A vast gulf between the rich and the rest of
us is incompatible with democracy.
You've no doubt heard about our widening gap between the rich and
the poor. But did you know that the gap between the rich and America’s middle
class is growing almost as fast?
The Center for Budget and Policy Priorities and the Economic
Policy Institute have just released a study that illustrates the severity of
both these gaps, on a state-by-state basis.
In 15 different states, our most affluent 20 percent now average
over eight times the income of our poorest 20 percent, the two think tanks
explain in their new report, Pulling Apart. Back in the late 1970s, not one single state
had a top-to-bottom ratio that large.
After adjusting for inflation, the
nation’s richest fifth of households have seen their incomes rise an average
$2,550 each year since the late 1970s. Average incomes in the nation’s bottom
fifth have increased just $1,330 for those entire three decades.
And incomes for the households in America’s middle fifth? In all
50 states, the gap between the top 20 percent and the middle 20 percent has
widened significantly. The gap between the middle 20 percent and top 5 percent
has widened even more, according to Pulling Apart.
In New York, for instance, inflation-adjusted incomes for the
state’s middle fifth of households increased by just $14,118 between 1977-1979
and 2005-2007. Over that same span, the top 5 percent of all incomes soared by
$193,877.
All these figures, Pulling Apart emphasizes,
understate the real gap between our affluent and everyone else. The report's
data come from surveys the Census Bureau conducts every year. These surveys
don't take into account income from capital gains, the profits from buying and
selling assets.
Capital gains income, the report notes, flows “overwhelmingly” to America’s most
affluent. In 2012, 87 percent of all capital gains “will go to families in the
top 5 percent of the U.S. income distribution.” The gaps detailed
in the report would be substantially wider if it took this income into account.
But do these gaps, in the end, matter all that much? The
researchers behind Pulling Apart have a clear answer. Rising
inequality, they contend, “adversely affects our economy and political system.”
The most basic problem with growing income gaps? They eat away at our social
cohesion.
In a democracy, civics textbooks tell us, people come together
to discuss, debate, and decide solutions to common problems. But this
democratic deliberation only works effectively when most people have the same
problems in common. In deeply unequal societies, they don’t. The rich in these
societies live apart, in their own private universes.
These wealthy people “become increasingly isolated from poor and
middle-income communities,”Pulling Apart's authors observe. One
example: They send their children to private schools and “lose sight of the
need to support public schools.”
“As a result,” the report explains, “support
for the taxes necessary to finance government programs declines, even as the
nation’s overall ability to pay taxes rises.”
The encouraging news? We may still have gridlock in Washington,
but states, individually, can take steps to reduce inequality. States can enact
minimum wages higher than the federal minimum wage rate. They can de-emphasize
sales taxes and rely more on taxing the income of ultra-wealthy households.
The payoff from moves like these?
“States that narrow — rather than widen — income gaps,” promises Pulling Apart co-author
Elizabeth McNichol, “will reap economic benefits in the long run.”
OtherWords columnist
Sam Pizzigati is an Institute for Policy Studies associate fellow. His latest
book is The Rich Don't
Always Win: The Forgotten Triumph over Plutocracy that Created the American
Middle Class.
OtherWords.org