Describing the social and economic costs of growing income inequality, economist Robert Frank explained in yesterday’ New York Times that while the first three decades after World War II were a time of broadly shared prosperity, income gains over the next three decades went almost entirely to the very wealthy. You can see the striking contrast in the graph below.
In the first generation following World War II, a rising tide really did lift all boats. Incomes for families just 20 percent up the income ladder, median-income families halfway up the ladder, and families 95 percent of the way to the top all roughly doubled between 1947 and 1973, after adjusting for inflation. The period since then has been a different story altogether.
The chart shows the divergent trends between the rich and everyone else since the 1970s that we have analyzed in greater detail here and here.
As we also noted recently, the average middle-income American family had $13,000 less after-tax income in 2007, and an average household in the top 1 percent had $782,600 more, than they would have had if incomes of all groups had grown at the same average rate since 1979.
That’s something to keep in mind as the President and Congress decide which of President Bush’s tax cuts to extend — and which to let expire on
schedule at the end of this year. After all, as we have noted, each year the average millionaire gets about $125,000 from the Bush tax cuts, according to the Urban-Brookings Tax Policy Center.