The economic conditions the United States has been through over the course of the past three decades are interesting and, in my opinion at least, reveal a disturbing trend. Just in the last decade we have seen middle class income fall 7%, relentless tax cuts and breaks for millionaires, billionaires, and corporations, all while the top 1% of income earners have captured a level of wealth not seen since the 1920’s. Friction has begun to appear between these different groups of income earners and, while many don’t like the tactics of the Occupy Wall Street Protesters, many share the opinion that the economy and opportunity have become titled in favor of the wealthier. Additionally, emerging research about the relationship of socioeconomic mobility and a families wealth paints a picture where the United States is becoming less a land of opportunity as our intensely patriotic rhetoric would tell us and more of a country where wealthy families are entrenched at the top of the income distribution. What does the research say about upward mobility in the United States and why does this matter?
University of Michigan research Fabian Pfeffer is an organizer of a conference that analyzes on an international scale the income inequality over generations for different parts of the world. In a press release with his researches findings, Pfeffer stated;
“Wealth not only fulfills a purchasing function, allowing families to buy homes in good neighborhoods and send their children to costly schools and colleges, for example, but it also has an insurance function, offering a sort of private safety net that gives children a very different set of choices as they enter the adult world. Despite the widespread belief that the U.S. provides exceptional opportunities for upward mobility, these data show that parental wealth has an important role in shielding offspring from downward mobility and sustaining their upward mobility in the U.S. no less than in countries like Germany and Sweden, where parental wealth also serves as a private safety net that not even the more generous European public programs and social services seem to provide.”
Essentially, the United States lacks the public infrastructure to provide an equivalent opportunity to those who come from privileged roots on the same scale as other industrialized countries. Why does this matter to you?
This reason this matters is that this growing wealth of these few Americans has managed to wield political power that has served to push policies that serve their interests and not necessarily the interests of the shrinking middle and growing lower class. While many of these wealthy individuals enjoy a myriad of tax breaks that push their actual tax rates below 10% (which is much less than a typical middle income family), the government faces the choice between steep cuts to federal spending on military, research and development, and education or to cut some of these tax breaks that generally benefit our legislators largest political contributors. The most frustrating thing about some of these tax breaks such as carried interest is that to qualify, you have to start with a considerable amount of wealth to have the opportunity to invest at a lower tax rate. While the counterargument is that cutting taxes for the wealthy spurs economic growth and job creation, a look at the decline in middle class income compared with the steep climb in wealth for America’s top income bracket rubbishes that. If any group should have tax relief, it should be the largest volume with the largest propensity to consume and therefore create economic growth; the middle and lower classes. Until movements like Occupy Wall Street can gain a more mainstream audience, politics will continue to be molded by and give benefit to the top income earners in this country while constraining the very ideal that has brought millions of immigrants to the United States; a fair shot at the American dream.
For more information on Fabian Pfeffers research, check out his work at the University of Michigans Institute for Social Research at http://www.sampler.isr.umich.edu/