Month: February 2024

Civic Issue Blog #2: How the Income Gap has Affected America

amg8310 on

In my last blog, I discussed how the growing wealth gap in the United States became so enormous in the first place. I discussed the impact of tax cuts, productivity, lobbying, and restrictions on unions. I talked about how these issues have caused the rich to become richer and the middle class to sink into poverty. Yet, what are the actual implications of America’s income gap? How has this affected your average, everyday American?

The Middle Class

A bar chart showing that incomes rose the most for upper-income households in U.S. from 1970 to 2020

The middle class, over time, has been shrinking while simultaneously getting poorer and poorer. The widening of the income gap and the shrinking of the middle class has led to a steady decrease in the share of U.S. aggregate income held by middle-class households. In 1970, adults in middle-income households accounted for 62% of aggregate income, a share that fell to 42% in 2020 (Pew Research Center). Middle-income Americans have fallen further behind financially in the new century. In 2014, the median income of these households was 4% less than in 2000. Furthermore, because of the housing market crisis and the Great Recession of 2007-09, their median wealth (assets minus debts) fell by 28% from 2001 to 2013 (International Monetary Fund).

The middle class is a representative of the center of society. Before income inequality became so apparent, the middle class served an important role in our economic system. It is not so economically precarious that middle-class Americans feel powerless and completely dependent on gifts from others. They had the time to look up political candidates and make an educated vote, or read the news, and they had room to take risks, such as starting a business or inventing something new.

However, nowadays being “middle class” means something entirely different. Families, as I’ve mentioned before, experience limited income growth over time, making it challenging to keep up with rising costs of living, inflation, and unexpected expenses. This is why both the recession of 2008 and the COVID-19 pandemic hit the middle class so hard- because so much of the nation’s income is taken up by the top 1%, that the class we intend to be the most stable is highly unstable in today’s economy. And considering how many Americans are in the middle class, the issue of income inequality is affecting your average, everyday citizen. Inflation has skyrocketed, and now people cannot afford housing, education, hospital bills, etc. Their incomes were meant to adjust for that increase in prices over the years. But it hasn’t. Because (as I talked about in my last post) people are not being paid for their increase in productivity. People’s real wages are decreasing by the second, and that money is instead going to the extremely rich. If the middle class is so affected by this issue, you can only imagine how it would affect the lower class.

The Lower Class

12.4% of Americans now live in poverty according to new 2022 data from the U.S. census, an increase from 7.4% in 2021. Child poverty also more than doubled last year to 12.4% from 5.2% the year before. The U.S. poverty level is now $13,590 for individuals and $23,030 for a family of three (U.S. Census Bureau). According to the latest ACS data, nearly 41 million people in the United States lived below the poverty line in 2022. That is nearly 1.5 million more people than in 2019, before the pandemic struck. The COVID crisis has exacerbated inequalities between the very wealthy and the rest of the population, and similarly to the middle class, the lower class has become extremely unstable.

 

As shown by the graph, the ideal economic system that 92% of citizens agree on is a system in which nobody falls below the poverty line. This is far, far from our reality. Each year, more and more people are falling from the middle class to the lower class, and even more are falling below the poverty line. The lower class, just like the middle class, is incredibly unstable due to its minuscule share of the nation’s wealth as well as little to no political power. The lower, working class does not have the resources to fight against poverty. The government will keep ignoring poverty, as long as the upper-class keeps funding that ignorance and continues to lobby politicians. Poverty is a vicious cycle that has only been exasperated by the recent trends in income inequality.

The Upper Class

The rise in income from 1970 to 2020 was steepest for upper-income households. Their median income increased 69% during that timespan, from $130,008 to $219,572 (Pew Research Center). As I talked about in my last post, the ultra-rich hold political power, in which they are able to receive tax-cuts and restrict their workers from receiving proper compensation for the immense growth in productivity over the years. Instead, they take that compensation for themselves. Even worse, the general public does not recognize this. The human mind cannot fully comprehend large numbers, and therefore we largely underestimate how rich the rich actually are. Billionaires could bring thousands upon thousands of families out of debt with a tiny fraction of their income. They could invest that money in small businesses, workers, etc to fuel the working class… but most don’t. As they say, “There is no ethical billionaire”.

They have made it there by exploiting their workers, not compensating them, and then keeping the general public in the dark about how they make their money. They focus their agenda on policies that will benefit them, instead of the general public. This is also a cycle- when the rich are continuously empowered, both financially and politically, they will continue to do things that benefit them and only them, while simultaneously hurting everyone else. There is no incentive to stop. And there is no incentive for the government to do anything about it, because these are the people that hold political power. Not the middle class. Not those suffering from poverty. This issue is byproduct of the very fundamental flaws our system of government and economic system have. Until those flaws are resolved, income inequality will continue to rage on.

Passion Blog #2: 500 Days of Summer

amg8310 on

500 Days of Summer is different from most romantic comedies, as it’s about a love story where the two protagonists don’t end up together. A story between the two lovers, Tom and Summer, 500 Days of Summer is a modern representation of how love is messy, and sometimes just isn’t enough.

In the movie, Summer is Tom’s boss’s new assistant. They meet at work, and shortly start a relationship thereafter. Summer admits that she doesn’t want a serious relationship. The movie doesn’t end with the two protagonists getting together like in a normal rom-com. Instead, in the movie the two get together fairly early on. The rest of the movie delves into how their relationship progresses and eventually fails. Throughout the movie, Tom has big ideas for his relationship with Summer and thinks that they’re going to last forever. He believes that he has found “The One” as he puts it. However, he is an unreliable narrator. The audience sees his true thoughts about how he perceives Summer and the expectations for their relationship, but it’s not reality. Tom is devastated when Summer breaks up with him early on in the film. He doesn’t see it coming at all and believes it to be completely out of nowhere because he has a certain image of Summer in his head. Additionally, he doesn’t fully realize who she actually is as a person and instead overly romanticizes their relationship, overlooking its struggles and flaws.

The movie, in Tom’s perspective, paints Summer out to be a villain- someone who broke Tom’s heart out of nowhere. Yet, later on in the movie when speaking to his little sister, Tom realizes that the relationship wasn’t as perfect as it once viewed it to be. He recognized there were issues- namely Summer’s unwillingness to commit but also his unwillingness to respect that. He recognized that Summer was very unhappy at some points in the relationship, and especially in the moments leading up to their breakup. 500 Days of Summer explains that Summer wasn’t a villain and it’s a good reminder for the audience that other people aren’t responsible for how another individual views them.

The rest of the movie, after their breakup, chronicles Tom’s life and depression after his relationship with Summer is over. Even though they only dated for about eight to nine months, for 500 days (hence the title) Tom is not able to move on. Eventually, Tom is able to move on from the relationship and finds that he can again feel happy, even though he’s not with Summer and he’s actually alone. The only reason he was able to move on was because he was able to let go of Summer instead of living in the past. He begins to focus on himself and his work. He starts studying to become an architect, which is something he had always wanted to do. He regains his sense of self and gets his architecture license, eventually going in for a job interview to be an architect. When he goes to this job interview, he meets another girl named Autumn. They talk about how they both always visit this same park, and Tom says “I’ve never seen you there before”… Autumn responds with “Maybe you weren’t looking.” This displayed that Tom had been so caught up with his relationship with Summer for the past year and a half, that he had missed other opportunities and possibilities for relationships. Yet, the movie ends with him asking Autumn for coffee, displaying that he has fully healed and is ready to take on new opportunities.

Civic Issue Blog #1: How the Growing Wealth Gap Began

amg8310 on

In the United States, the income gap between the rich and everyone else has been growing markedly, by every major statistical measure, for more than 30 years. According to the Congressional Budget Office, over the past four decades the richest 1 percent of Americans have enjoyed  the fastest income growth. Between 1979 and 2020, the average income of the richest 0.01 percent of households, which is only about 12,000 households, grew 17 times as fast as the income of the bottom 20 percent of earners. In fact, the Richest 1 percent make 104 Times as much as the bottom 20%. With time, that gap is only expanding and expanding. The rich are getting richer, and the poor are falling into even more jeopardy than ever before. Worst of all- the middle class, which makes up the highest percentage of the American population- is falling below the poverty line.

Unions

You may ask yourself- how did this happen? How could this happen? Well, to understand the origin of such a divide in wealth across the classes, we must first look at another instance of severe income inequality- the Gilded ages. Yes, the last time we had such an income gap was the early 1900’s-1930’s, up until former president Franklin D. Roosevelt’s expansive policies for the middle class. In particular, he passed the National Labor Relations Act of 1935 (NLRA). The NLRA was a major turning point in American labor history because it was supposed to put the power of government behind the right of workers to organize unions and bargain collectively with their employers about wages, hours, and working conditions. This policies allowed union membership to skyrocket, which allowed America’s workers to advocate for better working conditions and better wages. As you can see in this graph from the U.S. Bureau of Labor Statistics, when union membership was on the rise, the top 1 percent’s income share decline, narrowing the income gap.

However, a slow decline in union membership began in the 1950’s, and began to steeply decline after the 1980’s due to the lack of pro-union policies being passed. Some legislators also scaled back on pro-union legislation entirely. Now, only 10% of Americans (one in ten Americans) is a member of a union. If Americans cannot unionize to advocate for better wages, their productivity will continue to go unpaid.

Productivity

Productivity has increased at a relatively consistent rate since 1948. But the wages of American workers have not, since the 1970s, kept up with this rising productivity. Worker hourly compensation has essentially flat-lined, increasing just 17.3 percent from 1979 to 2021 (after adjusting for inflation). Over this same time period, worker productivity has increased 64.6 percent, according to the Economic Policy Institute. In other words, productivity grew at a rate 3.7 times as fast as worker pay.

Even worse, the rich have not been dealt the same cards. Between 1979 and 2007, according to Economic Policy Institute research, paycheck income for those in the richest 1 percent and 0.1 percent exploded. The wage and salary income for the rich dipped after the 2008 financial crisis but recovered relatively quickly. Between 2009 and 2019, the bottom 90 percent had wage growth of just 8.7 percent, compared to 20.4 percent for the top 1 percent and 30.2 percent for the top 0.1 percent.

Lobbying

In 2014, Benjamin Page and Martin Gilens released the results of a study (https://templatelab.com/testing-theories-of-american-politics/) they completed over twenty years of analyzing policymaking in the U.S. Congress.  They found that “the average citizen exerts little or no influence on federal government policy.” The chances of a policy passing Congress was essentially unaffected by how much of the public supported it. The people who did affect policymaking were the rich. “Policymaking,” they concluded, “is dominated by powerful business organizations and a small number of affluent Americans.”  And this imbalance of power, they argued, seriously threatened “America’s claim to being a democratic society.”

The work of these rich lobbyists involves meeting with members of Congress, taking them out to dinner, testifying at key committee hearings, constantly meet with staff and provide them with information, and sometimes writing the legislation itself.  They may work for years to get one small provision inserted in a bill- but that provision could mean millions of dollars in tax cuts or an exemption from an expensive business regulation. The rich also have the capability to support candidates campaigns. The more supportive of the rich the candidate, the more money they will receive for their campaign, which incentivizes them to support the rich’s interests- and this cycle continues, and continues. And unfortunately, it leads to some policies that are not beneficial to the middle and lower class, including massive tax cuts for the rich.

Tax Cuts

Data from the Congressional Budget Office shows that taxes and governmental assistance narrow the income divide somewhat, but the gaps remain staggering. Between 1979 and 2019, the richest 0.01 percent of households had an income growth rate of 507 percent, which is more than five times the 94 percent growth rate for the bottom 20 percent of households. Tax cuts for the rich are a key driver of this rising inequality. The top U.S. marginal tax rate in 1979 was 70 percent, compared to just 37 percent today.

As I mentioned before, lobbying had a great deal to due with the large tax cuts enacted towards the end of the 20th century. However, there was also a new economic theory at play (which may have also been pushed for due to lobbying), called trickle down economics. Trickle-down economics employs the theory that tax breaks and benefits for corporations and the wealthy will trickle down and eventually benefit everyone. The logic behind this theory was that tax cuts would ignite capital investment because business owners would now have more disposable income, allowing more people to be hired and allowing them to be paid more for their work. Former President Ronald Reagan was a firm advocated of this policy (which may again be a result of lobbying) and proceeded to pass policies that would initiate tremendous tax cuts for the rich while simultaneously vetoing policies that would initiated tax cuts for the poor and the middle class. Of course, this didn’t work, as evidenced by the rapidly growing income gap we have been facing ever since the 1980’s when Reagan was in office. The upper-class did not compensate their workers for their increasing productivity, as illustrated earlier in the “Productivity” section. Tax cuts did somewhat stimulate investment, but not to the point in which it narrowed the income gap. Instead, the income gap grew, and grew, and grew.
Now, the middle class is falling below the poverty line. In my next blog, I’ll talk about the implications of these issues and how the American people have been affected by the increasing income gap.