Should Americans Support Media’s Desire for the Rich to Get Poorer?
As the stock market has continued to regularly make new highs in 2007, how many times have you heard or read a media report carping about how the rich are getting richer?
Quite a bit, right?
If you feel bombarded with such inanities, consider that a completely unaudited LexisNexis search of major American media outlets identified 234 reports which included phrases like “rich get richer,” “income inequality,” “wealth disparity,” etc., since January 1.
Add it all up, and that’s almost two a day.
A fine example of this nauseating mantra was demonstrated by CBS’s Charles Osgood on “Sunday Morning” April 15: “Squeezed is what a lot of middle class Americans are these days, running as fast as they can just to keep up financially.”
Another goodie came from the New York Times’ Paul Krugman on April 27 (subscription required, emphasis added): “Income inequality -- which began rising at the same time that modern conservatism began gaining political power -- is now fully back to Gilded Age levels.”
Krugman predictably argued: “You might have thought that in the face of growing inequality, there would have been a move to” – wait for it – “raise taxes on the rich.”
Isn’t that always the answer?
However, there’s a question these jealous journalists never ask: Would it actually be good if the rich got poorer?
For instance, what would make a rich person get poorer? There really are only three answers, correct? A serious economic contraction, a bear market in stocks, or a real estate collapse, right?
To be sure, the poor and the middle class don’t do well in a recession or depression. Do you think they fare any better when stocks or real estate decline?
Let’s examine this exclusively from an employment perspective, shall we?
The last bear market in stocks began in September 2000, and bottomed with a roughly 50 percent decline in the S&P 500 by March 2003. During that period, the nation lost about two million non-farm payroll jobs, with the unemployment rate going from 3.9 percent to 5.9 percent.
Clearly during this phase, the rich getting poorer didn’t help anybody else.
In the previous bear market in 1990 that began after Saddam Hussein invaded Kuwait, and included a serious nationwide real estate contraction as well, what was a 5.5 percent unemployment rate peaked at 7.8 percent almost two years later.
Finally, the bear market in the early ’80s saw unemployment go from 7.5 percent to 10.8 percent.
Doesn’t look like the rich getting poorer does anything good for the poor or middle class, does it?
Yet, conversely, employment does quite well during bull market phases. For instance, from the stock market’s bottom in August 1982, to its interim peak in July 1990, the unemployment rate went from 9.8 to 5.5 percent, with the economy adding more than 20 million non-farm jobs.
The nation expanded payrolls by nearly 24 million during the ’90s bull market, with the unemployment rate dropping from 7 percent down to 3.9 percent.
And, although this bull market is not over, a roughly 6 percent unemployment rate at the beginning of the rally has already dropped to 4.4 percent with almost 8 million new non-farm jobs added.
With this in mind, does it seem at all reasonable to want the rich to get poorer?
In fact, looking at these numbers, shouldn’t we instead hope they constantly get richer and richer and richer?