Wealth and Income Distribution Charts

I created  two charts, one on income, the other on wealth.
And I've included two essays, both rather basic. 


Basic to a modern economy are the distribution profiles of income and wealth. I've fashioned two home-made colored-pencil charts in this posting, one displays wealth distribution and the other income distribution. And below them I've included two recent short essays that are introductory in nature, all the same they are crucial for understanding the needs we face. In short, the lower-earning and -saving majority are being left out, and  a social disaster is in the making.  
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But first I'm including an Introduction to the overall blog, you can skip it, or read it, here it is:

A reader stumbling on to this blog might wonder what to read. The essay below is easy and basic, "America's Economic Decline Simply Explained"  (click here). The next about Stark Inequality is a little harder, but full of basic info. The Solutions essay breaks a lot of assumptions about how to solve economic problems, and the Full Employment is good, also bursting with unconventional ideas; and last of all the Radical Populist Budget is one of my favorites. The most popular essay is "The 1950s and Today." 
I have few readers, but few is better than none. This is my public record book where I store thoughts. I also enjoy constructing the photos and making detailed and very involved searches  -- Growth and the Federal Budget is such a long-winded and overly detailed screed. Often I'll come back and realize that I've forgotten the content of an essay. That's because they are too dense, but, then, also I repeat a lot. The graph from Olivier Giovannoni on the decline of income share for the lower-earning 90%, from 1980 to the present, is the most important thing a reader should learn. Most of the above articles I recommended contain this graph. The Radical Populist essay has it, and in several more it appears. Even this present essay could use, so here it is, again. 

What does the graph show? The deep blue area represents the "labor share" to the lower-earning 90%. Note that in 1980 it begins to decline, from 55% to 38%. Here's what Giovannoni states at the Levy Institute: "This amounts to a transfer of $1.8 trillion from labor to capital in 2012 alone and brings the US labor share to its 1920s level." In 2018 the share decline, of 17%, represents $2.75 trillion. Without this drop the incomes of the lower-paid workers would be about $19,000 higher per worker among each one of the 144 million workers whose income is below $90,000 a year. So this is a major shift in income distribution, and if we could ever regain the "labor share" of 1945 to 1980 we would be living in a much improved society. Not perfect, by any means, but improved. That's why the graph is so important. (Continued at --  the most recent essay of May, 2018.) 

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Today's report:

It's a common sense Keynesian idea that aggregate demand is necessary for efficient, mass production. Mass production exists only with mass consumption which is also called purchasing demand. Therefore a relative equality is needed. The worker-majority must be able to purchase what they produce. Wages and wealth must keep pace. A too equal distribution would be unfair, but a too unequal distribution will be a drag on output -- not enough purchasers. What corporation will produce goods that are not purchased? Why is India so poor? 

From two reports I've reproduced two charts, on income and wealth distribution.
And I've included two recent essays, one 1,200 words, the other 900. Similar in focus. 

Wealth today:


































Source, Edward N. Wolff
YouTube has a video on "Wealth Inequality in America". By July, 2018, some 21 million had viewed the video. It is amazing, check it out here.

Income today:


Hope you can read the small print.
Source: here, here and here.

Post-tax income growth of 21% between 1980 and 2014 shows a slight improvement for the lower 50%, but that's in light of an overall growth rate of 61%.

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This following is a letter to the editor, so it's general info and simple: 

    The Trump/Republican Budget and                                

               America’s Poorest 40%                               

In April, 2018, the Congressional Budget Office scored the Trump/Republican tax bill passed in December, 2017, and said it would increase the public debt from 76% to 96% of GDP by 2028. This is an increase of $4.6 trillion. Mr. McClintock voted for this bill stating that economic growth would increase the tax revenues offsetting the decline created by the tax cuts. In 1980, running against Ronald Reagan, George H. W. Bush called this “voodoo economics”. Reagan and Bush I increased the national debt from 25% of GDP to over 50%. Bush was correct. And in 10 years we will see approximately the same increase in the national debt. A report from ITEP states: "The national debt today [April 9, 2018] stands at $15.7 trillion.[3] Two decisions made since 2000 — tax cuts and America’s wars since September 11, 2001 — together account for roughly two-thirds of that amount.[4]"

Due to the fact that about 60% of the county voted for Mr. McClintock, and he and Mr. Trump see eye to eye, I don’t know how to approach the readers of the Mariposa Gazette. It will be an uphill battle. In my opinion, the Republicans, nationally, are making life worse for most Americans.

Approximately 43% of Americans live with incomes that fall below 200% of the official poverty level. They are either poor or “low income" in this very wealthy nation, according to the Supplemental Poverty Measure, U. S. Census, page 7. This is after paying taxes and receiving government transfers. Many scholars claim the poverty line is artificially low, and 140% of poverty is where it should be set. These 43% are our neighbors, and they make up the majority in some cities and neighborhoods. As a nation we are so rich that poverty could be eliminated. How much income does our economy generate? It created over $15 trillion in 2017 (see page 34), and evenly divided among 163 million workers, that’s an income of $92,067 per worker. But over half of all workers earned less than $30,553 in 2016 (last year for available statistics), and the average annual income for the lower half was below $13,000 a year. These facts come from the Social Security Administration’s annual report on wage income. An income of $13,000 a year is also 11% of the average of $92,067, and a minimum wage worker working full-time year-round would earn more. I repeat, we are very prosperous, but we have polarized income and wealth distribution. 

Between 1980 and 2014 the economy grew by 60%, according to two reputable reports. The income of the lower-earning half increased from $16,000 to $16,200, while the income of the top 1% increased from $420,000 to $1,300,000. The top 1% received 36% of all growth, the next 9% received 32%, and the percentiles 50 to 90 received 32%. The lower half received zero percent. 

On June 7, 2018, the Federal Reserve released its quarterly Flow of Funds report, (see page 2) and the private “household net worth” is over $100 trillion. That’s trillion, not billion. It stood at $100.768 trillion  — the first time surpassing $100 trillion. The federal government will spend $4.1 trillion in 2018 in comparison. And still we have a $500 billion deficit. We could easily tax that $100 Trillion and balance the budget. A financial transaction tax would be enough. Household net worth stood at $48 trillion just 9 years ago, so there has been a boom in the value of paper assets, as many stock watchers know. Wage income did not double, it increased by 5%. The nation’s average wealth, per adult over 20 years-old, stands above $400,000. We are wealthy. Yet the median wealth — the middle rung — per adult is about $40,000. The lower-saving 40% of U.S. households has a negative net worth, they owe on average $9,860, according to a study by Edward N. Wolff, a scholar with abundant credentials in wealth studies. The wealthiest one percent own nearly 40% of all wealth, on average about $15 million per adult, or $31,300,000 per household, according to E. Wolff. Eighty percent of U.S. households own only 10.1% of all wealth. 

This is not the profile of a nation that should massively cut taxes to the wealthiest. The Trump tax cut and the following budget are twin policies. Mr. McClintock railed for years against the Obama era deficits, and now he supports deficits. Obama’s high spending was directly related to the worst recession in 75 years; they included unemployment insurance payouts, food, housing, and medical services to the nearly 9 million families who lost employment, and often their homes. The first 14 months of the recession were under George Bush’s term of office, the last 4 months were under Obama’s term. Deregulation of the financial sector resulted in the approximate evaporation of 25% of the private savings of America’s households, 70% of which were financial savings. It was a financial sector crisis.

The Trump budget will slash funding to programs that provide “social benefits” to the lower-earning 40% of America. These “non-defense discretionary” programs will lose 60% of their funding by 2028, it’s clearly stated in the 2019 budget proposal. Robert Greenstein at the Center for Budget and Policy Priorities states these are “massive cuts in . . . education, health care, assistance to low-income children and families, job training, environmental protection, and scientific research.” 
              
In light of these facts, I can’t understand how intelligent adults can vote in support of the present government. 
And a last graph originating from the Office of Management of Budget: 

How to absorb all this? The largest cuts occur to which agencies? 
$15 bn to HHS, $11 bn to State, $9 bn to Education. The EPA and State are the big losers, HHS is second biggest loser. But what is the average cut in one percentage? Maybe it's 14%. These are discretionary non-defense programs, so Medicaid, Medicare and Social Security are not included. Note the fine print about "eliminate funding". And the IRS? The CBPP has a report, stating, "Despite the once-in-a-generation enforcement challenge that the law poses, the bill leaves enforcement funding at roughly the same level as in 2017 — and down $1.5 billion (23 percent) since 2010 in inflation-adjusted terms." The new tax law is an opportunity for evasion. 

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The next article deals with the income distribution of 1960. 

     Give Me That Ol’ Time Income Distribution    

Times aren’t so good for many Americans. A recent survey found that 78% of U.S. workers live paycheck to paycheck -- "38% sometimes live paycheck-to-paycheck, 17 percent said they usually do and 23 percent said they always do.", that's 78% on the edge --- and 71% live in debt, and 56% save less than $100 a month, and 40% of adults say that finding $400 in cash for an emergency within 30 days would be impossible. The total national income divided by all who worked and submitted a W-2 form, 163 million, equals over $92,000 per worker. Something is wrong here.

The Millenial generation (comprising 34% of U.S. population and between 18 and 34 years-old) is often paying between 68% to 90% of income just to rent an apartment. Nationally a rate of 34.1% of young adults are living at home with parents; this rate has never before been so high; in Miami area “a whopping 44.8% of 18- to 34-year-olds live with their parents.” The Pew Center published a graph showing in 1960 the median income for this age group was $27,300 a year, and it is now $15,000. Rental costs as a percentage of income have increased. The Federal Reserve conducts an annual survey,  page 7, on household well-being, and reading the fine print, it concludes that 40% of all adults “have scores that suggest a high likelihood of material hardship”. The U.S. Census poverty study, the Supplemental Poverty Measure, shows that 43% of Americans live in households with after-tax and after-transfer incomes below 200% the poverty line. That indicates a per person income of below $12,500 in a family of four. Yet our very prosperous economy generates over “$45,090” of income after taxes for each individual, says the Bureau of Economic Analysis (Table 2.1). Very likely, 40% of Americans live with incomes that are less than, and often much less than, a quarter of the average that our economy generates. That is shocking and depressing. We should work to change the depressing picture. Some of these data come from an article by Paul Buchheit at Common Dreams. Another article by Buchheit argues that about half of Americans live in poverty. Kathleen Short of the U.S. Census has stated, see page 30, in 2013, about 30% live below 140% of the poverty threshold, and that's poverty. 

As Woody Guthrie once sang, 

“If you ain't got the do re mi, boys, you ain't got the do re mi,

Why, you better go back to beautiful Texas, Oklahoma, Kansas, Georgia, Tennessee.

California is a garden of Eden, a paradise to live in or see;

But believe it or not, you won't find it so hot

If you ain't got the do re mi.”

It was not always like this. Let’s look at past distribution ratios of wealth and income, this will restore a little hope on our sad condition. I printed out a page from Edward Wolff's 2018 report on wealth , 2017, "Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?" (For a summary, see here.) Table 2 shows figures for wealth and income distribution from 1962 to 2016. The wealth picture shows in 1962 the lower-saving 80% owned 19.0% of everything, and now they own 10.1%. If we had that 1962 ratio today, an additional $87,840 would be in the savings of each of the 100 million households of the lower-saving 80%. It would increase the median household savings from  $78,100 to almost $166,000, and it would erase the debt burden of the lower-saving 40% of U.S. households. 

And for income distribution, in 1962 the lower-earning 80% took in 54.0% of all income, but by 2015 its share had dropped to 36.0%, a drop of 18.0%. What happened to the 18%? The top-earning 10% in '62 took in 30.0%, and in 2015 they received 49.9%  - an increase of 19.9% of all income. How much is 18% of all income? Today it's $2.7 trillion (multiply 18% times $15.007 trillion, from Congressional Joint Committee on Taxation, Overview), or it's $2.9 trillion (BEA.gov, Table 2.1). So $2.7 trillion distributed to the lower-earning 80% of workers, and that would be about 130 million workers, would increase the income of each of the 130 million by $20,769 every year. Other researchers also report the same general shift in income shares. This is in the ballpark for the figures that the Economic Policy Institute present on their web page “What should you be earning?” It also matches the general picture drawn by Olivier Giovannoni (Working Paper #66) showing a distribution slide of the lower-earning 90% beginning in 1980. The CBO report of 2011 also shows a massive shift. 

Now let’s look at the change that would happen to the incomes of the lower-earning half of U.S. workers. The median income worker — half earned more wage income and half earned less —  among all 163 million workers in 2016 earned in wages $30,533. That means 81 million earned less than $30,533, and the average income for the lower half was just under $13,000 in 2016. (You have to add the income columns of the Social Security Administration report, and divide by number of workers.) If we could add back the income share they once enjoyed, it would be, on average, an additional $20,769 of yearly income on top of today’s average of $13,000, for a total average income of $33,769 per worker for all 81 million in the lower-earning half. This is to say this average income would increase by times 2.6, and would be a little more than today’s median. The median worker’s income would increase from $30,533 to $51,299. The Economic Policy Institute estimates that $47,050 would be this worker’s income.

Wolff’s report shows the lower 80% earning 36.0% of all income in 2016. Restoring that to 54% adds $2.7 trillion back to the lower 80% of worker’s income. So the upshot -- if we had the same distribution as 1962, half of all workers would nearly triple their average incomes, from $13,000 to $33,769. Today’s median would become the average for the lower 50%, and the median would be between $47,000 and  $51,299. A different world it would be.  

How did the economy survive with such a strange and equal distribution of income? It grew faster, and all wage levels grew together, not like today (see here). We still could return to 1962 policies, I think the top marginal income tax rate was 91% on all income in excess of $3,000,000, and 81% on all income above $1,050,430 (see the Tax Policy Institute). 

Many economists would claim this distribution ratio would be impossible. When Gerald Friedman stated that the Sanders’ proposals for the economy would drive growth to 5% a year he was thoroughly scolded by mainstream left-wing economists such as Paul Krugman. 

Friedman offered a reasonable reply, affirming it is possible. It is. 

As another song goes, “I want that old time religion (or income distribution), It is good enough for me."  

                                                                                                            

                    Some Recommendations                   

                                                                                                             

OK, too much info already. But here's some reading that is promising. First the Center for American Progress published a positive paper, Blueprint for the 21st Century, which includes a government jobs program. What a relief that this is getting some attention. I calculated recently that the actual unemployment rate is around 11.8%, not the official 3.8%. The report states unemployment is 8.7%, but they should add on part-time workers who want full-time, and it jumps to close to 12%. Here's a few relevant sentences from the Intro: "As part of the Jobs Blueprint, the Center for American Progress proposes five major initiatives that will provide high quality, affordable child care; rebuild America’s infrastructure; modernize K-12 schools; prepare America’s communities and housing stock for the effects of climate change; and provide critical supports to senior citizens and persons with disabilities. We propose investing in America’s physical capital and human capital for the 21st century—investments that the market will not make by itself. Together, these nationwide investments will create more than 3 million new jobs. Furthermore, in the most economically distressed areas of the country, CAP proposes a job guarantee that, we estimate, about 1.2 million persons will take up."

Also I'm listening to the Ralph Nader Radio Hour, this morning I'm listening to economist Robert Pollin talk about the California health care for all program, funded by a corporate tax on "gross receipts" on the largest corporations with more than 500 employees. Remember that 1,900 or so corporations in the U.S. employ 34% of all workers and generate 44% of all revenues. They will fund the California health care tax, in part, the other part is a sales tax that exempts spending on food, housing and transportation, and has a tax credit to households with low incomes. Same show, Dr. S. Woolhandler explains health care for all. Ralph's shows in general are very high quality; you can learn a lot. 

Last recommendation, read the article at the Century Foundation about labor unions, "A 'Better Deal' Ensures Long-Overdue Worker Protections".  On the same topic, Bernie Sanders' web page explains his position on labor reform.  

Here's a quote from the Sanders' web page: "According to the OECD, in 2013 Americans worked 54 more hours [one week] per year than Japanese workers, 119 hours [3 weeks] more than British workers, 299 hours [7.5 weeks] more than French workers, and 425 [10 weeks] hours more than German workers. According to this Gallup poll, the average American working a full-time job is working well over 40 hours a week:", and a graph follows. Here's a link to an article published at In These Times, "Sanders Has a Sweeping Plan to Expand Worker Rights and Workplace Democracy". 

The "last" recommendation, for now, July 16, continues. Professor William Lazonick published this month in the American Prospect, the article "The Curse of Stock Buybacks". Here's the concluding paragraph: "And most importantly, on March 22, [Senator] Baldwin introduced legislation known as the Reward Work Act, which would rescind Rule 10b-18 [that allows stock buybacks] and, for the sake of retain and reinvest, mandate that all U.S. publicly listed business corporations have one-third of board members be representatives of workers. Rolling back the 2017 corporate tax cut is imperative. In addition, a ban on stock buybacks would be a giant step in resurrecting corporate employment as a foundation for a prosperous and expanding middle class."

Two such new rules -- eliminating stock buybacks and mandating workers on corporate boards -- would mark a radical departure from the predatory, value extraction model that now characterizes the core of the American economy. Lazonick is the source of the fact that "The largest 1,909 corporations, all employing more than 5,000 workers in the U.S., generated 44% of all revenues, and employed 34% of all workers. The health (or non-health) of these large companies spills over to the smaller ones. "

I wrote that sentence, it appears in this recent essay. 

Certain reforms are critical: 
1) Prohibit stock buybacks; 
2) Establish a short-term capital gains tax that will kill the pernicious short-term speculative beast that has captured American finance; 
3) Place workers and community members on corporate boards; 
4) Legislate tax incentives to transform American corporations into profit-sharing and ownership-sharing organizations (ESOPs); 
5) Re-establish the power and legitimacy of worker strikes; 
6) Raise the minimum wage to $15 an hour, which would increase the incomes of 41 million workers (see here), or 25% of U.S. workers. 
7) Tax financial assets;
8) Finance elections with public funds only;
9) Re-establish the guillotine. 
Maybe only #9 is necessary. 
Nick Hanauer also published at the American Prospect with the advice to raise taxes on the wealthiest. "Want to Expand the Economy? Tax the Rich"   -- The "Solutions" essay at this blog elaborates on this theme.