The economic meltdown which began on wall street and reverberated throughout main street resulted in millions of people losing their pensions, savings, homes and jobs. Six years later, the wealthy have prospered extraordinarily well…the rest of America is still struggling.
The economic crisis was a result of unregulated investment markets; using predatory lending practices, banks paid out mortgages to risky borrowers while simultaneously betting against the borrowers’ ability to pay back the loan. When the housing bubble collapsed, the financial industry collapsed too.
The financial industry easily convinced the government that they were too big, too important to fail. Congress acted quickly and within a few days President Bush signed a bill, written by bankers, that would bail corporations out with taxpayer dollars. There was no legislation that would prevent the crisis from reoccurring.
The Great Recession had devastating impacts: the taxpayers paid out trillions in emergency loans to businesses (with no help for 200,000 small businesses that went under). Americans lost 8.8 million jobs and $3.4 trillion in retirement savings. Unemployment rates spiked above 10% in fall of 2009 and hovered over 9% for several consecutive months. Foreclosures increased by 81%.
Six years later, under the leadership of the Obama administration, the economy has vastly improved. The stock market has more than doubled, the unemployment rate has dropped to 5.7% and the housing market has stabilized.
It’s not all good news. The median American wage has stagnated and workers are working harder and longer hours for less money. Low wage earners, fifty percent of which are 25 years of age or older, have seen no increase in the federal minimum wage and pay a higher percentage of their wages to taxes than higher wage earners.
The truth is the middle class has been struggling for decades while the wealthy have been, well, getting wealthier. Adjusted for inflation, the average wage today has approximately the same purchasing power as it did in 1979. Median incomes, adjusted for inflation, have remained flat over the last 20 years.
The wealthy, however, have done very well…especially in the last six years. The top 1% saw their real income increase by 35% while the rest of Americans saw only a .08% increase. Through this massive economic recovery, the top 1% had captured about 91% of the gains.
America’s wealth gap between the middle and upper incomes is at it’s widest since the Great Depression. The wealthiest 160,000 families own as much wealth as the poorest 145 million families.
Why are the working class not getting ahead while the wealthy are making extraordinary gains? Are the wealthy working harder than the average American or have they simply gamed the system?
For decades, there have been strategic efforts, spearheaded by corporate interests, to destroy the labor movement, decrease and even eliminate taxes on the wealthy, deregulate the financial markets, stall wage increases, privatize social security, dissolve private pensions and capitalize on global trade.
These strategies have been very successful. Today, union membership rates are at 100-year lows; the federal minimum hourly wage is $3 less than what it should be, adjusted for inflation; privates pensions are almost extinct; trade agreements such as WTO and NAFTA have sacrificed the American manufacturing industry so that corporate profits could increase; and the repeal of Glass Steagall is what many believe caused our most recent financial crisis.
Progressive leaders like Robert Reich, Elizabeth Warren and Bernie Sanders have been sounding the alarm on wealth inequality for years, proposing a number of strategies that would protect the working class: raising the minimum wage; stronger regulations on financial markets; taxing financial transactions…to name a few.
Conservatives are talking about income inequality because they can’t not talk about it. It is the giant gorilla in the room. They, however, propose the same old strategies that benefit the rich and exasperate the wealth gap.
We have two choices: we can empower the working class to benefit from the growing economy or we can continue to allow the prosperous to prosper at the expense of the middle class. There are economists that believe that the middle class is an endangered species…it will be up to the middle class to fight for its survival.