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In America, income inequality used to be the difference between rich and poor. But now it's increasingly a matter of the ultra rich and everyone else. The economy appears to be charging ahead, until you realize that most people are being left in the dust. The "American Dream" of opportunity for all is turning into a nightmare of inequality.
As the rest of the country struggles to get by, a huge bubble of multi-millionaires lives in a parallel world - their own world of private education, private health care and magnificent mansions. They have their own schools and their own banks. They travel in private jets and yachts. Their world now has a name. In his new book, Wall Street Journal reporter Robert Frank has dubbed it "Richistan" (weblink below).
In 1985 there were just 13 US billionaires. Now there are more than 1,000. In 2005 the US saw 227,000 new millionaires being created. One survey showed that the wealth of all US millionaires was $30 trillion - more than the GDPs of China, Japan, Brazil, Russia and the European Union combined.
Meanwhile, America itself is heading towards 'developing nation' levels of inequality. The average US worker's wage increases barely match inflation, 36 million people live below the poverty line, and 45 million have no medical insurance. In 2005, income for the top 1% jumped 14%, while the rest of the US gained less than 1%. The situation is especially bad for those living at half the official poverty level - their numbers are at a 32-year high.
The US government has helped the rich with tax breaks. In the 1950's the proportion of federal income from corporate taxes was 33%. By 2003, it was just 7.4%. Some 82 of America's largest companies paid no tax at all during some of the years of the current Bush administration.
The growth of the super-rich class, coupled with deepening poverty, is starting to tear at the fabric of American society. Even some of the most wealthy - like Gates and Buffett - have spoken about the need to address the "inequality gap", in effect asking to be taxed. Warren Buffett - the third richest man in the world - pointed out that his tax rate was 17.7% of his income, while his secretary was taxed at 30%.
The debate over the booming lives of the super-rich is about the American soul. This is a country where the creation of wealth was seen as virtuous and a source of pride. But now that bloated wealth has started to squeeze the "middle class" out of existence, leaving the haves and have-nots in very separate worlds. This will be the root cause of significant and inevitable change.
Will any of our current crop of Presidential-candidates do something about this problem? One wonders whether they can accept campaign contributions from the wealthy, and still expose the problem.
