Although the Occupy Movement helped focus attention on income inequality in
the US, the reality of just how wide the gap has grown sometimes got lost in
tax-policy arguments about Warren Buffett’s secretary.
But the Federal Reserve’s Survey of Consumer Finances released yesterday
showed that the recent financial crisis left median American families in 2010
no better off than they were in the early 1990’s.
The Fed’s data helps to explain why the economic recovery has been slow and
painful, according to an article in the New York Times. Home values fell by
almost 50 percent between 2007 and 2010 in some parts of the country; in
addition, median family incomes fell. The data shows that middle-income
families sustained the largest percentage losses in both wealth and income
during the crisis.
The impact on the economy means that the recovery is going to be slow no
matter who becomes president. “Given the scale of those losses, consumer
spending has remained surprisingly resilient,” says the Times. But Americans
are weary. Some of us are saving, but we’re saving for the short term as a
precaution in case of a job loss or some other emergency. We’re not saving for
a home or retirement.
It’s true that the losses are being felt across all income levels, but those
at the very top of the ladder have slipped the least, says the Times.
What was most concerning about the survey was the hit middle income
Americans took in their single biggest asset, their homes. Many Americans have
long counted on their home equity for their retirement or furthering their
children’s education.
The Fed’s survey indicates it will take a long time to rebuild trust in
either the housing market or the economy. And the inequality gap is likely to
continue.
This article appears in Summer Guide 2012.
