Boom Was Bust for Millions in the U.S.

[jacdon@xxxxxxxxxxxxx]

The following article appears in the June 15, 2002, issue of the
Mid-Hudson Activist Newsletter, published in New Paltz, NY, by the
Mid-Hudson National People?s Campaign/IAC.
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BOOM WAS BUST FOR MILLIONS IN THE U.S.

By Jack A. Smith

By all accounts, the 1990s was the decade of  U.S. economic
triumphalism, with high employment for workers and Wall Street
distributing the big bucks as fast as the Treasury Department could
print them.  But it should hardly be a surprise that not precisely
everyone shared the riches.    Indeed, 20% of American households
emerged from the boom years with a substantial negative net worth.

The result was that the gap between rich and poor in the United States
is widening to record proportions, even according to Census Bureau data
which tends to undercount wealth (such as big bonuses for corporate
bosses,  capital gains, income from non-wage sources) and too narrowly
examines the context of poverty.

According to a Census Bureau report June 1, 10% of America?s families
were deemed to be poor in 1989, before the boom, and 9.2% (6.6 million
families) were poor when the good times reached their apogee in 1999.
(The poverty level for a family of four in ?99 was $16,954 or less.)
True, there was a national decline in poverty (though in New York State
it increased), but due to the subsequent recession, layoffs and welfare
cutbacks, the number of poor people in the U.S. today is quite likely at
least as bad as it was in 1989, if not worse.  

Using a more just and sensitively calibrated measure of poverty in the
U.S., the Economic Policy Institute (EPI), a progressive Washington
think-tank, reported last year that 12.7% of the American people were
poor in 1999 (34,476,000), not 9.2%.  Of this number, 18.9% were
children, mainly African-American and Latino.  EPI also reports that
among the employed in 1999, 26.8% were earning poverty-level wages,
compared to 23.6% 25 years earlier.  (In most cases, the income of
African-Americans and Latinos is in the lower percentiles, an example of
which may be determined by comparing the ratio of white to black median
family income in 1998:  1.7 to 1.)

In our own New York State, according to an Associated Press report this
month based on the new Census Bureau data, 2.7 million people lived in
poverty in the last year of the ?90s. This amounted to 14.6% of the
state population (2.7 million out of 19 million), compared to just 13%
in 1989. In terms of families, 535,935 (11.5% of the total) lived in
poverty in 1999, including 3,460 families in the Mid-Hudson?s Dutchess
county and 3,153 in Ulster county, at around four people per family. 
Child poverty continued to rise in the state during the decade,
according to census figures.  In New York City -- the country?s richest
urban area -- a total of 560,000 children existed in poverty in 1999,
compared to 490,000 a decade earlier.  

The financial boom of the 1990s produced millionaires galore, creating
the greatest increase in the polarization of income between classes in
two decades, according to new economic extrapolations by  EPI and
another Washington think-tank, the Center for Budget and Policy
Priorities (CBPP).  An estimated 205,000 taxpayers reported procuring $1
million or more in 1999, compared to about  87,000 in 1995. On average,
individual millionaire income increased by $568,000 to $3.2 million. By
the end of the ?90s, the growth of the super-rich was such that the top
20% enjoyed incomes 10 times greater than the bottom 20%, an increase of
30% during the decade.  (This only relates to income, not to assets --
where the wealthy simply leave everyone else behind in the dust.)

Although the income of millionaires soared throughout the ?90s, at
decade?s end the percentage of their income that went to the federal
government in taxes fell by 11% due to the 1997 congressional reduction
of capital gains taxes.  Speaking of millionaires, it is the rich top 1%
of the population that pays the most in estate taxes, which Congress
greatly reduced in 2001 for the next several years.  On June 6, the
House kowtowed 256-171 to make the cuts permanent after last year?s
legislation expires at the end of 2010.  On June 13, however, the
Senate  rejected a permanent cut  54-44.   The Bush administration
favors permanent repeal of the tax,  and the legislation is certain to
be reintroduced.  The rich were the greatest beneficiaries by far of the
entire 10-year tax cut enacted last year (which included the estate
taxes), legally purloining most of the $1.35 trillion reduction.  If the
estate tax is finally repealed the next time around, the wealthiest
Americans will pilfer an additional $740 billion  between 2011 and 2020.

According to the EPI, the rich are getting richer not just at the
expense of the poor but the middle income earners as well.  ?While wage
inequality the 1980s was characterized by the top wage earners pulling
away from the middle and the middle pulling away from the bottom, trends
in the 1990s were different,? the group noted. ?The 1990s involved the
bottom and middle wage earners growing closer while the top pulled even
further away from the rest.?  Appropriately enough, the greatest
difference in wealth in 1999 was reported to be in the very capital of
the worldwide free enterprise system -- Washington, D.C. -- where the
top 20% of families managed to survive on an income 22 times greater
than the bottom 20% (with family incomes averaging $9,400).

EPI also reported that poor families with children had to work three
weeks longer at the end of the ?90s than they did at the end of the ?80s
in order to retain the same standard of living.  In 1989, poor family
members had to work an aggregate of 68.3 weeks a year to sustain the
family unit, compared to 82.6 weeks a decade later.

The CBPP survey pointed out that the biggest winners in the stock market
boom decade were those in the top 1% of the population, who own almost
50% of the stocks. The bulk of stock owners, 80%, hold just 4%.  The
remaining 19% accounts for the remaining 26% of stock values.  The last
two decades have been exceptionally good for the richest 1%, who doubled
their enormous share of the national wealth during this period.  They
now are said to possess  just about 40% of it.

EPI calculated the net worth (the value of money, property and assets
remaining after all costs, losses, taxes, depreciation, etc., are
deducted) of 1998 households and found that the top 1% was worth
$10,203,700 net; the bottom 80% of households had $56,100.  For the
bottom 20% of households alone, the average net worth was an almost
unbelievable -$8,900.  That?s a minus sign before the last figure,
meaning that one-fifth of the households in America -- when all assets
and debts are accounted for -- have no assets and are almost $9,000 in
the hole, making it rather difficult for these utterly powerless
millions to enjoy their vaunted democratic right to life, liberty and
the pursuit of happiness.

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