In US rich are getting richer, faster!

It seems that the rich are not facing any problems because of the U.S. expenditures on defence. No doubt many actually profit. One wonders about the long term problems of such expenditures. Will personal and government debt ultimately cause problems in the US economy.
There seems little movement towards any narrowing of income gaps in the US. No doubt the market moves in mysterious ways its wonders to perform and it would be sinful to try to change that! Of course markets and crony capitalism have little to do with one another as any libertarian would tell me!

NY Times, December 15, 2007
Report Says That the Rich Are Getting Richer Faster, Much Faster
By DAVID CAY JOHNSTON

The increase in incomes of the top 1 percent of Americans from 2003 to
2005 exceeded the total income of the poorest 20 percent of Americans,
data in a new report by the Congressional Budget Office shows.

The poorest fifth of households had total income of $383.4 billion in
2005, while just the increase in income for the top 1 percent came to
$524.8 billion, a figure 37 percent higher.

The total income of the top 1.1 million households was $1.8 trillion,
or
18.1 percent of the total income of all Americans, up from 14.3 percent

of all income in 2003. The total 2005 income of the three million
individual Americans at the top was roughly equal to that of the bottom

166 million Americans, analysis of the report showed.

The report is the latest to document the growing concentration of
income
at the top, a trend that President Bush said last January had been
under
way for more than 25 years.

Earlier reports, based on tax returns, showed that in 2005 the top 10
percent, top 1 percent and fractions of the top 1 percent enjoyed their

greatest share of income since 1928 and 1929.

The budget office report takes into account a broader definition of
income than tax returns that is known as comprehensive income. It
includes untaxed Social Security benefits, welfare, food stamps and
part
of the value of Medicare benefits, giving a fuller picture of incomes
at
the bottom than tax data.

Much of the increase at the top reflected the rebound of the stock
market after its sharp drop in 2000, economists from across the
political spectrum said. About half of the income going to the top 1
percent comes from investments and business.

In addition, Congress in 2003 cut taxes on long-term capital gains and
most dividends, which advocates said would encourage people to turn
untaxed wealth into taxable income. Some economists have said that the
increase in incomes at the top is illusory and is in good part simply
converting untaxed assets into taxed income to take advantage of
reduced
tax rates.

The Congressional Budget Office report made no attempt to explain the
increases in income in its annual report on effective federal tax rates

paid by people at different income levels.

Asked how much of the increase at the top was from the tax cuts rather
than market gains, Peter R. Orszag, the budget office director, said,
“I
can’t give you an answer to that because we just don’t know.”

Chris Frenze, Republican staff director for the Congressional Joint
Economic Committee, said the increase in top incomes is much more
modest
if viewed over longer time periods. Since 2000, he said, the average
income of the top 1 percent has risen $97,900, or 6.7 percent, the same

percentage increase this group had from 1992 to 1997.

Jared Bernstein, an economist at the Economic Policy Institute in
Washington who characterizes the Bush administration’s policies as
YOYO
economics, based on You (Are) On Your Own, said the differences in
income growth explained why so many Americans have told pollsters that
they are feeling squeezed.

“A lot of people justifiably feel they are working harder and
smarter,
they are baking a bigger and better pie, and yet their slice is not
growing much at all,” Mr. Bernstein said. “It is meaningless to
middle-
and low-income families to say we have a great economy because their
economy looks so much different than folks at the top of the scale
because this is an economy that is working, but not working for
everyone.”

At every income level Americans had more income, after adjusting for
inflation in 2005 than in 2003, but the increases ranged from almost
imperceptible for the poor to modest for the middle class and largest
for those at the top.

On average, incomes for the top 1 percent of households rose by
$465,700
each, or 42.6 percent after adjusting for inflation. The incomes of the

poorest fifth rose by $200, or 1.3 percent, and the middle fifth
increased by $2,400 or 4.3 percent.

The share of all federal taxes paid by the top 1 percent grew, but only

slightly more than half the rate of their growth in incomes because of
the tax rate cuts. The top 1 percent paid 27.6 percent of all federal
taxes in 2005, up from 22.9 percent in 2003, while the share paid by
the
middle fifth of taxpayers declined to 9.3 percent from 10 percent in
2003.

The share of their income that the top 1 percent paid in all federal
taxes and in income taxes fell. The total tax rate dropped 1.8
percentage points, to 31.2 percent, from 2003 to 2005 while their
average income tax rate declined one percentage point, to 19.4 percent,

largely because of the cuts in taxes on capital gains and dividends.