The top 1 percent captured 95 percent of the income growth during the economic recovery. That's just one depressing lowlight in Thomas Piketty and Emmanuel Saez's 2012 update on the fortunes of the nation's top earners.
Piketty and Saez's dataset, drawn from exclusive access to the IRS filings of the top 1 percent of wage earners since 1913, paints a clear picture of the increasingly potent ability of the richest Americans to extract rents from the rest of the society. Taking into account capital gains, Piketty and Saez find that the current recovery has been a windfall for the richest Americans. After a momentary decline during the Great Recession, the incomes of the top 1 percent of earners surged again during the 2011-2012 period.
The addition of 2012 data helps paint of a more complete picture of the missing recovery for most Americans. During the recession, the incomes of the richest fell, but not nearly at the rate of everyone else, despite their role in precipitating the crisis. But that inequality of performance has gotten worse during the recovery. Showing the difference between the bottom 90 percent of earners and the richest 1 percent accentuates the degree to which this has been a recovery in name only for most Americans. Indeed, while the highest earners captured only half of the income growth during the Clinton boom years, they captured nearly all during the current recovery.
Meanwhile, the incomes of everyone else barely budged. Piketty and Saez conclude of the new data that:
Overall, these results suggest that the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s.
The richest Americans are doing better during both recoveries and recessions, while the poorest have simultaneously done worse. The headline finding is that inequality is back to levels not seen since before the Great Depression, with the top ten percent of earners making the most on record: Half of all income in 2012. At the top it's even more severe. The Associated Press reports that "the top 1% of U.S. earners collected 19.3% of household income... their largest share since 1928."
Even that undersells it. The chart below makes clear how much better each stratification of contemporary top earners has done than their predecessors in the 1920s.
That the richest Americans weathered the severest economic downturn in eighty years is due in no small part to their ability to write the rules that govern their own economic status. Capital gains, which the study shows account for over 40 percent of the wealthiest of the one percent's income, remain taxed at a rate far lower than income despite the preferences of a vast majority of Americans. Meanwhile, Senator Max Baucus and others on the Senate Finance Committee are moving steadily to substantially reduce the corporate tax rate in a budget deal this fall, while eschewing the infrastructure spending demanded by President Obama.
We live in the age of capital. And, without intervention, capital begets capital. Over the 20th century, it was gradually curbed through strong union protection, progressive taxation, and government stimulus like the New Deal (or, more importantly, World War II). We need another era of bold, persistent experimentation to revive that contract. Happy second birthday, Occupy.
