The growing gap between the top 1% and the rest of the U.S. population has emerged as a major issue in this year's presidential campaign, but it's not likely to narrow much no matter who wins, says Chrystia Freeland, author of the new book "Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else."
As the title suggests, "the increase in income inequality" in the U.S. is not just a domestic development but "is happening in all Western industrialized countries," Freeland tells The Daily Ticker in the accompanying interview. "And crucially you're seeing the same phenomenon in the big emerging market economies."
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Freeland says globalization is at the root of income inequality around the world. Both capital and labor are global therefore businesses leaders must maintain a global perspective, says Freeland.
"Inevitably that means the super-elite see themselves as citizens of planet earth" rather than as a citizen of their home country, which means they are less concerned with the health of the middle class in the U.S. or any other country they call home.
In the U.S. the gap between the very rich and everyone else "is wider than at any time since the gilded age," says Freeland.
Between 1979 and 2007, the top 1 percent of earners more than doubled their share of the nation's income over the previous three decades, according to the Congressional Budget Office report last year.
More recently, the Census Bureau reported that annual income between 2010 and 2011 increased 4.9% for the top 5% but fell for the middle class and held steady for the poorest.
The average household income in 2011 after inflation was $50,054 — 1.5% lower than the 2010 average and 8.9% lower than a 1999 peak.
President Obama has said he wants more economic fairness and favors higher tax rates for only the wealthiest Americans. He's proposed extending the Bush-era tax cuts for all but those earning more than $250,000. He also favors the "Buffett rule," named for billionaire investor Warren Buffett, which would set a minimum 30% tax rate on income of $1 million or more.
Mitt Romney, in contrast, has proposed extending the Bush-era tax cuts for everyone plus a 20% income tax cut across the board along with the closing of tax loopholes and spending cuts. He believes in the tenants of supply side economics — lower taxes will lead to stronger growth and benefit all Americans.
Freeland says if the president is serious about helping the American middle class, he needs "to connect the dots between his domestic and foreign policy in a new way" and possibly work with other Western industrialized economies which are experiencing the same "hollowing out of the middle class."
As for the plutocrats, Freeland says if they confuse their own self-interest with the common good, they threaten the very system that created them.
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