BOOM WAS BUST FOR MILLIONS IN THE U.S.
By Jack A. Smith
By all accounts, the 1990s was the decade of U.S. economic triumphalism, with high employment for workers and Wall Street distributing the big bucks as fast as the Treasury Department could print them. But it should hardly be a surprise that not precisely everyone shared the riches. Indeed, 20% of American households emerged from the boom years with a substantial negative net worth.
The result was that the gap between rich and poor in the United States is widening to record proportions, even according to Census Bureau data which tends to undercount wealth (such as big bonuses for corporate bosses, capital gains, income from non-wage sources) and too narrowly examines the context of poverty.
According to a Census Bureau report June 1, 10% of America’s families were deemed to be poor in 1989, before the boom, and 9.2% (6.6 million families) were poor when the good times reached their apogee in 1999. (The poverty level for a family of four in ‘99 was $16,954 or less.) True, there was a national decline in poverty (though in New York State it increased), but due to the subsequent recession, layoffs and welfare cutbacks, the number of poor people in the U.S. today is quite likely at least as bad as it was in 1989, if not worse.
Using a more just and sensitively calibrated measure of poverty in the U.S., the Economic Policy Institute (EPI), a progressive Washington think-tank, reported last year that 12.7% of the American people were poor in 1999 (34,476,000), not 9.2%. Of this number, 18.9% were children, mainly African-American and Latino. EPI also reports that among the employed in 1999, 26.8% were earning poverty-level wages, compared to 23.6% 25 years earlier. (In most cases, the income of African-Americans and Latinos is in the lower percentiles, an example of which may be determined by comparing the ratio of white to black median family income in 1998: 1.7 to 1.)
In our own New York State, according to an Associated Press report this month based on the new Census Bureau data, 2.7 million people lived in poverty in the last year of the ‘90s. This amounted to 14.6% of the state population (2.7 million out of 19 million), compared to just 13% in 1989. In terms of families, 535,935 (11.5% of the total) lived in poverty in 1999, including 3,460 families in the Mid-Hudson’s Dutchess county and 3,153 in Ulster county, at around four people per family. Child poverty continued to rise in the state during the decade, according to census figures. In New York City -- the country’s richest urban area -- a total of 560,000 children existed in poverty in 1999, compared to 490,000 a decade earlier.
The financial boom of the 1990s produced millionaires galore, creating the greatest increase in the polarization of income between classes in two decades, according to new economic extrapolations by EPI and another Washington think-tank, the Center for Budget and Policy Priorities (CBPP). An estimated 205,000 taxpayers reported procuring $1 million or more in 1999, compared to about 87,000 in 1995. On average, individual millionaire income increased by $568,000 to $3.2 million. By the end of the ‘90s, the growth of the super-rich was such that the top 20% enjoyed incomes 10 times greater than the bottom 20%, an increase of 30% during the decade. (This only relates to income, not to assets -- where the wealthy simply leave everyone else behind in the dust.)
Although the income of millionaires soared throughout the ‘90s, at decade’s end the percentage of their income that went to the federal government in taxes fell by 11% due to the 1997 congressional reduction of capital gains taxes. Speaking of millionaires, it is the rich top 1% of the population that pays the most in estate taxes, which Congress greatly reduced in 2001 for the next several years. On June 6, the House kowtowed 256-171 to make the cuts permanent after last year’s legislation expires at the end of 2010. On June 13, however, the Senate rejected a permanent cut 54-44. The Bush administration favors permanent repeal of the tax, and the legislation is certain to be reintroduced. The rich were the greatest beneficiaries by far of the entire 10-year tax cut enacted last year (which included the estate taxes), legally purloining most of the $1.35 trillion reduction. If the estate tax is finally repealed the next time around, the wealthiest Americans will pilfer an additional $740 billion between 2011 and 2020.
According to the EPI, the rich are getting richer not just at the expense of the poor but the middle income earners as well. “While wage inequality the 1980s was characterized by the top wage earners pulling away from the middle and the middle pulling away from the bottom, trends in the 1990s were different,” the group noted. “The 1990s involved the bottom and middle wage earners growing closer while the top pulled even further away from the rest.” Appropriately enough, the greatest difference in wealth in 1999 was reported to be in the very capital of the worldwide free enterprise system -- Washington, D.C. -- where the top 20% of families managed to survive on an income 22 times greater than the bottom 20% (with family incomes averaging $9,400).
EPI also reported that poor families with children had to work three weeks longer at the end of the ‘90s than they did at the end of the ‘80s in order to retain the same standard of living. In 1989, poor family members had to work an aggregate of 68.3 weeks a year to sustain the family unit, compared to 82.6 weeks a decade later.
The CBPP survey pointed out that the biggest winners in the stock market boom decade were those in the top 1% of the population, who own almost 50% of the stocks. The bulk of stock owners, 80%, hold just 4%. The remaining 19% accounts for the remaining 26% of stock values. The last two decades have been exceptionally good for the richest 1%, who doubled their enormous share of the national wealth during this period. They now are said to possess just about 40% of it.
EPI calculated the net worth (the value of money, property and assets remaining after all costs, losses, taxes, depreciation, etc., are deducted) of 1998 households and found that the top 1% was worth $10,203,700 net; the bottom 80% of households had $56,100. For the bottom 20% of households alone, the average net worth was an almost unbelievable -$8,900. That’s a minus sign before the last figure, meaning that one-fifth of the households in America -- when all assets and debts are accounted for -- have no assets and are almost $9,000 in the hole, making it rather difficult for these utterly powerless millions to enjoy their vaunted democratic right to life, liberty and the pursuit of happiness.