Nickolai

Most people know of the great depression but few are aware of the great compression. In the 1930's as today, a key line of conservative defense against demands to do something about ine******y was the claim that nothing could be done---that is the claim-- that no policies can appreciably raise the share of national income going to families, without wrecking the economy yet somehow Franklin D Roosevelt and Harry Truman managed to preside over a dramatic downward redistribution of income and wealth that made Americans far more equal than before--and not only did not wreck the economy but set the stage for a generation long economic boom.

In 1953 Time magazine, sent one of its contributing editors, Alvin Josephy, on a national tour. His mission was to get a sense of America. The portrait he painted bore little resemblance to the America of 1929. Where the America of the twenties had been a land of extremes, of vast wealth for a few but hard times for many, America of the 50's was all of a piece. Even in the smallest towns and most isolated areas the Time report began "the US is wearing a prosperous, middle class suit of clothes " People are not growing wealthy but more of them than ever are getting along. And where the America of the twenties had been a land of political polarization, of sharp divides between the dominant right and the embattled left, America in the fifties was a place of political compromise " Republicans and Democrats have a surprising sameness of outlook and political thinking. " Unions had become staid establishment institutions. Farmers told the man from Time that if farm subsidies were socialism, then they were socialists. Poverty was no longer a majority condition. By the mid 50's the rich was significantly poorer than they had been in the twenties their incomes were 20 to 30 percent lower and the incomes of the really rich the top tenth of one percent --were less than half of that of the twenties. Meanwhile the real income of the median family had more or less doubled from 1929.

And most families didn’t just have more income they had more security too. Employers offered health ins. retirement plans, and the federal government backed it up with unemployment ins. Social Security, and employees with formal education, like lawyers and engineers were paid less of a premium over manual laborers than they received in the twenties --or than they receive today. These statistics tell a human tale, that of a vast economic democratization of American society. By 1955 a majority of Americans owned a car and 70 % had a telephone. The rich might have had bigger houses but they could no longer afford to live in vast mansions and in particular, they couldn’t afford the servants necessary to maintain those mansions. The differences in dress had largely vanished, partly because ordinary workers could afford to wear good clean clothes, and partly because the rich could no longer afford to dress in a style that required legions of servants to help them to get in and out of their wardrobes. but how did that democratic society come into being?????????????????

The more carefully we look back at that equalization, the less it looks like the result of gradual response to market forces and the more it looks like a sudden change brought on by the change in the political balance of power. We know more about the incomes of wealthy than we know about the rest of the population because the wealthy have been paying income tax since 1913. What the tax data suggest is that there was no trend toward declining ine******y until the mid 1930’s or even later. In FDRs inaugural address in 1937 the one where he spoke of one third of the nation still in poverty there was little evidence the wealthy had any less dominant position than they had before WW-l But a mere decade later the rich had clearly been demoted. It was not by accident nor did it happen gradually it happened quite suddenly.

This sudden decline in the fortunes of the wealthy can be explained in large part with just one word; taxes Where todays wealthy receive much of their income from employment (think CEOS and their stock options grants) in the twenties matters were simpler; The rich were rich because of the return on the capital they owned. In 1929 70 % of stock dividends went to only 1 percent of Americans so the division of national income was the difference between wages and return on capital. So you might think the sharp fall in the share of the wealthy in American national income must have reflected a big shift in the distribution of income away from capital and toward labor; but it turns out that this didn’t happen In 1955 labor received 69 percent of the pre tax income vs 31 percent for capital little difference from the 67-33 split in 1929. The division of after tax income changed radically . In the twenties taxes had been a minor factor for the rich. The top rare was only 24 % and because the inheritance tax was only 20 % wealthy dynasties had little difficulty maintaining themselves but with the coming of the new deal the rich began to face taxes that were not only vastly higher than those of the twenties but high by today’s standards.

The top rate rose to 63 % during FDRs first term 79 % in his second and during the cold war of the 50’s 91 %. The average tax on corporate profits rose to more than 45 % by 1955. The top inheritance tax rose from 20 % to 45-60-70 and finally 77 % . While the rich were the biggest victims of the great compression, blue collar workers were the biggest beneficiaries. By 1955, those numbers remained essentially the same at sixty-nine percent for labor and thirty-one percent for capital. Interestingly the economy did not collapse, and the wealthy did not substantially change their investing habits.

Floyd Brown Loc: Milwaukee WI

I became an adult in the 50's.
It was not until 59 that I got what could be said to be a decent job.

Let me say that I did attain the American dream by the early 60's.

I still have the perks of the American dream.
But the American Dream is not there for many today.

If one were to put it in just a few words of what we are facing today.
It could well be mixed in with the Death of the American Dream.

eden

The analysis here is essentially correct but overeager Democrats have been indiscreet with calls for redistribution of wealth, triggering outrage among upper income folks who feel they rightfully worked for what they have.
A better message is redistribution of opportunity and the method is found in restructuring the tax code to reward hard work and enterprise. The GOP “Tax Break” is clearly slanted in favor of the “Have Mores” and with the fullness of time will ripen into the sourest of fruit.

old marine Loc: America home of the brave

The American dream is still there for those who are willing to persue it. Now days the dumbdowned kids want the American dream handed to them on a silver platter.

You only get what you are willing to WORK FOR.

no propaganda please Loc: moon orbiting the third rock from the sun

The socialist desire is e******y of outcome, no matter what the effort. The free market desire is for e******y of opportunity, the outcome therefore reflecting the effort the person puts into the accomplishment.

Chocura750

Great post. Nicholai. If we could put back the tax structure of the 1950s the country would surely become great again.

Floyd Brown Loc: Milwaukee WI

Well old man:

What was in the past for you is not there for many today.
The day of the angree old man is now on it's last lap.

Enjoy your last days.

Your wisdom was been put aside by all those Big Money people who have picked your pockets through the years.

So many like you are looking back at what was & hoping for a return to those days.
But you don't really put into words just what you wish to see.

Like me & many others are finding that bigger numbers we are playing with.
Were just bigger meaningless numbers.

Our age & years of doing what we did is what leaves us ahead of the game.
The game we are or were a part of was to see that the money just kept flowing to the top.

Not really paying attention to what Big Money was spending that money on

We are now locked in to a system with over bearing harshness to most.
We have granted the rights to others to do what they please with out spelling out their obligations to us.

Many of us live in our own little cocoon & shut out the outside World of things we don't wish to acknowledge.
By doing so we now find our self in a place we don't wish to be in.

So what are so many like you doing now?
Your looking at a would be politician to save you from what the politicians have sold out to.

So much like you I am left to basically sit back & watch it all collapse around us.
What I have been trying to say falls on mostly deaf ears.

So on this fathers day each of us can only hope that we have left our children with the means to meet what ever challenges they will face.

I can only say that I an my wife have done a decent job.

But there is more to life than ones personal well being.

Living in a complex World that has much unrest.
Leaves our personal safety & well being only as good as the safety & well being of others.

For all that has been gained.
There are far to many with out proper safety & well being.

Much in your & my personal life's is fine.
For a planet to have so much abundance of things & so many lacking basic things is not a sign of progress.

May we all pray for the wisdom & strength to correct our short comings.

teabag09

When so many can't make change without a machine telling them how much, when so many, including you, don't pay attention to the difference between two, to and too, between their, there and they're just being two examples don't lay the problem at the feet of those at the top. When I would go in for a job application I stated what I expected to make because I knew my qualifications. I wasn't insane in asking for more than I would be worth to them but if they weren't willing to pay me what I thought I was worth, I'd go else where. I'd go on but realize it's a waste of time. Mike

no propaganda please Loc: moon orbiting the third rock from the sun

king hall Loc: Tucson,AZ.

The "tax structure" or the tax rate?

old marine Loc: America home of the brave

BOTH..

The TAX STRUCTURE needs a lot of things removed. I don't agree that the government should tax inheritance because the income has already been taxed as income.

Profit on investments should not be taxed because the money used has already been taxed as income.

The TAX RATE should be 10% no more on all income individual and businesses alike. Americans are beginning taxed to death as it is.

That is just my two cents worth.

Semper Fi brother's and sister's and all true American patriots every where.

Long may old glory fly over the land of the free and home of the brave forever amen and amen.