What they found is that as the rich got richer in the decades before the Great Recession, everyone else tried to maintain his standard of living by going deeper into debt. As income inequality grew over that period so did debt levels, because the rich increasingly invested their growing wealth in bonds and bank deposits, in effect providing money for ever more lending to the poor and middle class.
Wall Street headhunter Daniel Arbeeny said his “income has gone down tremendously.” On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound.
“They have a circular that they leave in front of the buildings in our neighborhood,” said Arbeeny, 49, who lives in nearby Cobble Hill, namesake for a line of pebbled-leather Kate Spade handbags. “We sit there, and I look through all of them to find out where it’s worth going.”
Executive-search veterans who work with hedge funds and banks make about $500,000 in good years, said Arbeeny, managing principal at New York-based CMF Partners LLC, declining to discuss specifics about his own income. He said he no longer goes on annual ski trips to Whistler (WB), Tahoe or Aspen.
He reads other supermarket circulars to find good prices for his favorite cereal, Wheat Chex.
“Wow, did I waste a lot of money,” Arbeeny said.
"And while the bankers’ period of remorse may or may not be over, the period of pay restraint certainly is. Bank leaders turned down bonuses in 2008 and 2009, but 14 out of 15 chief executives of leading US and European financial institutions accepted one last year. Total pay for those chief executives rose 36 per cent while revenue increased just 2.9 per cent, according to data compiled for the Financial Times by Equilar, an executive pay research firm."
"Starting around 1980, which is exactly when income inequality in America started to gap out, savings steadily fell. Fundamentally, what this represents is two things: the rich accumulating most of the gains of economic prosperity while the middle class suffered from sluggish wage growth. The rich couldn't really use that gusher of new money, so for 30 years they loaned it out to the middle class in increasingly Byzantine ways, and the middle class used these loans to sustain the steadily improving lifestyle they had gotten accustomed to. In 2008, this game of musical chairs came to a sudden end and the middle class stopped borrowing. And guess what? The rich still couldn't spend all that extra money. If they could, the savings rate would have stayed low. Instead, it shot up. The middle class was borrowing less, and the rich, left with no customers for their money, couldn't find anything to spend it on either. So now they're saving it."
The income mobility myth
By David Callahan
The opinions expressed are his own.Top Republicans have a simple answer to surging public concern about America’s vast wealth divide: More income mobility. “We want success for everybody,” House Majority Leader Eric Cantor said last week, adding that Americans shouldn’t “excoriate some who have been successful.” This remedy for economic unfairness taps into the popular American belief that public policy should ensure equality of opportunity, not outcome.
Too bad it won’t work.
Changes in the economy mean that, no matter how hard people work or how much they invest in education, they may still find themselves barely treading water. Even before the financial crisis, there weren’t enough good jobs to go around – thanks to globalization, automation, declining unionization, and lax labor standards. The majority of new jobs created during the presidencies of Bill Clinton and George W. Bush were low-wage positions with no benefits. These trends – not, say, a lack of ambition – help explain why half of all American households bring in under $50,000 and have no assets. …
“Success for everybody” is simply not possible against this backdrop of structural inequality. Ironically, conservatives like Cantor are placing ever more faith in the great American virtues of hard work and self-improvement even as these virtues deliver less and less mobility. …
New Congressional Budget Office data confirms what we’ve been saying for a while: There’s an income inequality gap, and it’s growing.
"The CBO concluded that while after-tax household incomes grew by 275 per cent for the richest 1 per cent between 1979 and 2007, they rose by 65 per cent for the rest of the top 20 per cent of Americans. For the 60 per cent in the middle-class, after-tax incomes grew by slightly less than 40 per cent, and for the poorest 20 per cent by only 18 per cent."
chart of the day: as union membership rates decrease, middle class share of income shrinks and top 1 percent incomes explode
(Source: think-progress, via gonzodave)
It is clear that poverty, drilled down into neighbourhoods and families for long periods of time, leads to violence – not only the direct violence of crime and suicide, but the structural violence that stunts individual lives, fractures communal bonds, and turns the state into an armed occupier of poor communities … For several decades, protests over poverty and unequal treatment were limited to representatives of the most impoverished and marginalised communities. But the spread and intensification of deprivation, coupled with the impotent posturing of the political establishment, is rapidly changing that.
