Progressive Economics Tend Toward Givers and Receivers, Not Earners


Being a lover of long-term economic graphs, I found this ZeroHedge post intriguing.  The theme of the post is the disappearance of the middle class, which (as one chart shows) no longer accounts for half of the country’s population and (as another shows) no longer holds more wealth than upper-income households.

The animated graphic from FT is worth watching through a few times.  The first take-away is that much of the middle class has smoothed out upwards since 1971, but with a huge boom at the very top of the income scale (as a percentage of all adults).  It’s the animation that tells the historical tale.  The ’70s didn’t see much growth, and the ’80s saw about a one-percentage-point increase among the rich.  Bill Clinton’s ’90s turned into a big boom for the rich, while George Bush’s ’00s pretty much held them steady. In the wake of the economic collapse, the first three years of Barack Obama’s presidency saw a decrease at the top with more than a recuperation since then.

Scrolling down to the next chart reveals at least part of the reason.  The early ’70s saw the end of 30 years of income growth for the bottom 90% of earners, and it hit a ceiling with the death of the gold standard.  Money was no longer tied to some finite good, so government policy could be truly redistributive, without being bound by anything of actual value.  The bottom 90% have stagnated or drifted down, since then, while the top 1% have taken off.  One bump came in the mid-to-late ’80s, but Clinton’s banking and mortgage policies cut the reins.

As I’ve said before, fiscal, monetary, and regulatory policy under Obama have only solidified the tendency to make the well-being of the rich investor class and established players the core basis for policy decisions while shoring up political power by simply giving things to those toward the bottom of the scale.

This scheme wouldn’t work out well under any circumstances, but with the explosion of automation, it’s going to be a recipe for economic disaster, civic unrest, and lost rights.

  • ShannonEntropy

    The early ’70s saw the end of 30 years of income growth for the bottom 90% of earners, and it hit a ceiling with the death of the gold standard.

    The ’71 “Nixon Shock” that turned the US Dollar into a ‘fiat currency’ is what made today’s trillion-dollar-a-year federal deficits possible … and one reason why States keep floating Bond issues (( Borrow & Spend today … pay it back with inflated // debased money thirty years from now ))

    Nixon was also the guy who opened the door to China being our biggest economic threat

    THANKS ,, Tricky Dick !!

  • D. S. Crockett

    Yes, converting to the gold standard did enable central governments to expand the money supply, an idea put forth by Keynes in response to the Great Depression and the WW. Keynesian economics aside, the U.S. Supreme Court made several decisions between 1937 and 1942 which gave the U.S. Congress unlimited spending and regulatory power beyond those intended by Madison and the founders. First among these
    decisions was Helvering v. Davis, 1937, which validated the Social Security Act. Other Supreme decisions followed, which expanded the authority of the U.S. Congress all under the guise of the general welfare clause. Heretofore, the U.S. Constitution limited the spending power of the U.S. Congress. For example, the federal budget of 1928 totaled $38 billion (2010 dollars) when it now exceeds $3.4 trillion. For background on the history a must read is “By the People”, authored by Charles Murray. My friends, the cause of income inequality today is not fiat currency but the $3 trillion in tax receipts the U.S. Congress now spends to win the votes of their constituencies. Without the court cases cited earlier, the U.S. Constitution would have continued to constrain federal spending which has now spun out of control as evidenced by the sucking sound of $3 trillion dollars in tax receipts taken out of the economy. Murray in his book spells out a remedy.