Rich getting richer: Campaign issue?
Studies show that the rich are getting a lot richer, the poor a little poorer. The middle class is slipping.
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Then The New York Times this month reported that average compensation for chief executives who served at least two years at some 200 major US companies grew by 5 percent in 2007, to $11.2 million. With their businesses often slumping, performance-based bonuses were down. But discretionary bonuses, not linked to performance, were up a bit. For CEOs, "things go well when things go up; they go well when things go down," says Mr. Bernstein. "It's a heck of a racket."Skip to next paragraph
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A couple of decades or so ago, CEO compensation had minor material impact on the bottom line of corporations. Now their pay has reached such a level that more and more shareholders object. Congressional committees hold hearings on the issue. But at a time when political candidates need campaign contributions, no restraining action has been taken.
Meanwhile, the presidential candidates are speaking of the urgency of dealing with the housing crisis and the economic slowdown. But it seems likely that the Democratic candidates will talk more than the Republican one about growing income inequality.
Conservatives tend to think the economic system is fair, rewarding the deserving properly. Americans have generally been tolerant of unequal outcomes, since most believe opportunities to get ahead are abundant and that hard work and skill are well rewarded, as Isabel Sawhill, of Washington's Brookings Institution notes.
But she questions these assumptions, citing a Brookings study released in February that found that 1 out of 3 American children are worse off than their parents were at their age. It also noted that intergenerational economic mobility in the US is worse than in Canada and the Scandinavian countries, and even lower than in France and Germany with their aristocratic heritages.
Assuming American tolerance for income inequality continues, some political pundits figure Hillary Rodham Clinton's electoral prospects won't be damaged by reports that she and her husband made $109 million in the past eight years.
Even so, Elizabeth McNichol at the CBPP worries that the growing income gap will worsen public cynicism about government and erode support for the tax revenues needed for education and other necessary government services.
She and Bernstein suggest several tactics to remedy for the income-gap situation: States could raise the minimum wage above the federal level; both state and federal taxes could be made more progressive, with the extra revenues helping support such poverty-fighting programs as the Earned Income Tax Credit; barriers to unionization could be cut, and health insurance coverage could be expanded.