The last few years have taken a toll on most Americans and on America itself. The Great Recession has put millions of people out of work, increased foreclosures by big banks, and offered drastic cutbacks to basic social services such as schools and assistance for struggling families.
There are positive signs about overall economic growth (along with evidence that Oregon is outpacing the rest of the country), but much of the recovery has yet to reach middle-class families or really anyone who doesn’t have a private jet.
In a bleak article, the New York Times details American family net worth over time. In 2007, the median was $126,400. In 2010, it was $77,300 — just 60% of the median three years prior. Median household income fell more than 10% in the same time period. “The Fed found that middle-class families had sustained the largest percentage losses in both wealth and income during the crisis, limiting their ability and willingness to spend.”
One basic reason for this disproportion is that the wealth of the middle class is mostly in housing, and the median amount of home equity dropped to $75,000 in 2010 from $110,000 in 2007. And while other forms of wealth have recovered much of the value lost in the crisis, housing prices have hardly budged.
At the same time, the plummet in household incomes has added weight to the debt held by these families–if there’s a silver lining, it’s that the economic crash saw interest rates fall, but that’s cold comfort for a generation that’s finding itself worse off than their parents.
What will this mean for our country’s economic future? Famed economist Joseph Stiglitz recently penned a blistering essay for Slate about how income inequality is destroying the American dream. Some high–errrr, rather, low–lights:
In the “recovery” of 2009-2010, the top 1 percent of US income earners captured 93 percent of the income growth. Other inequality indicators—like wealth, health, and life expectancy—are as bad or even worse. The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.
Stiglitz points to the ways in which those at the top have rigged the system to benefit themselves–at the expense of the rest of us. “Some have obtained their wealth by exercising monopoly power,” he writes, “others are CEOs who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings; and still others have used political connections to benefit from government munificence: either excessively high prices for what the government buys (drugs), or excessively low prices for what the government sells (mineral rights).”
What it adds up to is an unbalanced recovery–and that won’t change without significant changes to current policies.
America is paying a high price for [increasing inequality]. Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset—its people — is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education, and technology, impeding the engines of growth.
In Oregon, we’re seeing the impacts in cuts to our K-12 schools, higher education, and basic services for seniors and people with disabilities. But we’re also seeing it in the strain that’s being placed on charities and food pantries that help those in need. With the number of people in need still at record levels (and growing), these local nonprofit services are stretched beyond capacity. If the New York Times and Slate pieces didn’t depress you enough, head on over to the Oregonian to read about troubled times for food pantries.
Here’s a picture of a really cute puppy because this story is so depressing.