The growing wealth gap

The booming economy has been a bust for millions of Americans. Most households have lower inflation-adjusted net worth now than they did in 1983, when the Dow was still at 1,000...Since the 1970s, the top 1 percent of households have doubled their share of the national wealth to 40 percent. The top 1 percent of households have more wealth than the entire bottom 95 percent... The top 1 percent of households have nearly half of all financial wealth (net worth minus net equity in owner-occupied housing), says economist Edward Wolff of New York University. Wealth is further concentrated at the top of the top 1 percent. The richest 0.5 percent of households have 42 percent of the financial wealth...the net worth of the household in the middle (the median household) fell from $54,600 in 1989 to $49,900 in 1997. Median financial wealth fell from $13,000 in 1989 to $11,700 in 1997...The percentage of households with zero or negative net worth (greater debts than assets) increased from 15.5 percent in 1983 to 18.5 percent in 1995—nearly one out of five households. That’s nearly double the rate in 1962 when the comparable figure was 9.8 percent—one out of ten households. The net worth of the poorest fifth of households averaged –$5,600 in 1997. That’s down from –$3,000 in 1983. Many households are deeper in debt. Debt as a percentage of personal income rose from 58 percent in 1973 to 76 percent in 1989 to an estimated 85 percent in 1997. Between 1983 and 1995, the median household net worth dropped 11 percent and the bottom 40 percent lost an incredible 80 percent. The top 1 percent, meanwhile, gained 17 percent. Between 1995 and 1998, S&P 500 stocks had an annualized return of 30 percent. Most of it went to the top 10 percent of households. Almost 90 percent of the value of all stocks and mutual funds owned by households is in the hands of the top 10 percent. According to Edward Wolff, an estimated 42 percent of the benefits of the increase in the stock market between 1989 and 1997 went to the richest 1 percent alone. The bottom 80 percent of households split 11 percent of the gains. Fueled by low mortgage interest rates, the U.S. homeownership rate hit a record 66 percent in 1998, but for people under age 55, the rates were actually lower in 1998 than in 1982...As the New York Times reports (January 10, 1999), for each dollar in tax savings from the mortgage-interest deduction “going to the average taxpayer making $200,000 or more, the average taxpayer in all lower income groups combined saves just 6 cents.” ...For the fiscal year ending September 30, 1999, the mortgage deduction will add up to about $53.7 billion. That’s $23 billion more than total 1998 federal spending by the Department of Housing and Urban Development (under $31 billion). The mortgage deduction costs 23 times as much as the credit for low-income housing investment ($2.3 billion). While tax subsidies for affluent homeowners remained high, federal funding for low-income housing was cut by 80 percent from 1978 to 1991, adjusting for inflation. By Holly Sklar, Chuck Collins, & Betsy Leondar-Wright