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The Gap Between the Rich and Middle Class Grew During Recession (685 hits)

It turns out that the gap between the rich and the middle class is larger than it's been in recorded American history. Much of the growth in the gap is due to the recent housing crisis taking place over the past three years.

According to the Economic Policy Institute, the wealthiest 1% had an average net worth that was 225 greater than the average American. That's higher than the previous record, which was 190 times in 2004.

An intriguing aspect of the divide is that it occurred while the wealth of all Americans declined on average. The richest households lost 27% of their wealth between 2007 and 2009, while middle class Americans lost 47% of their wealth during the same time period. So, the growth in the gap was mainly due to the fact that the middle class and poor suffered more during the recent recession than the wealthy.

The decline in wealth was primarily driven by declines in real estate values. Most middle class Americans have the bulk of their wealth tied up in their homes. Wealthy Americans, on the other hand, are likely to have other forms of wealth, including stocks bonds and investment real estate. Additionally, changes in tax laws during the 1980s led to the wealthy paying lower taxes on investment income than they've paid in the past.

The poorest Americans struggle the most. In every study on net worth since 1962, the poor have had a negative net worth. The number declined recently to $27,000, nearly double what it was just two years before.

The results of the study are interesting in light of the recent debate on Capitol Hill regarding the extension of the Bush Tax Cuts. The Republicans, who've successfully branded themselves as the party of the rich, fought hard to preserve tax cuts for the wealthy in spite of the fact that these tax cuts would substantially increase the nation's budget deficit and lead to dramatic costs for the poor and unemployed. The bottom line is that neither the Republican Party, nor most of our other political leaders, care much about what happens to the poor in America. In fact, while you consistently hear political leaders in Washington make reference to the middle class, you hear almost no reference whatsoever to the poor. These numbers are a reflection of that fact.

On another note, there is a strong racial dimension to these numbers as well. The average African American family has a net worth that is roughly one-tenth that of the average white family. Therefore, when we talk about the nation's poor, African Americans are disproportionately represented within that particular demographic. So, when our nation's political leaders fail to mention the poor in their rhetoric, they are continuing to leave black folks behind. This is unfortunate, and I am not sure we should support any political leader who doesn't have our best interests at heart.
Dr. Boyce Watkins is the founder of the Your Black World Coalition and the author of the bookBlack American Money.

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Posted By: anita moore
Tuesday, December 28th 2010 at 10:00AM
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We are going to need to focus on purchasing items that appreciate in value if we want to increase our net worth. This may means spending less on stuff and things and buying stocks and bonds.
Tuesday, December 28th 2010 at 11:36AM
Dorothy Johnson
Yes, Yes, Yes Sista, but how do we teach our own to do just that, and show them they have to reach out to help others that can't. This is the problem in our communities. When one makes it, they leaves everyone else behind. We all have to buy, not just one.
Tuesday, December 28th 2010 at 1:16PM
anita moore
[According to the Economic Policy Institute, the wealthiest 1% had an average net worth that was 225 greater than the average American. That's higher than the previous record, which was 190 times in 2004. ]

And they (wealthies Americans) will continue to get wealthier as long as the Bush Tax Cuts are in place thanks to the U.S. Congress...


Tuesday, December 28th 2010 at 5:40PM
Jen Fad
Anita, sadly I think the upcoming events will force us to. With the GOP controlling the Senate,and with the country's budget issues, we are either going to sink or swim. The usual safety nets are not going to be there. It is sad it has come to this point but in a since we can only blame ourselves. We have had time to strategize a game plan on this site but what have we acomplished? It's not to late but, we need to get get busy and put the petty isues aside and roll up the sleeves.
Thursday, December 30th 2010 at 11:08PM
Dorothy Johnson
I'm with you Sista. Its going to take a miracle, but guess what I believe in miracles. We can do this. Plans are going into action as we speak. If you are brainstorming, lets brainstorm together, because only when we come together will much be accomplished. Its never to late, until God says it over. We did it before and we will succeed again. We will prevail! A Revolution is about to happen.
Friday, December 31st 2010 at 12:11AM
anita moore
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