To Obama: Inequality Is Worse Than You Think

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Talk about just-in-time: If President Barack Obama focuses some of tonight's State of the Union address on income inequality and the opportunity gap (as the Bloomberg View editors urge), the issue's leading data-cruncher has newfigures and analysis to buttress any initiatives.

Emmanuel Saez, an economics professor at the University of California at Berkeley, calculates that, during the 2007 to 2009 recession, average income per family declined dramatically by 17 percent, the largest two-year drop since the Great Depression.

Average income for the bottom 99 percent fell by almost 12 percent -- by far the largest two-year decline since the Great Depression. The drop erased all the bottom 99 percent's gains from 2002 to 2007.

But average income for the top percentile fell an even faster 36 percent. The sharp decline was due mostly to the collapse of the stock market, resulting in much smaller realized capital gains.

Before you shed a tear for the top 1 percent, consider this: From 2009-2011, their income grew 11.2 percent. The average family income at the same time rose a modest 1.7 percent, and the bottom 99 percent's shrank by 0.4 percent.

In other words, the top 1 percent captured 121 percent of the income gains in the first two years of the recovery. The richest Americans' incomes are likely to keep on surging because of the booming stock market.

The recession, Saez writes, depressed top income shares only temporarily. Recent policy changes, including financial re-regulation and top tax rate increases, are too modest to reduce such a concentration of wealth, he concludes. Over to you, Mr. President.

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Paula Dwyer at