American Exceptionalism: Inequality in the US and Why It Matters

The United States is, by every reasonable measure, the most unequal of the world’s rich countries and, for more than four decades, it’s been getting worse. After too many years of inaction and complicity, a growing number of Democrats seem to get it. The Republicans and their patrons, on the other hand, are hell-bent on making it worse. Indeed, it’s an essential part of their mission.

And note well—this is not just a “troubling development” or one more example of Republican cruelty. This massive transfer of income and wealth toward the top represents a major restructuring of the US political-economy—a major shift in economic and political power in the US.

Evidence of extreme and rising economic inequality in the U.S. is overwhelming. In 1979, the top 1% earned about 9% of all income; in 2022, the top 1% earned 21% of all income. More than half of all income growth since 1976 has ended up in the pockets of the top 1%. The incomes of the top 0.1% have grown even faster, and the incomes of the top .01% (the top ten thousandth) have grown faster still. In 1965 the typical CEO earned about 20 times as much as the average worker. In 2022, this ratio was 344.And corporate profits continue to break records.

Meanwhile, the incomes of the shrinking middle class have stagnated, and the incomes of those with a high school education or less have fallen substantially. Since 1980, labor productivity—the market value of what the typical U.S. worker produces in an hour—has increased by 65% while real wages (what workers get paid for an hour of work) have barely budged. Since 1970, the purchasing power of the minimum wage has fallen by more than 40%. 11.5% of US residents (about one in nine) live in poverty.

The next time an economist or a banker or a Republican or a “fiscally conservative” Democrat tells you that we “can’t afford” universal health care or affordable higher education or Social Security or public investments in clean energy or commitments to housing security, clean air and clean water, think about this massive shift of income and wealth.

Carter Price and Kathryn Edwards estimate that from 1975-2018, there was a shift of $47 trillion (and counting) from the bottom 90% of income earners in the U.S. to the top 1%. That is, if the distribution of income in 2018 had looked like the distribution of income in 1975 (if the incomes of the bottom 90% had grown as fast as aggregate income) the annual income of the “bottom” 90% of Americans would have been $2.5 trillion higher in 2018 alone. That’s enough to pay every U.S. household in the bottom 90% an additional $1,144 per month. Every month. Every year.

The next time an economist or a banker or a Republican or a “fiscally conservative” Democrat tells you that we “can’t afford” universal health care or affordable higher education or Social Security or public investments in clean energy or commitments to housing security, clean air, and clean water, think about this massive shift of income and wealth. How will we pay for a more equitable, sustainable, and secure economy? The answer starts with tax the rich.

And while much has been made of the (very real) hard times endured by the “white working class” in recent decades, profound racial inequality remains a defining feature of the U.S. economy. The income of the median African American household is about 60% that of the median white household, and this ratio is lower than it was in 1960. The wealth of the median African American household is about one-ninth that of the median white household. One in six African Americans (17%) live in poverty—twice the rate for whites—and one in four African American children live in poverty. This appalling racial inequality manifests itself in other realms of social life as well: education, health care, housing, employment, capital markets, exposure to toxins, life expectancy, infant mortality, the “criminal justice system,” and more. (African Americans are five times more likely to be incarcerated than white Americans.)

Many millions are a lay-off, a health crisis, or a divorce away from bankruptcy and/or poverty.

Tens of millions are without adequate health care. Twenty-six million are uninsured. (The U.S. is the only rich country without universal health care. Two-thirds of bankruptcies in the U.S.—more than half a million per year —are caused by medical debt.) Our schools are underfunded, we work too hard, and the organization of economic life—the ways in which we produce, distribute, and consume stuff—has put our bodies, our planet, and our grandchildren’s prospects at risk.

Isn’t rising inequality inevitable in a capitalist economy? No! It has not always been this way.

And, by the way, the burdens of climate change are (and will continue to be) felt disproportionately by the poor – in the U.S., and around the world.

OK. But isn’t rising inequality inevitable in a capitalist economy? No! It has not always been this way. Between 1948 and 1975, the income of the median US household doubled. The incomes of the bottom 20% actually grew a little faster than the incomes of the top 20% over this period. Between 1928 and 1950, the distribution of income and wealth in the U.S. actually became dramatically more equal. And many of the world’s richest capitalist countries thrive with dramatically lower levels of inequality.

Why should we be concerned about inequality? America is about opportunity, not guarantees—right? Actually, no. Among the world’s rich countries, the US is tied for last in class mobility; a US resident’s economic success is in fact very highly correlated with their parents’ wealth and status.

And further, economic inequality inevitably means political inequality. The right-wing Koch brothers and their billionaire allies have spent hundreds of millions of dollars advancing their self-serving agenda: tax cuts, deregulation, union busting, climate change denial, cuts to Medicare, Medicaid and Social Security, voter suppression, appointments of right-wing justices (who reliably affirm the Koch agenda), and political hits on legislators who dare to step out of line. When asked why he—along with virtually every other Republican in the US Congress – would vote for President Trump’s massive (and widely unpopular) corporate tax cuts in 2017, Republican Chris Collins of New York answered: "My donors are basically saying ‘get it done, or don’t ever call me again.’” Increasingly—at the federal and state level—legislation is literally being written by corporate lobbyists and think tanks funded by rich right-wingers. As Republicans attempt to explain their economic policy agenda, you can almost see the Koch Brothers’ lips moving.

Increasingly—at the federal and state level—legislation is literally being written by corporate lobbyists and think tanks funded by rich right-wingers.

There is also compelling evidence that inequality is socially corrosive. In their magnificent book, The Spirit Level, Richard Wilkinson and Kate Pickett show that unequal societies suffer from higher rates of violent crime, incarceration, infant mortality, stress, mental illness, substance abuse, and suicide. Inequality is also associated with lower life expectancy, lower levels of educational performance, and lower levels of trust. Inequality is not just bad for the poor. It's toxic. In her powerful book, Weathering: The Extraordinary Stress of Ordinary Life in an Unjust Society, Dr. Arline T. Geronimus shows that the deep and relentless stress associated with social, economic, and political marginalization has dramatic and, often, lethal health effects. Differences in health outcomes depend essentially on how society treats us, rather than how well we take care of ourselves.

Despite this grim reality, the Republican Party’s economic policy agenda has not changed for decades. Cut taxes for the top 1%. (The effective tax rate on the 0.1% richest Americans has fallen by a third since 1980.) Reduce corporate accountability (“deregulation”) so that banks, hedge funds and private equity can run wild and corporations can pollute with impunity. Attack the bargaining power of workers. And then blame the inevitable decline in workers’ incomes on people of color—"illegal immigrants," "welfare queens," food stamp recipients, those who’ve “cut the line” thanks to "quotas" and "special preferences," and “unfair trade deals” with Mexico and China.

Sound familiar? After more than four decades, it should. This is trickle-down economics (enriched by a shameless racist narrative). The “logic” here is that the economy will grow if we provide a better “business climate”—lower taxes and fewer regulations will liberate corporations to create jobs. The problem is that it doesn’t work. Nearly four decades of lower (and lower) taxes and reckless deregulation have saddled us with soaring inequality, the financial meltdown of 2008, a devastating recession, an epidemic of housing insecurity, rising tuition at our public universities, diminishing opportunities, and eroding economic security for millions of Americans, and a planet in peril. And yet—like a zombie that will not die—trickle-down economics is alive and well in the U.S., despite its long record of failure. Ask a Republican about the economy, and they are likely to tell you that we need more of this toxic concoction.

But it is wrong to conclude that trickle-down economics has “failed.” The U.S. economy doesn’t serve most of us because it is not designed to. It’s designed to generate profits – which it does extraordinarily well. University of Cambridge economist Ha-Joon Chang hits this nail on the head: "Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are—a simple upward redistribution of income, rather than a way to make all of us richer, as we were told."

The U.S. economy doesn’t serve most of us because it is not designed to.

The lost income of workers of all sorts—union and non-union, black, brown and white, public sector and private sector, etc.—can be found in the pockets of the 1 percent.

The U.S. remains a very rich country. We have the capacity to do much better. We have the capacity to deliver equitable, sustainable prosperity—and we know how to do it. A detailed plan is beyond the scope of this short essay, but here’s a start: a tax on wealth; tax increases on corporations and the super-rich; a higher minimum wage; deliberate, active efforts to improve worker bargaining power; affordable health care for all; a well-funded effort to provide affordable housing for all; the promotion of renewable energy and sustainable production technologies, and affordable higher education—including the elimination of student debt. More generally, we need to reject the presumptions that (a) our well-being depends on growth and (b) prosperity requires that we pander to corporations.

Inequality is, to a considerable degree, a political choice. And there are powerful forces out there fighting with all of their might and all of their abundant resources to preserve the status quo.

Soaring inequality is not inevitable. It’s not about the “inexorable” forces of globalization or technological change. Inequality is, to a considerable degree, a political choice. And there are powerful forces out there fighting with all of their might and all of their abundant resources to preserve the status quo. The US economy is working for them.