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60 Years of American Economic History, Told in 1 Graph, by Jordan Weissmann, The Atlantic


Stashed in: Economics!, Wealth!, America!, Charts!, Rich people get richer.

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Here's the arc it captures: In the immediate postwar period, America's rapid growth favored the middle and lower classes. The poorest fifth of all households, in fact, fared best. Then, in the 1970s, amid two oil crises and awful inflation, things ground to a halt. The country backed off the postwar, center-left consensus -- captured by Richard Nixon's comment that "we're all Keynesians now" -- and tried Reaganism instead. We cut taxes. Technology and competition from abroad started whittling away at blue collar jobs and pay. The stock market took off. And so when growth returned, it favored the investment class -- the top 20 percent, and especially the top 5 percent (and, though it's not on this chart, the top 1 percent more than anybody).

So this is the direct result of Presidential policy, Congressional policy, both, or neither?

That's what's unclear from this chart. This is the effect. What was the cause?

This graph may be helpful:

upload.wikimedia.org

Yes, kids, for much of the high-growth part of the 20th century the top tax rate was over 70%. And in fact the emptying out of the middle class happened in lockstep with income tax cuts on high earners. Plus for most of this time capital gains were taxed at a rate of 25% or so.

What I see here is that in the 1970s the economy ground to a halt.

To try to stimulate the economy marginal tax rates dropped.

The effects of the tax rate cuts were not evenly distributed. 

Rich people got richer, but other people did not see benefits.

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