CBO: Incomes of top earners grow at a pace far faster than everyone else’s

As Occupy Wall Street and related protests inject themselves into the 2012 presidential campaigns, a new government report shows that over the past three decades the incomes of the nation’s top earners have grown far more rapidly than those of everyone else.

The nation’s economic gains have been increasingly concentrated in the households of the top 1 percent, according to the Congressional Budget Office, echoing previous studies cited by Occupy Wall Street protesters.

For the 1 percent of the population with the highest incomes, average income grew 275 percent between 1979 and 2007, the report said. Middle-income Americans saw just less than a 40 percent rise during the same period, while the 20 percent of the population on the bottom saw an 18 percent increase.

All figures were reported in inflation-adjusted terms after taxes.

“The distribution of market income became more unequal almost continuously between 1979 and 2007,” according to the report from the Congressional Budget Office.

The report comes as the concerns of the Occupy Wall Street movement are increasingly entering the nation’s political debate.

Some Republicans have largely shrugged off the growing divide, calling it a distraction from the more important task of expanding economic opportunity for everyone.

Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, delivered a speech Wednesday criticizing President Obama’s approach to taxes and accusing him of scoring political points by dividing Americans.

“The president is barnstorming swing states, pushing a divisive message that pits one group of Americans against another on the basis of class,” Ryan said, according to a copy of his prepared text. “This just won’t work in America. Class is not a fixed designation in this country. We are an upwardly mobile society with a lot of movement between income groups.”

Obama has shown some sympathy for the Occupy movement, saying it reflects “broad-based frustration about how our financial system works.”

The question of income inequality is also coming up in the presidential campaigns. On Tuesday, after rolling out his flat-tax proposal, Texas Gov. Rick Perry was forced to defend his plan after a reporter on CNBC suggested it would amount to “a huge tax cut for wealthy people in this country.”

“Those that want to get into the class warfare and talk about, ‘Oh my goodness, there are going to be some folks here who make more money out of this or have access to more money,’ I’ll let them do that,” Perry responded.

He added that he “doesn’t care” that it might mean millions of dollars for those at the top.

“What I care about is them having the dollars to invest in their companies,” Perry said, “to go out and maybe start a business because they have the confidence again that they actually get to keep more of what they work for.”

Politically, the inequality issue may play well for Obama. Recent polls show that people believe he is far less likely to favor the rich than are Republicans.

According to a CBS News-New York Times poll released this week, about 28 percent of people say the Obama administration favors the rich and about 69 percent said Republicans in Congress favor the rich.

While the numbers released by the CBO are being used to argue that the government should act to reverse the trend, the effect of tax policy on the gap seems unclear in the data.

“The major reason for the growing unevenness” is that income before taxes was so uneven, according to the report.

Moreover, several observers noted that the more meaningful issue for many Americans is not the income gap but whether Americans have equality of opportunity.

“The amount of growth of the top 1 percent is shocking,” said Erin Currier, project manager with the Pew Charitable Trusts’ Economic Mobility Project. “But the piece that is missing is income mobility, and what we see there does not reflect the American dream. We’re not seeing equality of opportunity.”

Peter Whoriskey is a staff writer for The Washington Post handling investigations of financial and economic topics. You can email him at peter.whoriskey@washpost.com.
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