Where's the money going?

The middle decades of the 20th century were boom times for Americans. Partly this is because much of the rest of the industrialized world had been devastated by World War II, but actually recovering from that devastation meant that economic growth rates were pretty good even in Europe and Japan after the war. Even better, for once a rising tide really did lift all boats. Low-, middle-, and high-income people all saw major gains from economic growth, and low-income people working people actually saw their income grow a little faster in percentage terms than their higher-income counterparts.

Since roughly 1980, however, the spread between rich and poor has been getting worse. Consider just the 2000s: Below is a graph showing the change in real per capita gross domestic product for the United States. That is, it's the total amount of economic activity in the United States adjusted for inflation and divided by the size of the population:

Real GDP 2000-2018

This is an increase of over 25 percent on top of inflation, which is pretty good considering we went through a very bad recession starting in 1998 that was on its way to becoming a deep depression had the government not adopted a massive economic stimulus early in the Obama administration. (The last months of the Bush administration did some serious bailing as well.)

If the distribution of income had stayed the same, everyone would be about 25 percent better off in terms of gross income. The rich would be the same proportion better off than the poor and middle class, etc., but every group would be doing the same percentage better relative to a couple of decades earlier.

But of course we're not all equally better off. Quite the contrary, as the graph below illustrates. It was created by blogger Kevin Drum based on census data you can find here.

U.S. household income 1999-2018

The rich are getting richer, the poor are getting poorer, the people in the middle are doing a little better, and the top fifth of the population saw their income rise by about 11 percent.

But this looks like nobody is enjoying a 25 percent income increase. How is that possible? The answer, of course, is that the great bulk of that additional income is flowing to the narrow sliver of the population at the very top. These are of course the people enjoying the main benefits of last year's massive tax cuts for wealthy individuals and corporations.

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