The Big Obscenity: A Trillion Dollars a Year to the Richest 1%

(That's seven times more than the budget deficits of all 50 states combined)

by Paul Buchheit

If you make less than $114,000 a year (90% of us), you've been financially damaged by the flow of income to the richest 1% of Americans over the past 30 years. Based on Internal Revenue Service figures, if middle- and upper-middle class families had maintained the same share of American productivity that they held in 1980, they would be making an average of $12,500 more per year.

If you make less than $160,000 a year (95% of us), your household value has decreased, percentage-wise, over the last 25 years. According to noted researcher Edward Wolff, only the top 5% of American families increased their percentage of the country's total household net worth from 1983 to 2007.

U.S. GDP has quintupled since 1980, and we all contributed to that success. It's not unreasonable to say that upper-middle class families should have maintained the same size of their slice of pie.

But if earnings since 1980 were based on this measure of productiveness, the richest 1% of Americans would be making $1 trillion less per year.

A trillion dollars a year. That's more than we spend on the entire military.

A trillion dollars a year. That's seven times more than the budget deficits of all 50 states combined. Many states have been forced to cut police forces and teachers to balance their budgets.

A trillion dollars a year. Yet Congress just voted to continue the Bush tax cuts.

The richest 1% ($400,000 or more) didn't work harder than the rest of us. They profited from stock market gains, shrewdly designed financial instruments, and tax cuts.

The very wealthy insist that all their income will stimulate the economy. But low-income earners spend a greater percentage of their overall income on consumption, while high-income earners save more. Middle-class America has been led to believe that the growth at the top will eventually produce more jobs. But many of us have college-educated sons and daughters who can't find suitable employment. Fortune Magazine reported that the 500 largest U.S. companies cut a record 821,000 jobs in 2009 while their collective profits increased to a record $391 billion.

Even the upper class should be concerned about this. As inequality increases, the majority of Americans will consume less, leading to conditions not unlike the years before the Great Depression, when the working class was unable to buy the goods they produced. The rich, with extra money, speculate in risky investments. The majority of middle-class Americans, with little money, go deeper into debt. The result is an unstable economy for all of us.

Who are the people making up the richest 1%? Bankers, CEOs, upper management, university presidents, Congressmen. They live in their own world, supporting each other's needs. They can no longer relate to the needs of average Americans.

Taxing them is not "soaking the rich." The greatest redistribution of income in history has taken place over the last 30 years, and the victims are beginning to make a fuss about it.

Paul Buchheit is a faculty member in the School for New Learning at DePaul University.