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And, yes, I DO take it personally: Spitzer: "Where is the public's fair payback for playing banker to the bankers?"
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Wednesday, July 29, 2009

Spitzer: "Where is the public's fair payback for playing banker to the bankers?"

eliot spitzer seems to be taking a much more public profile in the last week... it's good stuff and i hope he keeps it up... i'd like to hear a lot more from joseph stiglitz as well...

from the 28 july slate...

Presenting income data is fraught with risks, as there are so many ways to look at any arrangement of numbers. So I will use three sets of data to shed light on the road we have traveled. The single most frequently used measure to gauge income distribution is the Gini coefficient, which ranges from zero to one, with zero representing perfect equality (that is, everyone has the same level of income) and one representing perfect inequality (that is, one person has all the income).

U.S. Gini Coefficient

As a point of reference, the Gini coefficient for Canada is 0.326, for the United Kingdom it is 0.36, for Norway it is 0.258, and for Germany it is 0.283. In fact, the U.S. Gini coefficient is significantly higher than that for any Western European nation.

More textured are the data showing the percentage of total income garnered by each quintile of the population over a particular time frame.

Percentage of Total Income by Population Quintile

Lowest Quintile Middle Quintile Highest Quintile
19674.0 17.343.6
19774.2 16.944.0
19873.8 16.146.2
19973.6 15.049.4
20073.4 14.849.7

The top 1 percent of all income earners garnered 21.8 percent of all income in 2005, up from 8.9 percent in 1976.

Of course, it can be argued that these pure distributional percentages are less meaningful if everybody's absolute income grew substantially over the period of time measured. But that is not the case. In fact, the gap here is quite remarkable:

Mean Household Income

Lowest Quintile Middle Quintile Highest Quintile
1967$8,683 $38,415 $96,725
1977$10,394 $45,323 $110,579
1987$10,706 $45,492 $130,768
1997$11,385 $47,886 $158,128
2007$11,551 $49,968 $167,971

Before 1987, it might have been reasonable to argue that overall income growth was softening the effects of rising inequality. But since then, the rate of overall growth for all but the top quintile has slowed dramatically, with the lowest quintile seeing its income grow by only 7.8 percent in the last two decades, while income for the top quintile grew by 28 percent. And looking at after-tax income, which factors in the impact of favorable tax policy for the rich, the numbers are even starker: Between 1979 and 2004, the top 1 percent of all earners saw their income grow by an astounding 176 percent.

Pretty much no matter how you examine the numbers, they are not encouraging for those in the middle class—and they are even worse for those at the bottom of the income totem pole. Once upon a time, America's income was distributed across the economy like a bell curve, with an increasing share of both population and income converging in the middle. Now a slow but continuous redistribution to the top, with the middle being squeezed, makes the graph look more like a barbell, with a bigger bump at either end—income at one end, population at the other.


The outcry over Wall Street salaries and bonuses is more understandable when you realize that, over the last 40 years, there has been an inexorable shift of wealth and income toward the upper end of the income spectrum. With the return to profitability of many of the institutions that needed bailouts, taxpayers are wondering why we have socialized the risk of failure but allowed the rewards of success to remain private. Where is the public's fair payback for playing banker to the bankers?


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