Former United States Treasury Secretary Lawrence Summers wrote an opinion piece in the Financial Times this weekend, in which he warned that the United States is at risk of becoming a "Downton Abbey" economy. Summers points to the growing share of income going to the top earners in the U.S. and stagnant real wages in recent years as evidence of a growing divide that is not likely to close without intervention.
“Tax reform has a major role to play. The current tax code is so badly designed that it is very likely to be having the effect of reducing economic growth. It also allows the rich to shield a far greater proportion of their income from taxation than the poor. For example, last year's increase in the stock market represented an increase in wealth of about $6 trillion, of which the lion's share went to the very wealthy," he said.
Meanwhile, a separate report revealed insiders at the six largest U.S. banks sold $26 million of stock in January, the busiest start to a year since 2007, according to data compiled for The Wall Street Journal by Equilar. The $26 million in January of this year is still well below the $47.6 million in stock sold in January of 2007 before the financial crisis. Some market-watchers wonder if all the selling is just profit-taking after a strong 2013 or if the selling means insiders believe their company shares are overvalued after the run-up.
While bankers cash in some profits, American households are racking up debt. More than 1 in 4 has more debt than savings. A new survey by Bankrate.com found 28% of Americans have more credit card debt than emergency savings. That is an increase from last year’s 24%.