Something Is Really Broken

September 19, 2013

On Tuesday, the U.S. Census Bureau issued its annual report on income and poverty in the United States. It revealed what has been obvious in the five years since the collapse of Lehman Brothers and the onset of the Great Recession; something is really broken in our country. Since 1980 we have seen a steady climb in the share of income going to the top 5% of American households, except the downturns of 2001 and 2008. During those downturns, financial bubbles burst and the top lost income share. In both cases, the Federal Reserve System acted aggressively to save the financial sector and stave off further contagion from the sector of finance and speculation into the sector of goods production and employment—the real economy. The restoration of the financial sector restored the incomes of the top 5%, and the recovery after 2001 and the current recovery restored the steady growth of inequality.

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