“The idea that people make the same or less today than they made 40 years ago is a stunning historical fact.” — Author Jeff Madrick
NPR: As income gap balloons, is it holding back growth?
“This inequality is destabilizing and undermines the ability of the economy to grow sustainably and efficiently,” [Fed governor Sarah Bloom Raskin] said. Income inequality, she continued, is “anathema to the social progress that is part and parcel of such growth.”
The income gap in the United States has ballooned: It’s wider than any time since 1928, in the days before the stock market crash triggered the Great Depression.
[...] “In the 1970s, there was an assault on government oversight and regulation,” Madrick tells Raz. “And eventually, the financial community stopped playing by the rules. There was an economic theory that kept justifying what they were doing. And the American public was not fully aware of what was going on.”
The traditional argument for deregulation states that those policies make America richer, and that a rising tide lifts all boats.
But Madrick says that for the typical American worker, the wage tide has gone out since 1969.
“The typical male worker makes less today, discounted for inflation, than the typical median worker made in 1969,” says Madrick. “The idea that people make the same or less today than they made 40 years ago is a stunning historical fact.”
[...] “[Bank failures] peak up in crisis years. They peak in the 1920s,” [David Moss, a professor of economics at Harvard Business School] tells Raz. “But then most striking, after 1933, when we saw the introduction of federal banking and financial regulation, these banking crises disappear almost completely. And then it continues very, very low until the 1980s, then they pick back up again.”
Moss found it striking that banking failures go down after financial regulation and start rising after the introduction of deregulation.
Then, one of Moss’ colleagues showed him a chart of income inequality over the same period. Moss took that curve and plotted it on the same page as his bank failure curve.
“And lo and behold, it was a striking, striking connection,” Moss says.
As bank failures went up in the 1920s, so did income inequality. As inequality came down in the 1930s, bank failures stayed down. They stayed down together until the advent of deregulation in the 1980s.
For Moss, this coincidence raises more questions than it provides answers. He isn’t sure what exactly the correlation between income inequality and financial failure means.
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So there’s an historical correlation that financial regulation might be one of the best things that could happen for creating economic growth and closing the income gap? Maybe that’s because government regulation and oversight actually keeps financial institutions more honest and accountable than fictional concepts, such as some “invisible hand” guiding everything or Reagan’s “trickle down” fallacy. Maybe it also helps ensure that individuals in financial institutions won’t gamble away everyone else’s money on things like sub-prime mortgage loans while they walk away with their own fortunes intact.
And I’m not even bringing up the 10.5 years of tax breaks for the
job creators wealthy here, or that the wealthy compounded their fortunes during a time of economic loss for everyone else. They work harder than us, right?
It’s almost TOO SIMPLE. That must be why the Tea Party base sides with millionaires like the Koch brothers to protest “big” government and regulation and expiring Bush’s tax cuts for the rich. Because they’re morans.
- The gap in income between the wealthiest Americans and all others has grown strikingly in recent decades, the CBO data show. In 1979, when the data begin, the average after-tax incomes of the top 1 percent of households were 7.9 times higher than those of the middle fifth of households. By 2007, top incomes were 23.9 times higher than those of the middle fifth — a more than tripling of the income gap.