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The wrecking ball

Sylvia Allegretto, Economist, Co-Chair of the Center on Wage and Employment Dynamics | July 16, 2012

The destruction caused by the bursting of the housing bubble and the subsequent Great Recession continues to wreck havoc on our economy, communities, families and workers. Last month, the Federal Reserve released 2010 data from its Survey of Consumer Finances (SCF). This triennial survey, one of the best sources on net worth (assets minus liabilities) for the U.S., just happened to coincide with the recession.

The 2007 SCF reflected the state of wealth at the last economic peak — as the recession officially began in December of that year. With the newly released 2010 data it is possible to assess where we were three years later. It isn’t a pretty picture. As the chart shows, over the 2007-2010 time frame typical families lost 39% of their wealth which put them back to 1992 levels (inflation adjusted).

To see what happened to the richest amongst us, the chart also shows the 2007 to 2010 change in wealth for the Forbes 400 and also for the six Waltons of Wal-Mart who are on the list. The decline was 16% for the cumulative wealth of everyone on the Forbes 400 list. However, the wealth of the Walton heirs grew by 22%. During a period of massive destruction of wealth for typical families and even when their peers lost some ground, the Waltons were able to cash in. It seems what has been bad for the vast majority of Americans has been very good for the Waltons. As the company’s then CFO said right before the start of the great recession “Tough times are actually a good time for Wal-Mart” (cite). Looks like he was right.

Last December I put the wealth held by those on the Forbes 400 list and the subset of Waltons into some perspective (here). In 2007 the total wealth of the Forbes 400 equaled the wealth of the bottom 50% of families in the U.S; wealth held by the Walton-six was equal to that of the bottom 30.5%. In 2010, the cumulative wealth of the Top 400 ($1.35 trillion) and the share held by the Waltons ($89.5 billion) equaled the entire bottom 56% and 41.5% of families, respectively. The ever increasing concentration of wealth at the top continued over this period.

Given that the stock market, corporate profits and CEO bonuses have surpassed pre-recessionary levels, it is likely the wealthy have turned the tide in their favor even more so of late. Recent research (cite) showed that income gains from the 2009/2010 recovery went overwhelmingly to the rich. Income for the Top 1% grew by 11.6% while the rest of the 99-percenters gained just 0.2%. In other words, 93% of all income gains went to the Top 1%!

On the other hand, the outlook isn’t as optimistic for typical families who have (had) most of their wealth in their homes. Today, more than one in five mortgages is still under water, foreclosure rates remain high, wages for most workers are at best stagnant, and unemployment has been stuck around 8.2% for the last six months. Until the labor market has momentous improvements it will be impossible for most workers and their families to regain, let alone transcend, the lower rung on the economic ladder they found themselves on post-Great Recession.

Comments to “The wrecking ball

  1. Try and make heads or tails out of the text of this bill, S2237. A PDF can be found here (only 20 pages, unlike 2,000 for Affordable Healthcare for America Act).

    We have to stop making such a stupidly complex and arcane tax code system. And worse, attempting to meddle in the minutiae.

    To think anyone can lay claim to the direct consequences of such a bill on either side of the argument is delusional. Not to mention the unintended consequences.

    Where is the outrage against such convoluted legislation?

  2. The Walmart emmpire which began by using the “Buy American” logo then proceeded to become the driving force in off shoring US Production jobs and socializing the cost by underpaying workers and transporting goods half way around the globe with cheap oil denying that a cost was coming up to be paid by the environment as well as US troops to keep the cheap fuel flowing.

    But the Democrats let it roll during the Reagan era while this was happening just as they failed to hold the neocons and their Republican sponsor, Ronald Reagan to bust unions and fund anti-union wars in Salvador, Nicaragua, and other points South teaching their military to torture at places like the School of the Americas. (US Southern Command!–Support our Troops) But the Unions had long ago sold out their solidarity — shown in the Air Controller Strike where they should have brought the corporate parties to their knees till Reaganomics was revealed as the fraud it really was.

    Does anybody really believe the bulk of the Democrats up for election to the Senate will change things any more than they should have back 30 years ago? The only party friendly to workers and pay is the Green Party. Build it or roast and starve. The 99% are proles. The 1% has won the class war or haven’t we noticed.

  3. How does the American worker have a chance? The press, desensitized by the 30 year assault on worker’s welfare, has now completely under-reported on the most recent shocking crime: the kidnapping of 14 million unemployed workers by the Republican minority in the U.S. Senate.

    On July 10, 2012 the Republicans, blatantly holding out for their ransom item, control of the Senate in the coming November election, filibustered the most straight forward, uncontroversial, small business tax reducing bill, in aid of a national business hiring and employment roll enhancement program to relieve the 14 million out of work, Senator Reid’s S.2237.

    What could be wrong with reducing business taxes or hiring American workers? What could be wrong with apple pie? But Republican ambitions to recapture control of the Senate are threatened by apple pie for American business and American workers before November. And the press is asleep at the switch, oblivious of this crass crime, this kidnapping and taking hostage of the American people by 40-some Republican politicians, who put their greed for power ahead of the economic suffering spread rife in our land.

    Where is the outrage? Where is the determination not to reward these kidnappers? Where is the determination to reduce Republican Senate ranks to less than 40, to strip these kidnappers of their once and for all of their filibuster weapon? Why is the press ignoring the incredibly high stakes for our country that is upcoming Senate elections?

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