City University of New York



PROBLEM MEMORANDUMTO: President Barack Obama, Senate Majority Leader Mitch McConnell, Speaker John Boehner, and Federal Reserve Chairwomen Janet Yellen. FROM: Greg Potter.RE: (SUBJECT) Wealth and Income Inequality in America.DATE: FEBUARY 11th, 2015.The United States has wider disparities of wealth between rich and poor than any industrialized country in the world. Wealth inequality can be defined as the unequal distribution of assets within a population. Your “wealth number” is equal to your assets, such as real estate, stocks, bonds and cash less your liabilities. Economist Emmanuel Saez and Gabriel Zucman, who have dedicated their careers to compiling and analyzing wealth and income data, point out that in America today, the wealthiest 160,000 families own as much wealth as the poorest 145 million families. And the New York Times reports that the six heirs of the Sam Walton fortune, the founder of Walmart, own as much wealth as the bottom 100 million Americans. Another display of the wealth disparity crisis is to compare the growth of the Forbes 400 list of America’s richest citizens vs. the wealth of the average middle class family. In 1982, when Forbes began annually listing America’s 400 richest people, the United States sported only 13 billionaires. In 2014, you won’t even make the Forbes 400 list if you have a billion dollars. In order to qualify now, you need at least a record high $1.55 billion in wealth, which means that 113 U.S. billionaires didn’t even make the cut in 2014. This puts the total number of American billionaires in 2014 at 513, which is a massive 3,800 percent increase since 1982. All the while, the average middle class American family is worth less today than in 1969. In 1969 the wealth of a middle class family was $68,000, while in 2013, the number stands at $63,800. (Indexed to 2013 dollars)Income inequality in the United States has also reached a crisis point, growing steadily for the past 30 years. Income inequality refers to the extent to which income is distributed in an uneven manner among a population. According to the AFL-CIO, the average CEO today in America takes home more than $12 million, while the average worker makes about $34,000.” That translates into the CEO making 353 times more than the average worker. That is the widest disparity in the developed world. To put these numbers into perspective, in Japan, the world’s third largest economy, the CEO makes only 65 times more than the average worker. A microcosm of income inequality is being played out at America’s largest private employer?Walmart?which employees over 1.3 million Americans. Walmart’s CEO Mike Duke took home a total compensation, income plus bonus, of $23.15 million in 2012, while half of Walmart’s workers made less than $22,400, which according to PayScale is below the poverty level for a family of four. Take note that Mr. Duke made roughly 1034 times more than his average employee. Another way to examine the income disparity problem is to analyze the issue in terms of total population. In 1982, the highest-earning 1% of families received 10.8% of all pretax income, while the bottom 90% received 64.7%, according to research by UC-Berkeley professor Emmanuel Saez. Three decades later, according to Saez’ preliminary estimates for 2012, the top 1% received 22.5% of pretax income, while the bottom 90%’share had fallen to 49.6%. This is the worst income disparity since the 1930’s. Wealth and income inequality harms over 100 million Americans, causing health outcome imbalances, food poverty and uneven educational opportunities. In the area of health, the people in the top 5 percent of the income earners live about nine years longer than those in the bottom 10 percent. And poor Americans are at greater risk for virtually every major cause of death, including cancer, heart disease and diabetes. Concerning poverty, nearly 50 million Americans face “food insufficiency”, which has severe health effects for children, leading to learning disabilities and conditions like anemia and asthma. The poverty and inequality crisis is exemplified by the fact that a record 46 million Americans currently participate in the “SNAP” food assistance program, while concurrently corporate profits and asset price are at their highest levels in recorded history. Education is under duress too. High income families spend seven times more a year on average than a low-income family, up from four times in the 1970’s, according to a report, coauthored by MIT economics professor Michael Greenstone. These families now spend as much as $9,000 annually on private tutoring, SAT prep courses, computers and other activities, compared to $1,300 for low-income families. The money advantage provides a true benefit, as test scores of low-income students have shown only modest gains nationally during recent decades, while high income students have shown large increases.Also, it’s been shown that mothers with college degrees spend 4.5 more hours a week engaging with their children than mother’s with a high school diploma or less. By age 3, children of parents who are professionals have vocabularies that are 50 percent larger than children from working-class families, and 100 percent larger than vocabularies of children whose families receive any sort of government assistance.One cause of wealth and income inequality in America is the extraordinary influence that corporate special interest groups have on fiscal policy. And now the “big money” has reached extreme levels, led by the 2010’s Supreme Court Citizens United v. Federal Election commission ruling. The Citizens ruling says that the government can’t place any restrictions on campaign contributions from both corporations and unions and also allows the creation of a Super PAC, which can take unlimited funds from individuals, unions and corporations. The Citizens ruling has given an unfair advantage to those with monetary resources as they can now affect elections directly, and ultimately shape policy at the expense of ordinary Americans. In addition, the Federal Reserve’s extreme monetary policy measures since the 2008/2009 financial crisis are stretching the wealth and income inequality gap even further. The Federal Reserve’s four trillion dollar quantitative easing program has driven interest rates close to zero, causing a massive increase in asset prices, as seen in the Dow Jones Industrial Average stock index’s meteoric rise by more than 150 percent since 2009. As a result, the incomes of the very wealthiest 1 percent of Americans increased by 31.4 percent from 2009 to 2012, and by contrast, the bottom 99 percent saw their earnings in the same period go up by just 0.4 percent. And in 2012, the top 1 percent collected 19.3 percent of all household income and the top 10 percent took home a record 48.2 percent of total earnings. Thank you for your time and I look forward to working with you so that we can solve America’s wealth and income inequality problem. ................
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