It is not what you are hoping.

What we have is some from the upper 5% moving into the upper 1% but very few from the 85% can make it up to even the 5%.

We should not be proud of this; we should fix it.

Doing that is important because of the tremendous diffusion across these categories. Llyod Blankfein, Joh Paulson, and George Soros, Bill Gates, Steve Jobs etc were not in the 1% bucket in 1979. The fact that they got there speaks more to the American system rather than the fact that the share of the 1% is rising. As long as the 1% is not a static entity, and there is constant churn in that population, the country is not becoming a plutocracy. It is a vibrant economy instead.

That is something to be proud of, not beaten down.

Personally (as a middle class guy with a few dollars in stocks) I believe that both Bush and Obama saw that they had no choice at all but to do the bailout to avert a depression that would have at least equaled that of the 30s. The banks had indeed become too big to fail, and if we had not bailed them out then we would be in much much worse shape than we are right now.

I should like to point out that this is (in large part) a direct result of the Gramm–Leach–Bliley Act that repealed the separation of commercial and investment banking provisions of the Glass–Steagall Act of 1933. (Please note that all the sponsors and promoters of this bill were Republicans) During debate in the House of Representatives, Rep. John Dingell (Democrat of Michigan) argued that the bill would result in banks becoming “too big to fail.” Dingell further argued that this would necessarily result in a bailout by the Federal Government.
See: http://youtu.be/y2RzRv8yQXQ

Just as in the Savings & Loan bailout was enabled by mindless deregulation during the Reagan administration, the repeal of the Glass-Steagle provisions were key to the current recession.

To my mind, the Tea Party and neo-concervative folks just want to return to more of the wild-west uber-deregulation that
has caused this recession.

http://news.yahoo.com/top-0-1-nation-earn-half-capital-gains-172647859.html

There is some good data in the article, and this is one of the money quotes: “Income and wealth disparities become even more absurd if we look at the top 0.1% of the nation’s earners– rather than the more common 1%. The top 0.1%– about 315,000 individuals out of 315 million– are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400.” [article is dated 21 Nov 2011]

On what basis, in a world of copy-paste duplication, does ‘capital gains’ get such tender treatment in the tax code? Ritholtz has a blog post pointing out that in 1997, one dollar invested in Amazon would be $140 today. And $1 in Webvan would be worth $0 today. I can say with relative certainty that the people making $10/hr (or whatever) working in Amazon’s warehouse are **not** the ones benefitting from that stock price. And I’m pretty sure they are *not* unionized.

This whole capital gains tax status is also messing up business structures, as people would rather goose their stock prices than focus on long term success in the business.

Part of my beef is this: who got all that TARP money?!
Well, the financial sector did. And where do we see the 1% income spike? In part, it’s in the financial sector.
IMVHO, what part of this graph reveals is the financialization of the US economy. How much of that 277% income increase was generated partly from TARP payouts for CDSs on CDOs?

As for inequality, people seem to think that post-1980s computerization is just industrialization with a twist, and that capital functions the very same way. But IMVHO, this is a deep misunderstanding.

A steam engine was not capable of replicating itself and making another new steam engine; but copy-paste creates a whole new kind of economic model. Yet government, in its knuckleheadedness, treats digital wealth as if it were the old industrial ‘capital’ used to create steel mills and railroads. In fact, digital capital does **not** work this way — yet we let the 1% get all the capital gains, as if we were back in the 1880s. Sheesh!

I’d really be interested in the overlay and interplay between the 1% gains and TARP bailouts, along with a better teasing out of the impact of computerization post 1980s, which is where we see the inequalities really start to accelerate.