Reaganomics worked? For 400 families, sure.

Notes on this graph:

1) In 1995, when the spike started, the Republicans controlled Congress. Remember the Contract On With America?

2) Note that while pre-tax income grew by 409%, these 400 wealthiest families also got tax breaks that raised their net income by 476%. How does one justify giving more back to people who have increased their income by 400%?

3) The argument that Gingrich made in his Contract was that Reaganomics worked. The trickle-down idea that if you put more wealth into the hands of the business owners, it would create more jobs. This is simply NOT the case.

Ezra Klein

This graph, from EPI, is probably the sort of thing most of you have seen before.

The normal takeaway from this is that the American economy is very unfair. But I don't think that's a sufficient conclusion. Rather, there's something dangerous in these lines. One of two things happen when the majority of a country goes through a sustained period of wage stagnation. Either political unrest reaches destabilizing levels or we mask the trend by amassing enormous amounts of debt so that people can spend more and have more services even as they're making less and the government is getting less in revenue. The outcome of that latter approach, of course, is a debt bubble, and we're enduring the aftermath of one of those right now.

So much as there's been real energy devoted to averting total financial collapse and mitigating the recession, there's really not been that much energy left over for figuring out how to rebuild an economy that shares its gains. Quite the opposite, in fact. Wall Street and high-end industries are either rebounding or were never hit very badly, while middle-class workers are still in terrible straits. There might not be much that we can do about this until economic growth returns and we can see what the economy looks like once it's settled back down, but if we're to avert either more bubbles or a much more gruesome level of political division, people better start considering it.