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Only the Rich Profit from US Growth

by Rainer Rupp Tuesday, Nov. 22, 2005 at 3:01 PM

"The same Congress since 1997 has consistently rerfused to raise the minimum wage from .15.. The founding fathers defined their new form of government as government by the people for the people. In the meantime US democracy has become government by the rich for the rich.."


Unequal Income Distribution at a Record High, according to the 2004 US Census Report

By Rainer Rupp

[This article published in: Neues Deutschland, 11/15/2005 is translated from the German on the World Wide Web,]

Although the US economy grew a solid 3.8 percent in 2004, the income of US households fell at the same time and at best has stagnated in the upper middle class.

The latest economic growth of the US only benefited the very rich few. The trend of the past Bush years continued for most workers and employees. In 2004 they again returned home with less in their pockets. Despite the “solid” economic growth, the multitude of US workers who must slave away without any social security or health insurance grew another 800,000 to 45.8 million. Another 1,100,000 persons fell into poverty in the richest country of the world last year despite a growth that is still praised in Germany. The number of poor registered in the US swelled to 37 million, according to the annual report of the Census Bureau of the US government. This report was hardly noticed this year on account of the hurricane. However the catastrophe in New Orleans is connected with this increased poverty. In the destroyed city, the poverty rate was 30 percent. For that reason, many didn’t have money to leave the city on time. Five of the hundred poorest US counties with a per capita income of less than half the US average are in the state of Louisiana.

Although the US economy grew robustly for four years, the median household income in 2004 before taxation fell to ,389, the lowest level since 1997. Unlike the average, the median lies in the middle of a statistical distribution. This means 50 percent of US households have ,389 or less and the other 50 percent have ,389 or more. The middle class, defined statistically as 20 percent of the households whose income lies between the lower and upper 40 percent of the total income, has lost a few feathers to the rich. Their average income amounting to ,900 in 1999 adjusted for inflation has fallen 3.8 percent to ,555 (2004). The poor have become even poorer. The income of the poorest 20 percent has fallen on average 8.7 percent since 1999 to ,264.

According to the US Census report, the inequality of income distribution reached an historical record in 2004. The share of the lowest 20 percent of households in the total US income amounted to 2.4 percent (1970: 4.1 percent) and the middle class 14.7 percent (1970: 17.4 percent).

50.1 percent of the total income falls to the top 20 percent of US households. Additional census data edited by the Washington “Economic Policy institute,” showed that only the top five percent of US households registered a growth in income in 2004. Stock profits were not included. Otherwise the inequality would have been even more striking.

The fact that the incomes of the other 95 percent of households either fell or remained the same despite economic growth suggests the enormity of the income growth of the super-rich. This growth is largely owed to the tax cuts carried out by president Bush in his first term in office to benefit his rich friends. Party membership did not play any role. US president Bush and his vice-president Cheney like the democratic rivals in the last election, Kerry and Edwards, belong to the guild of the multi-millionaires. The Bush administration’s next ploy will be abolition of the tax on property and real estate and tackling tax deductions on stock profits that mainly flow to the richest of the rich. According to the New York Times, these bills in the US Congress have top priority while the same congress since 1997 has consistently refused to raise the minimum wage from .15 per hour. Instead the Congress is working on further proposals to reduce the meager US social programs like Medicaid and food stamps.

The founding fathers of American democracy defined their new form of government as “government by the people for the people.” In the meantime US democracy has become “government by the rich for the rich.” No wonder that the capital-friendly parties in Germany praise growth in the US and orient their economic and social program according to the US model.

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