Dear Neighbor,
My last newsletter was about the “hole in the bucket:”
We’re losing affordable homes almost as fast as we’re building new ones.
But we need to look upstream: what’s causing the housing crisis?
It's well known that new construction is limited by the cost of materials and exacerbated by tariffs, and high interest rates. The most commonly proposed remedies are reducing zoning restrictions and incentivizing (paying) developers.
The rapidly escalating concentration of income, wealth and power is less discussed. Because I love graphs, this newsletter presents data confirming what we all generally know, but can't really imagine the scale.
TAKE THE CHALLENGE: GUESS THE GAP!
To start, try guessing the distribution of wealth in the US! If you cut a pie into 10 slices, how many go to each 20% of the population?
This short CBS Instagram post: Free Pie! is fun, scary, and a good introduction to this newsletter. Just watch the first several seconds if you want to see the setup; then watch the rest to see the answers.
THE INCOME GAP WIDENS
The income gap between the richest Americans and the rest of us has grown as incomes for the richest Americans have skyrocketed
This graph and the next three are from Inequality.org. This one compares the growth in real (inflation-adjusted) income of the top .01%, the top .1%, and the bottom 20%. Because the incomes of the richest people are largely from investments, the stock market decline in 2022 temporarily reduced their incomes. (Those are the most recent graphs I have.).
The richest 1% make over 100 times as much as the bottom 20%.
The rich get more income from investing than other people, and capital gains income is taxed less than wages.
AS A RESULT, THE WEALTH GAP GROWS EVEN MORE
People with higher income obviously can accumulate more wealth, and more wealth allows more investment and yet more wealth. So wealth is concentrating even faster.
The majority of all wealth in the US is controlled by the top 10%. Graph from Washington Center for Equitable Growth. How much is left for the bottom half of the population?
CHALLENGE 2: HOW ABOUT YOU?
Where do you stand? You can figure out your income percentile here. And your wealth percentile here.
THE EFFECT OF CONCENTRATED WEALTH: CONCENTRATED POWER
The poster child, of course, is Elon Musk. Forbes just ranked him again as the world's richest person at over $1 trillion in net worth. He donated over $300 million to Trump's campaign. This year he's sent $366 million into political groups and campaigns presenting conservative candidates and rightwing causes. Could these be related to Trump's giving him unprecedented power as head of DOGE? And now, he's one of three people studying the future of warfare for Pete Hegseth, a study which could redirect Defense Department spending, over half the federal government's discretionary spending.
Another example: Tech billionaires have raised more than $340m to defeat Prop 40 in California, a one-time 5% wealth tax that will fund healthcare and education. If you can't think of more examples, including apparent pay to play, just read a newspaper.
BONUS: Free course on inequality by Robert Reich
Robert Reich, professor emeritus at UCal Berkeley, was secretary of labor in the Clinton administration. I was truly excited to support him when he ran for governor in 2002, finishing 2nd out of 6 candidates in the primary. He would have been a transformative governor. You can take his course, including lots more graphs. Class 1, Class 2, Class 3, Class 4, and Class 5. He argues that the problem is not bad individuals, but the system, and shows that the economy grew more equitably 1950-1980.
NEXT IN THE HOUSING AND INEQUALITY NEWSLETTER SERIES:
1. EFFECTS OF INEQUALITY IN MASSACHUSETTS, SOMERVILLE
2. WHAT IS TO BE DONE?
I believe inequality is the root of most of our problems and we should consider the effect on inequality in decisions about every policy.
Let me know your thoughts,
Pat Jehlen