Julia Reyna Professor Paul Phillips Govt 2305 April 1, 2012 Income Inequality in America Inequality of wealth in America

is becoming a bigger and more known problem that is coming out in the political media. The main entity that is making this phenomenon known is the all too popular Occupy Wall Street movement. These people have figured out that the gap between the rich and the poor has grown substantially in the past 30 years. According to the CBOs report, income for the top one percent of has grown massively since 1979shooting up 275 percent in that timewhile the incomes for those in the middle 60 percent grew by only 40 percent1. With these calculations starting to be known, individuals are now figuring out that the elite percentage of the wealthier class are starting to gain more and more power over middle and lower classes of income levels. Some individuals say that the wealthiest people in America control almost twothirds of the countrys net worth. These statistical figures and the growing knowledge of this problem may bring more complications in the recovery of this economy. The Occupy Wall Street movement could possibly be just the first of many movements coming across the country in the years to come. People are getting fed up with the government controlling so much and making so many regulations to help the rich keep getting richer and the keeping the poor down in the poor level. What the United States is starting to figure out is that the people that they are dealing with today are educated people that are fully capable of knowing what is going on in this country and they are getting tired of it and starting to speak out and let the rest of the country know what they know. The inevitable down turn of this economy started when all of the big banks, such as Fannie
1 Eichler, Alexander. The Huffington Post. 10/31/2011. Web.

Mae and Freddie Mac, started going under and losing massive amounts of money. This led to the government bailing out these banks and keeping them afloat. Then the big car companies started to go bankrupt and requested a bail out from the government, just like the banks did. This leads to a big problem because that put America in the biggest amount of national debt that has ever been accrued before in history. Yes the bail outs did save some jobs, but in all actuality, it just kept the wealthy people running these businesses from having to cut their yearly income. This also gave the American government more control over the country since it now owns most of these businesses due to the bail outs. So ultimately the government has more say so in how these businesses are operated and maintained. With all of these bail outs being granted, the United States in in some $15 trillion in debt and the politicians are starting to make the middle and lower class take the brunt of all the taxes that are starting to come out. But when will the government start taxing the higher percentage of wealthy people more? When will they have to help ease the pain that is put on the middle and lower income families? That day may never come, because the government is comprised of most of these wealthy individuals. And the individuals that are wealthy and that are not in the government make sizeable contributions to these politicians to keep the laws the way they are and to not take as much money from them as they need to be. The government puts out information that they know how many Americans live under or at the poverty line. The listless economy, which continues to put pressure on lower- and middleclass earners, may be contributing to the increasingly popular feeling that income disparity needs to be addressed. Some 46 million people, or 15.1 percent of all Americans, currently live below the poverty line. The government counts 14 million people among the unemployed, though the actual figure is probably higher.2 How could the government possibly know all of these figures? Not
2 Eichler, Alexander. The Huffington Post. 10/31/2011. Web.

every American that is unemployed seeks un-employment benefits and not every American is on food stamps or some kind of government assistance. For those who are retired or retiring and are currently withdrawing social security or anything like that, then those number can show some statistics. It is virtually impossible for the government to figure out the exact number of people under or on the poverty line. That number in all actuality is probably a much more massive number since the cost of living is increasing and the Americans that are working are not making enough money to survive with just the basics. Another problem the government has is their definitions of income in a typical household. The most common definition of income used by the Census Bureau and other statistical agencies is total money income of a household, excluding capital gains. All of the members of a household are assumed to share in the households combined income.3 So basically by this definition is that everyone in the household shares the income. How many teenagers do you know in a household has a job and actually contributes their income to their household? I dont know of many teenagers with jobs that want to share their money to help pay bills. And I really dont know many parents that request their kids to help pay any bills. So this information still has to be reported in the yearly tax returns and therefore the government thinks that anyone making money in the household should be helping pay on everything. The incomes can vary from regular salaries to child support or social security payments. That is another topic that doesnt agree with me. Social Security payments are not as high as they should be. Most people living on just social security alone have to survive month to month. Barely getting by and barely being able to pay their bills with the little money that they do get.

Babones. Salvatore. U.S. Income Distribution: Just How Unequal?. www.inequality.org.

02/14/2012. Web.

The actual wealth distribution in America is mind blowing. In the United States,
wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010). 4 This is a scary amount of people in America that have little to no wealth in their household. The upper class of income earners have a substantial amount of money that they do not have to report to the government, thus creates a problem because the lower income families have to report everything they earn. This makes the lower class have to pay more in taxes, while the upper class can earn more and more money without even having to report it. This is unconstitutionally fair to the lower class of income earners because they have no way to make money. If they were able to make more money, they may be able to pull themselves out of their debts and help the nation pull out of debt, as long as the upper class gets taxed just the same as the lower class. Here is some percentage figures of net worth distribution and financial wealth distribution.

Figure 1: Net worth and financial wealth distribution in the U.S. in 2007

4 Domhoff, G. William. Wealth, Income, and Power. www.ucsc.edu. March 2012. Web.

In terms of types of financial wealth, the top one percent of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.5 These figures show us exactly how much the lower class is worth and what the actual wealth distribution is. I think this is showing us that every one of those upper class wealthy people profit from the lower class income and how hard they work. For the vast majority of Americans, their homes are by far the most significant wealth they possess. Figure 3 comes from the Federal Reserve Board's Survey of Consumer Finances (via Wolff, 2010) and compares the median income, total wealth (net worth, which is marketable assets minus debt), and non-home wealth (which earlier we called financial wealth) of White, Black, and
5 Domhoff, G. William. Wealth, Income, and Power. www.ucsc.edu. March 2012. Web.

Hispanic households in the U.S.6 This shows that most of the lower income families put all of their income into their houses. They are not able to afford much other than their house because everyone needs a roof over their head. The government needs to do something about this, but in all actuality, this is just one of the many problems that the government is facing these days. I have a feeling the government doesnt know any other way to operate, other just helping the rich get richer and not worrying very much about the common people just trying to survive and make it in this country.

6 Domhoff, G. William. Wealth, Income, and Power. www.ucsc.edu. March 2012. Web.