Economic Recovery In The US Has Been A Recovery For The Top 1%

Paul Krugman has been writing about the new business cycle in the US that has U shaped recoveries from recession instead of the V shaped recoveries prior to 1982.  In this article he turns his attention to the primary benefactors from our U shaped recovery.  The gains in income during this recovery have gone primarily to the rich.  The top 1% has received 95% of gains in income.  Inequality is also found within the top 1%.  Those earning over $1 million have received 60% of the gain.

Krugman argues that growing inequality is undermining the values that have defined America.  He describes some of the ways in which that is happening and he explains why the growth in inequality cannot be explained by the concentration of skill within the top 1%.  They also benefit from greater opportunities to earn high incomes.

There has been a lot of debate about the causes of income inequality.  Some argue that it determined by market factors, while others believe that government policies have encouraged growth in inequality.  That is a complex debate that Krugman does not discuss.  However, the US economy grew rapidly prior to the 1980's when inequality in America was small relative to what it is today.  Extreme inequality is not necessary to fuel economic growth.  On the other hand, the changes made in the US under the guise of the "trickle down economy", initiated in the Reagan era, have contributed to the growth in income inequality since the 1980's.  The gains made by the top 0.1% have been made at the expense of the rest of the population.

Krugman does not examine most of the changes that have made it easier for the super-rich to grow their incomes at the expense of the rest of us, but he does offer one suggestion.  Perhaps it is time to make the tax system more progressive.  The tax system has been made less progressive as income growth has become more concentrated.