Chad Stone is chief economist at the Center on Budget and Policy Priorities.
Bloomberg reporter Max Abelson created quite a stir in the blogosphere with his tales of woe from the top 1 percent. "People who don't have money don't understand the stress," said a specialist in financial planning for the wealthy. Maybe he should talk to the heads of the estimated 1.5 million households, which include about 2.8 million children, that the National Poverty Center estimates live on $2 or less in income per day in any given month—one of the World Bank's main indicators of poverty in developing countries.
First, though, let's talk about what's going on at the top. Yes, 2008 and 2009 were relatively tough times for the top 1 percent. According to new estimates from Berkeley economist Emmanuel Saez, the top 1 percent absorbed almost half of aggregate household income losses from 2007 to 2009 and their share of total pretax income fell from 23.5 percent to 18.1 percent. But look at the chart below. Even with these losses, the share of income flowing to the top 1 percent has surged in recent years—to levels last seen in the Roaring Twenties—and was on the rise again in 2010, the first full year of the economic recovery. The dot-com collapse proved to be nothing more than a speed bump, and arguably the financial crisis and Great Recession will have similarly transitory effects.
Turning to the other end of the income scale, my colleagues at the Center on Budget and Policy Priorities have been busy documenting true hardship in America, including the developing-country level of poverty highlighted by the National Poverty Center. The chart below highlights two key findings:
So, things are very good and getting better for those at the very top. Meanwhile, extreme poverty has increased significantly at the very bottom. The block-granting of cash assistance in TANF appears to be an important factor contributing to the rise in extreme poverty, although SNAP benefits have filled some of the gap.
Doesn't that make you wonder about the priorities of policymakers who block every effort to restore tax rates at the top to the levels that prevailed in the very strong 1990s economic expansion, while they argue for policies that weaken the safety net by replicating TANF and turning effective programs like SNAP into block grants?