Top Romney Adviser: If You Own A Microwave, You Aren’t Really Poor

 By Igor Volsky/Think Progress

A top adviser to Mitt Romney’s presidential campaign denied the nation’s income inequality gap in a Wall Street Journal editorial on Thursday, brushing off the growing concentration of wealth in the hands of the very wealthy by arguing that lower-income Americans are buying more consumer goods.
“Today we hear that the gains from economic growth accrue to the highest-income earners while the standard of living of the poor and middle America stagnates and the gap between the richest and the poorest grows ever wider,” Kevin Hassett and Aparna Mathur argue. “That portrait of the country is wrong“:

Yet the access of low-income Americans—those earning less than $20,000 in real 2009 dollars—to devices that are part of the “good life” has increased. The percentage of low-income households with a computer rose to 47.7% from 19.8% in 2001. The percentage of low-income homes with six or more rooms (excluding bathrooms) rose to 30% from 21.9% over the same period.
Appliances? The percentage of low-income homes with air-conditioning equipment rose to 83.5% from 65.8%, with dishwashers to 30.8% from 17.6%, with a washing machine to 62.4% from 57.2%, and with a clothes dryer to 56.5% from 44.9%.
The percentage of low-income households with microwave ovens grew to 92.4% from 74.9% between 2001 and 2009. Fully 75.5% of low-income Americans now have a cell phone, and over a quarter of those have access to the Internet through their phones.

But this argument, a favorite of conservative think tanks like the Heritage Foundation, is highly misleading. Appliances and commonly used consumer gadgets like cell phones are necessities in the 21st century and are significantly cheaper today than they were just decades earlier. In fact, were families to sell their appliances in order to help pay for food and other basic necessities, many would still struggle — for while prices on microwaves and air conditioners have fallen, “the real everyday basics such as quality child care and out-of-pocket medical costs” are “squeezing the budgets of the poor and middle-class alike.”
Hassett argues that safety net programs like “unemployment insurance, food stamps, Medicaid” help families afford basic needs, further shrinking the nation’s income gap. But these programs are already failing to keep up with need and Romney and Ryan have proposed massive cuts to the safety net in order to pay down the deficit and finance a tax cut plan that is heavily skewed towards the rich.
Their approach would only exacerbate the differences between the rich and poor — a gap that has grown dramatically since the late 1970s. Indeed, compared to the 34 countries in the Organization for Economic Co-operation and Development (OECD), the United States has a Gini coefficient — a number that measures the distribution of income on a scale of 0 (perfectly equal) to 1 (perfectly unequal) — of 0.47 and ranks near the very bottom in inequality. America also suffers from the absolute highest “percentage of national income that went to the top 1 percent” and “has seen income inequality increase at a much faster rate than most other countries.”
This trend is already devastating the American democratic ideals of equal opportunity and upward mobility. Unfortunately, neither Romney nor his advisers can see the problem or offer the kind of tax and economic policies that will help solve it.

New Study Finds Tax Cuts For The Rich Cause Income Inequality, Not Economic Growth

By Pat Garofalo/Think Progress

According to a new report by the Congressional Research Service, cutting taxes for the wealthiest does not cause economic growth, despite constant conservative claims that it will. Instead, tax cuts for the rich merely exacerbate income inequality, CRS found:

Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.

As this chart shows, per capita GDP growth rates and the top tax rate have essentially no relationship:

This jibes with other recent studies that show little relationship between the top tax rate and economic growth. A new analysis by Owen M. Zidar, a former staff economist on President Obama’s Council of Economic Advisers and a graduate student at California-Berkeley, found that “a one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.” GDP growth, business investment, and a host of other economic indicators were all stronger during the 1990s, after taxes were raised on the rich, than during the supply-side eras of Presidents George W. Bush and Reagan.

CHART: WALL STREET SALARIES RISE 11 PERCENT ANNUALLY, WHILE OTHER WORKERS’ INCREASE BY JUST 1.8 PERCENT

From Think Progress

Mother Jones’ Kevin Drum re-engineered a chart from the New York State Comptroller’s office showing how, in the last three decades, salaries in New York City’s securities industry have far outstripped those in the city’s other sectors. “Wall Street salaries have risen11.2% per year, while all other salaries have risen 1.8% per year,” Drum found. In 2010, the average salary for someone in the securities industry was $366,000 while the average private sector salary in another industry was $66,000.

GRAPH: As Union Membership Has Declined, Income Inequality Has Skyrocketed In The United States

By Zaid Jilani

Across the country, right-wing legislators continue their attack on labor unions,claiming that they are saving their states money. Yet in waging these anti-labor campaigns, these politicians are ignoring one very simple fact: unions were a major force in building and sustaining the great American middle class, and as they declined, so has the middle class. As CAP’s Karla Waters and David Madland showed in a reportthey first published this past January, as union membership has steadily declined since 1967, so too has the middle class’s share of national income, as the super-rich have taken a larger share of national income than any time since the 1920s:

This is not to say that declining union membership is the only factor that led to the growth of income inequality over the past 35 years. Yet, the correlation does show that the presence of strong labor unions tends to co-exist with a strong and vibrant middle class. That is why a Main Street Movement all over the country is fighting to protect collective bargaining and the middle class wages, benefits, and protections it promotes.

UPDATEThe Progressive Change Campaign Committee is currently running a campaign to run a TV spot where ordinary Wisconsinites explain the value of collective bargaining to their livelihoods. Watch it:

Income Inequality In The U.S. Is Worse Than In Egypt

By Pat Garofalo

Protests in Egypt continued for a seventh day today, and pro-democracy demonstrators are organizing a “march of millions” to take place tomorrow. As financial markets dip across the Middle East, financial prognosticators are trying to divine what continued unrest will mean for the economies of the Middle Eastand the price of oil.

One of the driving factors behind the protests is the decades-long stagnation of the Egyptian economy and a growing sense of inequality. “They’re all protesting about growing inequalities, they’re all protesting against growing nepotism. The top of the pyramid was getting richer and richer,” said Emile Hokayem of the International Institute for Strategic Studies in the Middle East.

As Yasser El-Shimy, former diplomatic attaché at the Egyptian Ministry of Foreign Affairs, wrote in Foreign Policy, “income inequality has reached levels not before seenin Egypt’s modern history.” But Egypt still bests quite a few countries when it comes to income inequality, including the United States:

According to the CIA World Fact Book, the U.S. is ranked as the 42nd most unequal country in the world, with a Gini Coefficient of 45.

In contrast:

– Tunisia is ranked the 62nd most unequal country, with a Gini Coefficient of 40.

– Yemen is ranked 76th most unequal, with a Gini Coefficient of 37.7.

– And Egypt is ranked as the 90th most unequal country, with a Gini Coefficient of around 34.4.

The Gini coefficient is used to measure inequality: the lower a country’s score, the more equal it is. Obviously, there are many things about the U.S. economy that make it far preferable to that in Egypt, including lower poverty rates, higher incomes, significantly better infrastructure, and a much higher standard of living overall. But income inequality in the U.S. is the worst it has been since the 1920′s, which is a real problem.

Currently, the top one percent of households make nearly 25 percent of the total income in the country, after they made less than 10 percent in the 1970′s. Between 1980 and 2005, “more than 80 percent of total increase in Americans’ income went to the top 1 percent.”

According to the latest data, “the gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007.” And there’s even a stark divide within that one percent. “The share of the nation’s income flowing to the top one-tenth of 1 percent of households increased from 7.3 percent of the total income in the nation in 2002 to 12.3 percent in 2007,” the Center on Budget and Policy Priorities noted.

Yale economist Robert Shiller has said that income inequality “is potentially the big problem, which is bigger than this whole financial crisis.” “If these trends that we’ve seen for 30 years now in inequality continue for another 30 years…it’s going to create resentment and hostility,” he said. But tax and spending policies that provide adequate services and allow for economic mobility — along with a robust social safety net — can head off trouble that may come down the road.