Every revolutionary movement needs a clear enemy. The French revolutionaries had the monarchy, while the Bolsheviks had the Tsarist aristocracy.
Not to be outdone by those who came before them, the Occupy Wall Street movement has targeted the banks, modern hygiene, and the top one percent of income earners.
Consequently, the most widely disseminated claim of the protesters is that one percent of the population own 38 percent of the wealth. This is often said with a great deal of self-assuredness, as if it were the coup de grâce of free-market capitalism.
The Congressional Budget Office (CBO) recently released a report which found “that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the [top] one percent… And for the three-fifths of people in the middle of the income scale, the growth… was just under 40 percent,” The New York Times reported.
While it is true that the top income earners had a larger share of the pie than they have in the past, this ignores the fact that everyone is better off. If given a choice between taking a quarter of a pie and half of a pie, your answer would depend on the size of the pie.
Wealth has grown, as evidenced by the fact that every income group saw a gain over the past 30 years; it’ not a fixed pie. Just because your neighbor has become wealthier does not mean some poor schlub out there has become poorer.
To make things worse, the CBO report uses household income as a measurement, which is associated with two problems. The first is that there are less people per household today than there were in 1979, meaning that per capita income has grown at a greater rate than household income. Secondly, there are 39 million people in the bottom 20 percent of households and 64 million people in the top 20 percent. It shouldn’t be any wonder that an added 25 million people results in a greater household income disparity.
An additional error in accepting the CBO report at face value is that it doesn’t take into account actual flesh and blood people.
The report says nothing about what happened to actual income earners in the top one percent; instead, it only tells us how much money is required to qualify for the top bracket. Therefore, all we can take away from the report is that the top earners in 2007 earned more than the top earners in 1979. The problem is that most of the top income earners of 1979 are not the same people as those in 2007. A great deal of income mobility exists.
The Department of the Treasury tracks information on individuals, and according to their data, 80 percent of millionaires are first generation. Additionally, of those in the very highest income group in 1996, 75 percent were in a lower bracket by 2005. Meanwhile, 86 percent of those in the poorest fifth in 1979 rose into a higher bracket by 1988 (15 percent of which reached the top bracket).
Moreover, these numbers don’t tell us anything about the strides in the standard of living the poor now enjoy relative to the 1970s.
According to the Census Bureau, of Americans officially designated as poor, 99 percent have electricity, running water, flushing toilets, and a refrigerator. 95 percent have a television, 88 percent a telephone, 71 percent a car, and 70 percent air-conditioning.
In 1970 for example, only 36 percent of all households (poor and rich alike) had air-conditioning.
Many protesters can be seen using the latest iPhone, a technology that didn’t even exist a decade ago. In absolute terms, Americans today are far better off materially than they have ever been.
Of course these facts do nothing to alleviate the poor job market; they are only useful in realizing that capitalism is a dynamic system that allows people to rise and fall. Nobody is in favor of private gains and socialized losses; we all have a right to be angry. But all this class warfare targeted at the wealthy is a lot of nonsense. Instead, we should be taking aim at the source of the problem, Washington D.C.