Top 2% of income earners become much more wealthy while the middle class disappears.

There have been some recent articles that make reference to "the top 2% of income  earners"  or other similar type description. The reason for that is simple: the top 2% are way more wealthy than the rest of us, and it turns out, more wealthy by a considerable margin even compared to the other, lower 8% within the relatively tony top 10% of all income earners.


I came across a decent article that indeed references and explains this very topic.  The title of the article initially seems to be about a slightly different issue:  "Why So Many Rich People Don't Feel Rich".   But the top 2 % issue is brought to light in the article pretty well, so I am listing the reference here.

The article does not go into great detail, but I think that is a good thing; it is a very readable. I hope many of you take the time to read it.

http://economix.blogs.nytimes.com/2011/01/11/why-so-many-rich-people-dont-feel-very-rich/?src=me&ref=business 


Additional info:  
The top 1 percent of American earners now have tax rates half what they were in the 1970s. And they took in 23.5 percent of the nation’s pre-tax income in 2007 — up from less than 9 percent in 1976. During the boom years of 2002 to 2007, that top 1 percent’s pre-tax income increased an extraordinary 10 percent every year. In that same period, the average inflation-adjusted hourly wage went down more than 7 percent and the poverty rate rose.  The rich have been getting richer as their tax rate has steadily eased. And they are taking the added wealth and using it to influence public policy, to the detriment of the middle class.

The information above comes from a good article written by Jay Kimball. I highly recommend you read this:
When does the wealth of a nation hurt its well-being?

Many conservative pundits love to beat up on unions, and claim that unionized public service employees make too much money.  But what does this really mean?

If the average American's hourly wage has gone down, then all it means is that unionized workers have to some extent lost less of their wages than non-union workers.  So, would it make the pundits feel better if the union workers become as poor as quickly as the rest of middle-class America is becoming? So let average American point fingers at their neighbors and blame them, as if it's the unions' fault that everyone else's wages are going down. This is focusing on the wrong issue.

A better issue to research is: why the middle class is disappearing!   Why have middle class wages fallen while at the same time the wealthiest 2% have gotten more wealthy - and their taxes have gone down?  

This post will continue to evolve as I do more research and find additional data to add.

Since the NY Times is going to go to a subscription model very soon (as of the time of this writing), I have copied and pasted the entire article below.  I believe it is important enough to read.

Why So Many Rich People Don’t Feel Very Rich

By CATHERINE RAMPELL

2:37 p.m. | Updated to substitute chart, and to post link to underlying data.
Our post last week on whether the salary of Robert Gibbs, who is leaving his post as White House press secretary, is “modest” provoked some interesting reader comments. Several readers chimed in to say that even if it most likely placed Mr. Gibbs comfortably in the top 10 percent of earners, an annual salary of $172,000 probably didn’t feel like a lot of money, given where he lives, similarly educated counterparts in the private sector, etc.
But there seems to be a broader fissure underlying this discussion: why don’t people at the 90th percentile of the income distribution feel particularly rich?
The answer is simple: because any Americans who are richer than this cohort are so much richer.
At the request of The New York Times, the Tax Policy Center estimated Americans’ income percentiles for households across American in 2010. The numbers were calculated by Rachel Johnson, a research associate at the center, and were rounded to the nearest $100. The chart below to see where these income breaks fall.

Source: Rachel Johnson, Urban-Brookings Tax Policy Center Microsimulation Model (version 0509-7). Note: Distribution excludes dependents and units with negative income.

As you can see, for the bottom 90 to 95 percent of Americans, the income distribution is relatively flat. For an American household in bottom 30 percent of the distribution, a move upward of five percentiles (to the 35th percentile) would mean an increase in cash income of a just few thousand dollars. Same goes for a family at the 40th percentile, and at the 60th percentile.
But notice what happens on the right side of the graph, around the percentiles in the mid-90s, when the line suddenly kinks upward.
The line gets much steeper because at the very top of the income scale, the monetary divisions between percentiles grow much greater. Those in the middle earn a little less than people a few percentiles up from them, whereas those at the top earn a lot less than their counterparts in nearby, higher percentiles. For example, those who aspire to hop from the 30th percentile to the 35th percentile would need to increase their cash income by $4,000 annually (or by about 17 percent); those who aspire to hop from the 94th percentile to the 99th percentile would require an increase of $324,900 (or 171 percent).
In other words, at least in dollar terms, there is much greater inequality at the very top of the income scale than at the bottom or in the middle. Whether this translates to much greater differences in standards of living at the top is debatable, as an extra $1,000 for a poor family likely makes a much bigger impact on that family’s quality of life than an extra $1,000 for a wealthy family.
Still, when evaluating their own incomes, most families are trying to keep up with the Joneses: they envy the wealthier neighbor whose lifestyle they aim to match. And in dollar terms, the rich are falling far shorter of their respective Joneses than the middle-income and lower-income are.
So when the 95th-percentilers think of their incomes in the context of what their richer neighbors are earning, this cohort doesn’t feel very rich. (Indeed, the gap between the rich and the very rich has been growing in the last few decades. Exactly why the gap has been growing is unclear, but has likely been influenced by a combination of tax policy, deregulation and technological advances that allow people to control more capital.)
It is perhaps no wonder, then, that so many people who are statistically rich call themselves “upper middle” or even “middle class.” They are much, much richer than lots of poor people, but also much, much poorer than some very visibly rich people. From their perspective, they truly are in the middle. It’s the income version of China’s “Middle Kingdom” syndrome. 
Addendum: Since a number of readers have asked for it, here is the Tax Policy Center’s percentile data used to create the chart above.  

Here are some comments from the comment section of the NYT web site which I think are good:

"One look at this curve explains why it is taking so long for the economy to get going. Too shallow a slope for 95% percent of the curve and too steep a slope for 2% of the curve. The current economic softness in consumer spending would be crystal clear if you were to overlay a transparent graphs of percent of income increase, and increase in average household costs. The cost graph would be out pacing the income graph in 85% of the curve. The rest of the curve, well, you see how it grows so steep at the extreme far end. Whats wrong with this picture, its obvious."

"The book "Winner-Take-All Politics" by Yale's Jacob Hatcher and Berkeley's Paul Pierson explains why this has happened. Political decisions over the last 30 years by Democrats and Republicans both since Jimmy Carter. With TV advertising and the massive amounts of money required to win elections, BOTH parties realized huge campaign contributions are essential, and that means pleasing Wall Street and corporations. The little people no longer count. ALL political decisions regarding corporations and Wall Street or tax policy for 30 years have favored those with sacks of cash. Our politicians think they are independent and not corrupt but the historical record tells a different story. Our democracy is broken, people. It is now all about the money."

"It also explains why Social Security is in so-called crisis. When economic growth goes to people who are already well beyond the cap, the system is starved - artificially - of revenue."

"So much for the trickle-down theory of income distribution. When will the US be prepared to lable the deterioration in our economy which has taken place over the last 30 years a failure? The private sector upper class has responded to lower tax rates and fewer regulatory restrictions by lining its own pockets at the expense of the rest of the country. We have very high unemployment, a volatile housing market, and jobs migrating to other countries. Wake up, folks - we need to take the government back from the truly wealthy!"

"An excellent argument for taxing the wealthy at 95% so they can feel like the rest of us. And congress gave these folks a tax break on top of their wealth? Wow - are our priorities screwed up."

"Oh, those other '99ers'. Does anyone seriously think that the root cause of income inequality in America is whether one has or does not have a college degree? It's not complicated. The people at the top are paid way too much, and the people in the middle and the bottom are paid way too little."

-------------------------------------------------------------------------------------
I'm using this particular post to consolidate some interesting statistics about taxes and other related data.

There is a very good short article about the differences in the Democratic and Republican tax plans - which was a big issue leading up to the 2010 election.  Although the election is past the Republican tax plan has basically been adopted, it is worth seeing the differences presented in graphic form - which this article does.

Closer look at the bush tax cuts    

As you can see from the article, the vast majority of Americans would have been marginally better off with the Democratic plan, while the very rich are way better off with the Republican plan. Yet, most middle class income people were led to believe that the Republican plan was in their better interest.  The reason for that misconception is that the Republican's message is financed and choreographed with a lot of corporate money, and telling articles like the one above simply were not given the broad coverage they deserved.

The following is an excerpt from an article in Time magazine:
Money has emerged as the electoral trump card in the U.S. political system, and corporations have a Supreme Court-recognized right to use their considerable financial muscle to promote candidates and policies favorable to their business operations and to resist policies and shut out candidates deemed inimical to their business interests. So, whether it's health reform or the stimulus package, the power of special interests in the U.S. system invariably produces either gridlock, or mish-mash legislation crafted to please the narrow interests of a variety of competing interests rather than the aggregated interests of the economy and society as a whole. Efficient and rational decision-making it's not. Nor does it appear capable of tackling long-term problems.

Read more: http://www.time.com/time/world/article/0,8599,2043235,00.html#ixzz1BaEMxrpk