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Life, liberty and inequality

For most at the bottom, the American dream is a mythNiall Crowley 

 

In February 2012 Mitt Romney told CNN “By the way, I’m in this race, because I care about Americans. I’m not concerned about the very poor; we have a safety net there. If it needs repair I’ll fix it”. Romney’s policies would appear to preclude any such repair. He has pledged to reduce non-defence spending to 16% of GDP, requiring half a trillion dollars in cuts in 2016.

In the New York Times in 2009 President Barack Obama stated “we do want to grow the pie, but we want to make sure that prosperity is spread across the spectrum of regions and occupations and genders and races”. However in 2010 the poverty rate rose to 15.1%, from 12.5% in 2007, the highest level since 1993.

The richest 1% of households increased their share of total income from 16.9% in 2002 to 23.5% in 2007. This was the highest income concentration since 1928. The income of this group fell in 2008 and 2009 but rose by 12% from 2009 to 2010. In 2010 they received 19.8% of all after tax income.

Within this overall inequality there are particular inequalities for women who experienced a 19% gender pay gap compared to men in 2009.  In the same year the median weekly wage of African American workers was 65% of White American workers. The figure for Hispanic American workers was 61%.

Wealth is even more unequally distributed than income. The richest 1% owned 34.6% of total US wealth in 2007. In the same year the top 20% owned 85% of the wealth in the country. The wealth held by the richest 1% actually increased after the crisis to 37.1%.

‘CNN Money’ highlight that White Americans have 22 times more wealth than Black Americans and that this gap nearly doubled during the crisis. The median household net worth for White Americans was $110,729 in 2010, versus $4,995 for Black Americans, according to Census Bureau figures. Hispanic Americans had a median household net worth of $7,424, a 15 to 1 gap.

Inequality of power and influence is captured in terms of the demographic composition of Congress. In the current 112th Congress women make up 16.6% of members of the House and Senate. African Americans make up 9% and Hispanic Americans make up 5%.

The USA prides itself on being the land of opportunity. However,  the great American Dream might well be the great American myth. The USA has less relative mobility than most Western European nations and Canada. In its publication Pursuing the American Dream the ‘PEW Center’ economic mobility project measures mobility, by family income and wealth and personal earnings, to reveal how closely tied a person’s place on the economic ladder is to that of his or her parents.

Eighty-four percent of Americans have higher family incomes than their parents did which demonstrates absolute mobility. However, those born at the top and bottom of the income ladder are likely to stay there as adults, demonstrating an absence of relative mobility. More than 40 percent of Americans raised in the bottom quintile of the family income ladder remain stuck there as adults, and 70 percent remain below the middle. African Americans are more likely to be stuck at the bottom and fall from the middle of the economic ladder across a generation.

Joseph Stiglitz in The Price of Inequality points out that recent income growth primarily related to the top 1%: those at the bottom and in the middle are actually worse off today than they were at the beginning of the century. He concludes that “four years ago there was a moment where most Americans had the audacity to hope. Trends more than a quarter of a century in the making might have been reversed. Instead, they have worsened. Today that hope is flickering”.