One percent beats 60 percent: for the first time since statistics were introduced a good 30 years ago, the absolute top earners in the USA have more wealth than the entire middle class. According to the Washington Federal Reserve, in June 27 percent of the nation’s real estate, stocks and corporate assets were in the hands of the highest-income percentage of the population. The middle 60 percent of households, which economists consider to be the middle class, came to only 26.6 percent. For the families and singles affected, a new low has been reached after a long descent: In 1990, the numerically largest group in society owned a good 36 percent of total assets – more than twice as much as the top earners, who came to just under 17 percent.
The figures are an alarm signal for politicians, because they show what many people in the country have felt intuitively for a long time: the middle class is losing stability, it is hit harder by recessions and benefits less from economic upturns than the rich. A middle income also protects against financial hardship and social decline less well than in previous decades. While this experience is not the main reason, it is a decisive factor for the rise of populists like Donald Trump, the drifting apart of society and the internal struggles for direction among Democrats and Republicans.
The group of absolute top earners includes 1.3 million of the total of 130 million households in the USA. They have an annual income of more than 500,000 dollars (430,000 euros), with many employees having salaries in the millions, some even in billions. The pandemic has made the group even richer because almost everyone has real estate and securities and many also own their own companies. You benefit significantly from the dramatic increases in house and share prices as well as the tax cuts of the past decades. The loopholes in tax law, which are still very large, also came and will primarily benefit top earners.
The middle class suffers particularly from the high rents in large cities
The situation is very different in the middle class, which includes around 78 million households with annual incomes between around 27,000 and around 141,000 dollars. Now one can safely object that there are also very big differences between the single mother with $ 30,000 and the high-income family with $ 130,000 annual earnings. What unites the people, however, is that they usually do not receive any help from the state, bear the majority of the tax burden and, in principle, show similar consumer behavior. A significantly larger proportion of those affected also do not live in their own home. The financial pressure caused by the dramatically increased rents, especially in large cities such as San Francisco, Los Angeles and New York, is correspondingly great.
In 1991, the middle class still held a good 44 percent of the country’s total real estate assets. In the case of stock and company assets, the proportions were 21 and a good 22 percent, respectively. Today it is 38 percent for real estate, 12 percent for stocks and 13.5 percent for corporate assets – a dramatic decline that has contributed to the fact that more and more middle-class parents no longer believe that their children will one day have it better than themselves. From a social point of view, this harbors a lot of explosives: “If the economic system no longer works for a clear majority of the population, it will eventually lose political support,” said Nathan Sheets, chief economist at Citigroup, the Bloomberg agency. This realization is also the decisive reason why the government of President Joe Biden is currently pushing one reform program after the other.
In fact, Biden plans to spend around six trillion dollars over ten years to overcome the economic consequences of the pandemic, modernize the infrastructure, promote the ecological restructuring of the country and, above all, support families. For the first time, there will be permanent child benefit; according to the plans, daycare for three- and four-year-olds will be just as free as a two-year basic course at a state community college. Biden wants to pay for the programs, among other things, through tax increases for the rich. But because the Democratic Senate members Kyrsten Sinema and Joe Manchin obstinately block parts of the plans, many people have given up hope of a real redistribution from top to bottom. Many Republicans – including those from the middle class – reject it anyway as an encroachment on individual freedom.