Coming out of the Great Recession in 2009, inequality increased dramatically, the opposite of what happened when the Great Depression ended nearly eight decades earlier. Why? The top 1 percent of Americans raked in 95 cents out of every dollar of increased income from 2009, when the Great Recession officially ended, through 2012. Almost a third of the entire national increase went to just 16,000 households, the top 1 percent of the top 1 percent, Piketty and Saez’s analysis of IRS data shows. By contrast, in 1934, the year after the Great Depression officially ended, the 1 percent of the 1 percent saw their incomes slip by 3.4 percent. The income changes for the vast majority are just as revealing. The bottom 90 percent saw their average incomes rise 8.8 percent in 1934 over the prior year, while in 2012 the same statistical group had to get by on 15.7 percent less than in 2009. In showing the crucial role of government policy in the distribution of wealth and income, Piketty throws the proposals by many conservatives and billionaires to end all taxes on capital into proper perspective. The Steve Forbes flat tax, for example, would levy wages and business profits, but not capital gains, dividends or interest, meaning that the already rich could live tax-free while workers would bear the full burden of government. Piketty shows that whether capital is taxed or not, inequality will grow under current policies because savings from current wages and salaries cannot grow as much as returns to existing riches. The process of accumulating “becomes more rapid and inegalitarian as the return on capital rises and the [overall economic] growth rate falls,” Piketty writes. “Whenever the rate of return on capital is significantly and durably higher than the growth rate of the economy,” he writes, “it is all but inevitable that inheritance (of fortunes accumulated in the past) predominates over saving (wealth accumulated in the present).” america.aljazeera/opinions/2014/3/thomas-piketty-capitalinequalityeconomics.html
Posted on: Mon, 24 Mar 2014 13:01:48 +0000
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