructural development (health care facilities, schools, roads, public transportation, small businesses, housing, basic services, etc.) in areas populated predominantly by African Americans and Latinos to close the racial wage and wealth gap.
Of course such an agenda, which probably could be accomplished for less than the cost of one Bush war on Iraq (over $308 billion at this point), would require removing the Republicans from power and installing representatives who are willing to put the needs of the majority before the wealthy few.
--Contact Joel Wendland at
