NC Budget and Tax Center, Uncategorized

Fed Study Finds Growing Wealth Gap & Shows Economic Downturn’s Devastating Effect on Middle Class

During the budget debate earlier this week, North Carolina Senators did not approve an amendment that would cap a $336 million tax break for businesses, both small and large. Unrestricted business tax breaks like this benefit many North Carolinians who are already doing very well at the expense of struggling families. Lawmakers should consider policies that build a strong middle class and safety net for the least well off, especially considering research shows these groups were devastated by the recession.

Consider the Federal Reserve study released earlier this week that found the wealth gap increased from 2007 to 2010. The net worth—which is total assets minus total liabilities—of the median American household fell from $126,000 to $77,300, or by nearly 40 percent, to levels last seen two decades ago. Every income group experienced a decline in net worth except for the top 10 percent, as illustrated in the chart below. The middle class experienced the largest drops in net worth over the three-year period.

Chad Stone, Chief Economist at The Center on Budget and Policy Priorities, took a closer look at the data released by the Federal Reserve and found that not only is the wealth gap growing but wealth was more concentrated than income in 2010: the top 10 percent of households (ranked by wealth) held 75 percent of the wealth whereas the top 10 percent of households (ranked by income) hold 45 percent of income. And while median income continues to fall for most income groups, the share of income held by the top 1 percent rose in 2010.

North Carolinians are contending with widespread income inequality, a lower-than-average economic mobility rate, and high rates of poverty and asset poverty. As such, lawmakers have a lot to consider when they iron out the differences between the House and Senate budget proposals. The final budget should be designed to put North Carolina on a sustainable path rather than exacerbate inequalities so that everyone can enjoy the benefit of prosperity.

10 Comments

  1. Alex

    June 16, 2012 at 7:54 am

    Most of this drop is a result of the economic policies of the Obama administration. He has reduced the value of our savings yield to absolutely zero so he can fund his huge deficits. By flooding the market with cheap dollars, he has run the price up of every commodity, and drained middle class pocketbooks.

  2. david esmay

    June 16, 2012 at 10:02 am

    Alex, if you’re going to repeat a GOP lie, at least be creative.

  3. JeffS

    June 16, 2012 at 11:40 am

    Alex, can you explain what a tranche is without looking it up? I didn’t think so.

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    Our biggest problem is that we keep electing representatives that simply do not represent us. This is especially true on the republican side of the isle. An overwhelming majority of republican voters are not being served by the economic policies of their elected officials. Either they do not realize it, or have chosen to prioritize social policy (or their resentment of “them”) above all else. Either seems equally plausible.

  4. Alex

    June 16, 2012 at 1:16 pm

    I doubt either of you understand monetary policy very well if at all, so I’m not surprised that you don’t understand my statement. To break it down as simple as possible for the financially challenged, take $10,000 if you happen to have that much, and put it in a bank for a year, and then see if you can buy a McDonald’s Happy Meal with the earnings. That will show you how much the dollar is worth, and we are continuing to print them at a frenetic pace to fund our spending. We give it a fancy name called quantitative easing, but in effect it is nothing more than counterfeiting.

  5. Doug

    June 16, 2012 at 2:37 pm

    Folks in the middle class really didn’t have much wealth to begin with. The inflated real estate bubble made it seem like they did, but was quickly erased with the housing crash. In terms of net worth , many middle class Americans are still so loaded down with debt, they couldn’t come up with $5,000 if their lives depended on it. Any savings they accumulated are virtually worthless in the bank , and investments can be erased overnight in the next Wall St. panic.It’s not a pretty picture, and the middle class has been pounded under the Obama administration.

  6. Euchre

    June 16, 2012 at 11:21 pm

    This is not news. Obama said he wanted to spread the wealth around way back in 2008. It would appear that his policy has succeeded.

  7. […] The Great Recession forever changed the United States and this world. Where the Great Depression ended and gave way to times of strict regulation, high taxes, middle class prosperity, rapid job creation, and a baby boom because people could afford to have almost as many kids as they wanted, the Great Recession is leading the country into the opposite direction. While we no longer hang on the precipice of economic disaster and financial ruin we do remain in a heavily wooded forest of unrest and uncertainty. Prosperity cannot exist without balance and as weekly report after weekly report signifies we are completely unbalanced. […]

  8. david esmay

    June 18, 2012 at 2:25 pm

    Doug, the pounding took place from 2007-09, President Obama’s policies have save us from the GOP disaster. On the outside chance Myth Robme makes it to the white house, we’ll get to see what real destruction is all about. There is no middle class in the vulture capitalist’s world. Alex, Greenspan’s monetary policies created artificially low inflation and interest rates, he’s a smart guy who got it all wrong. His naivete concerning shifts in the markets and the economy created bubbles and wreaked havoc on the U.S. economy that will be felt for years to come. Why else does he spend most of his time defending his actions and admitted before congress that he essentially got it all wrong?

  9. Alex

    June 18, 2012 at 3:56 pm

    David, I’m glad you acknowledge that Greenspan, not Bush, was responsible for both the financial and housing crashes with his stupid monetary policies. We’re making real progress here. Unfortunately, Bernanke is going down the same path with the very same result.

  10. david esmay

    June 18, 2012 at 5:17 pm

    Bush wasn’t smart enough to be anything but a stooge for Cheney, Wall St., and Haliburton, but that doesn’t excuse his complicity.