By Kathryn A. Edwards / Bloomberg Opinion
When people worry about the U.S. economy these days, their focus is invariably too myopic. Forget about the battle with inflation: It will be won, perhaps at the cost of a painful recession, and the country will settle back into its previous trajectory.
The real problem is that trajectory. America is turning into an oligopolistic economy that marginalizes the vast majority of its inhabitants.
To get a sense of what I mean, consider a fairly conservative exercise: Take historical trends and extrapolate them for the next 25 years. The results are alarming.
Let’s start with income. By 2048, the top 1 percent of Americans will account for 22.5 percent of the nation’s total, the largest share since the peak of the stock bubble in 1928.
Meanwhile, the middle will stagnate. The median annual income will rise a mere 0.3 percent a year in inflation-adjusted terms, from about $67,000 in 2021 to about $72,000 in 2048. The income of the poorest 10 percent will actually decline.
The outlook for wealth is even worse. By 2048, more than 62 percent will belong to the top 1 percent, crushing the 1928 record of 51 percent. And nearly a quarter will belong to the top one-hundredth of 1 percent, far exceeding the extreme inequality of the robber-baron era.
How is this happening? It’s far from inevitable. In terms of development, the United States is on par with the industrialized nations of Western Europe. Yet in terms of inequality, it’s closer to Turkey, Mexico, Haiti and Iran.
Rather, America chooses inequality. Protections for the poor are extremely weak: On historical trends, the minimum wage will reach just $10.62 in 2048 in nominal terms, from $7.25 today. Preferences for the rich keep expanding: Our exercise projects that the amount exempted from estate tax should reach a nominal $24.3 million in 2048, up from $12.9 million today. The more concentrated the wealth, the less it is taxed.
No politician would campaign on a platform of giving more to the wealthiest, allowing the middle class to barely get by and stiffing the poor. Yet unless the U.S. changes tack, that’s precisely the future it’s headed toward.
Kathryn Anne Edwards is a labor economist and independent policy consultant.
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