Modern US History

All the modern US history fit to print

Category: Amalia Bilis

Introduction

The battle over income inequality became prevalent right before the Reconstruction era and was seen predominately between the American North and South. When the Civil War broke out, it was not only a battle over slavery but also a fight between the Northern industrial and urban wealth against the slave economy in the South (Frederick 2012, 29). As the United States entered the Gilded Age, the wealth gap became more noticeable when an influx of millions of European immigrants swamped the East coast in hopes of obtaining work that would allow them to achieve the American Dream. During this time period, captains of industry such as the Rockefellers and Carnegies dominated the American industry and provided the nation with rapid economic growth while those who worked in factories found themselves not making enough income to support themselves. As the United States shifted from an agricultural economy to an industrialized economy, wages increased and caused more Americans to enter the labor force. The Progressive Era made the concentration of wealth in the United Stated more visible and controversial since many farmers moved to urban areas to find low skilled jobs. This museum exhibition will outline the differences in the wealth gap beginning in the Gilded Age and continuing through to the present-day United States while demonstrating the various types of individuals affected by income inequality and how economic policies affect them.

During the middle of The Great War, the United States began to see the income inequality gap grow drastically, and the share of the nation’s income received by higher income households continued to augment. The increase in wealth gap kept growing as the United States passed through the Great Depression with Franklin D. Roosevelt’s implementation of the New Deal in 1933 as an attempt to strengthen the unions and combat the aftermath of the Stock Market crash. As the economy entered the 1960’s, the United States was becoming a dominant power with wealth and prosperity. The growth was shown as the number of millionaires tripled and as more citizens were becoming rich; with the average family income to rise by 30% in 1968 (Frederick 2012, 30). However, after the 1960s, ordinary Americans found stagflation diminishing their savings, while the economic standing of the wealthy was continuing to grow. With the rising growth for the rich, President Reagan found the supply-side economics useful as he cut taxes in order to bring in more tax revenue, thus allowing the wealth to “trickle down” to the poorer Americans (Frederick 2012, 31). However, between the years of 1977 and 1999, the average after-tax income of the lower half of the population decreased from $10,000 to $8,000, while for the top fifth of the population, the average salary after-tax income increased from $74,000 to $132,000 (Gonzalez 2011, 128). Since the United States became an industrialized economy in the late 19th century, the income inequality gap continued to grow because of how the national income for the United States was split among the population at various income levels and the limitations that accompanied the different levels.

One of the immediate effects of the United States becoming an industrial society and its result on the income gap was the movement from rural villages to urban centers that created new employment opportunities. This shift formed an increasing dependence on markets and money as a medium of exchange, thus producing a barrier between the elite and those who had very limited knowledge of the stock market and how to manipulate the marketplace (Eames 1978, 4). There are two arguments that define the income inequality gap and who is responsible for the high levels of inequality. The first one describes how the poor are responsible for their own condition, implying that the poor need to change themselves as individuals to advance fiscally. The second condition states that the lower income class are victims of a larger social system in which they have a minimal amount of control over and are unable to dictate changes that need to be made system-wide (Eames 1978, 2). These juxtaposing viewpoints provide debates on how to combat the existence of poverty in one of the wealthiest nations while keeping the economy stable. The United States has consistently exhibited higher rates of income inequality than most developed nations because of the support of free-market capitalism and less liberal spending on social services.

During the 1970s the spending on social services increased with the expansion of the welfare reforms in the hopes of helping individuals making less than $7,000 a year. Although there was a decline in real wages for the bottom half of the workforce, the welfare system would entice the poor away from finding lucrative work and moving towards a state of dependency. In the personal account Flat Broke with Children, Hays expresses colleagues’ experiences on welfare in two opposing opinions. One of the colleagues stated that “Welfare reform is the best thing that ever happened,” while another described that “welfare had become a trap and the clients had become dependent” (Hays 2004, 13). Welfare operates as a mechanism of social control to deter middle-class individuals from having to rely on welfare while attempting to discipline those who are unable to support themselves. This system of welfare looks down upon those who are receiving aid and is considered a taboo in society because of the negative connotations that are associated with the topic. American capitalism has undermined the foundations of the middle-class society and created a larger wedge between the poor and rich, making the income gap group significantly prevalent ( McCall 2013, 12). In addition, rising housing costs in the 1970s were adding to the larger income gap and forcing lower income groups to share accommodations and attempt to balance their payments before having their own mortgage (McKenzie 2011, 19). These welfare systems were put into place shortly after the Great Depression began, with many Americans being forced into unemployment and needing a welfare system to support their families because of the drop in personal income, tax revenue, and profits.

The Great Depression led unemployment to a new high of 25%. The drastic increase in unemployment brought forth the Home Owner’s Loan Corporation to help reduce the number of residential foreclosures by providing loans to homeowners who were going to default on their mortgages. Following these loans came a series of residential security maps that depicted the “desirability” of neighborhoods from a residential viewpoint and were given grades based off of their level of hazard (Hillier 2005, 217). These maps correlated with the practice of not lending to certain areas based on the characteristics of the neighborhood and if it was racially and ethnically different than the white American demographic. This was called redlining and drove a larger wedge into the income gap during and after the great depression. The lack of government and financial help to the areas affected by redlining caused for more Americans to suffer during a time of high unemployment with little supply for jobs (Hillier 2005, 219). The government support allowed the wealthy to stay affluent while driving ethnic and racial families out of their homes and into the welfare system. This prejudice made a larger income gap during and after the Great Depression, keeping individuals with low income stuck in a cycle of poverty with little opportunities.

Since the United States brought together the North and South after five years of fighting in 1865, income inequality has increased and the gap between rich and poor has widened tremendously. To combat the striking difference between the abundance of resources for the wealthy and limited ones for the poor, the United States hoped that with the implementations of the different welfare systems and work plans would revive the United States economy and bring more individuals out of poverty and into the middle class. Through these reforms and the effect of the Stock Market crash in 1929, the United States made attempts to change the wealth gap that still plagues Americans today, while maintaining a free market capitalistic society that supports mass consumerism.

 

HOLC Map rating Philadelphia areas from best to hazardous in 1935

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The Gilded Age and Progressive Era

How the Other Half Lives

Immigrant family staying in an immigrant enclave

Jacob Riis was a Danish immigrant who combined photography and journalism to show poverty in different parts of America. In these images, Riis portrays the life of immigrants living in tenements and how the slums were treated as a taboo subject for wealthy Americans. The idea that one half of the world does not know how the other half lives, is a theme for this image because many Americans did not want to know the lives of immigrants since it did not directly impact them or their lifestyle. Riis took many images of immigrants and published them to expand Americans knowledge of the lifestyles of immigrants, and how they were being treated unequally in the labor force and with their housing preferences. The increase in the immigrant population was a turning point for the United States economy and the extension of the workforce since the influx of immigrants allowed for more cheap labor and to fill the unskilled worker positions. This increase in immigrants also increased the stock of capital and the amount of money in the circular flow of economic activity for the United States.

 

Boardwalk looking South from Ocean City

This image shows men, women, and children shopping and enjoying the Ocean City Pier.

This image is part of a larger text that shows the transformation of Ocean City Maryland and how the boardwalk became a hub for affluent Americans to visit once vacations became a popular activity. As Americans were making more money, the national identity of the United States became a mass consumption society that would spend money on vacations, trips to see a movie, and on items that were not a priority. This shift changed how Americans viewed money and participated in the economy. Many women joined the workforce and immigrants played an important role in the growth of the economy with this shift in consumption practices. Groups of people who were unable to participate in the mass consumption felt they were not considered Americans since they were not given economic freedom to purchase items that they were not necessities. Many Americans were very prosperous during the 1920s and it was a common practice to flaunt one’s wealth and use a majority of their income for the purchase of consumer products. The expansion of credit in the 1920s allowed for more the sale of more cars and consumer goods that were considered luxury goods before.

The Aftermath of The Great Depression

Brother, Can You Spare a Dime?

By 1932, unemployment reached a new high of 25% and the song Brother, can you spare a dime was composed for a 1931 Broadway musical titled New Americana to capture the feeling loss and confusion during the Great Depression. The song describes the hope and faith that many men did not have after the stock market crash and hoped that other Americans would be there to help each other during the time of suffering. Morale in the United States was very low at the time with families being jobless, homeless and feeling disillusioned if they will ever return to their old lifestyles (Goldston 1968, 43). The repeated request for a dime shows how many American men put forth a lot of effort into constructing the United States and wanted to gain the respect from other wealthy men and now must beg for a dime to support themselves and family members.

The Growth of the Unemployed

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In the first minute of this newsreel, we see workmen living in worn down homes where they are eagerly waiting to become employed again. The Great Depression forced American families to cut back on spending and were given strong economic, political and social constraints. The average family income in 1933 was below $2,000 and many skilled men were laid off and began living in deplorable living situations until they were able to find work and provide better opportunities for themselves or families (Goldston 1968, 50). At the time, men were expected to be the breadwinners of the family and the unemployed man felt as though they were failing their families as a result of their inability to work. These men would then apply for relief or would look for employment in other cities as an attempt to support their families.

“Share Our Wealth!”

 

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Louisiana Senator Huey Long declared the “Share Our Wealth” program because he felt that Franklin D. Roosevelt’s New Deal policies did not provide effective economic relief for the average citizen. Long’s program wanted the federal government to heavily tax the wealthy and place a cap on personal wealth at $10 million (Graham 1970, 69). The collected taxes would then be redistributed to the poor to ensure that all families had the ability to “own a home and comforts necessary for a home”. Moreover, he proposed that no family own more than three hundred times the average family wealth, meaning that no family should have more than a wealth of approximately $5 million, nor for a family to have less than $5,000 (Graham 1970, 70). Furthermore, Long believed that every family should have an income equal to at least one-third of the average family income. Overall, Long wanted to make sure that income inequality was going to decrease and that more concrete plans needed to be enacted after the Great Depression.

 

1970’s to 1980’s

An Unchanging Gap

In 1972 families making more than $17,760, those who constitute the most affluent fifth of the economic hierarchy earned 41.4% of the nation’s aggregate income. Meanwhile, those in the bottom fifth, making less than $5,612 annually, took in 5.4% of the total income. Those percentages have been little changed for a quarter-century.

The annual report by U.S. Council of Economic advisors detailed a larger gap between the rich and the poor in 1972 than in 1947. Graduated income tax made a gap between rich and poor because it did not redistribute wealth evenly, making inflation worse for the poor. Taxpayers in the higher brackets clearly have more opportunities to use legal write-offs than those with low income. Poverty levels increased in 1972 with the rise in the total cost of Social Security, Food Stamps and Medicare to $7.6 billion (Madrick 2011, 111). While these groups were helping those in need, the benefits also went to affluent people who had an income of over $25,000. The increase in inflation punished the poor and low-income families had to spend an average of 71% on necessities.

America Becomes less Equal

It’s no surprise that government spending has succeeded in redistributing money to the poor. The poorest third of the nation now receives more money from the federal government in transfer payments than it pays the government in taxes, and the poorest tenth gets back as much as three times its tax bill. Most of this largesse is the result of Great Society programs such as Medicaid and Medicare, food stamps and AFDC.

Joseph A. Pechman conducted a study in 1985 that disproved the idea that economic growth helps everyone and showed that the distribution of income has not changed within the past 20 years. Furthermore, if programs such as Medicaid and Medicare, had not been in place then the gap between rich and poor would have widened even further. However, at the time these programs did not help to lessen poverty in the United States, rather it stagnated the gap and kept it in one place. While the progressive tax system was an attempt to reduce the gaps, in 1966 it did not and the poorest tenth of the population paid federal, state, and local taxes at a rate of 17 % and the wealthiest tenth paid at a rate of 30% (Madrick 2011, 118). By 1980, these numbers rose for the poorest tenth from to 21% and declined to 27% for the richest tenth.

United States Census Bureau: Managers and Professionals

The data for Managers and Professionals from the consumer expenditures database shows the income of white-collar professionals from 1984-2016. The starting income after taxes in 1984 was $32,873 and as of January 2016 was $95,513. This graph shows a steady increase in wages for white-collar professionals with a dip from 2012-2013 of $14,000. This dataset accounts for manager positions, including architects, engineers, natural and social scientists, lawyers, teachers, and writers.

United States Census Bureau: Construction Workers and Mechanics

This data set shows the income after taxes for construction workers and mechanics from the consumer expenditures database from 1984-2016. The income in 1984 was $21,912, approximately $14,000 less than the white-collar income. The data shows growth over the period of thirty-two years and at 2016 the income level was $59,490. This figure compared the white-collar income in 2016 shows how the income gap has increased and the difference between the two parties is $41,000. As the wealthy have been gaining income through the years, the blue-collar workers have not had growth had such an increased pace. These jobs include production, craft, and repair workers, mechanics and construction trades occupations. These consumer expenses focused on frequently purchased items such as food, housekeeping supplies, and the payment of rent and utility bills.

Present Income Inequality

Extreme of the Rich and Poor in 1995: The smaller the person, the smaller the inequality gap is in the country. The United States is the largest person with a ratio of .34. Whereas Finland is the smallest country with a ratio of .21 for wealth inequality.

The Gap in Wealth in the U.S. Called Widest in West

At the time in 1995, the United States had left egalitarian society and become an economically unconventional nation with the economic inequality rising since the 1970s. In the 1980s, the gap broadened between the rich and poor because of the Clinton Republican tax cuts. The Federal Reserve showed figures in 1989 that the richest 1% of American households have a net worth of $2.3 million each and account for roughly 40% of the nation’s wealth. Inequality is rising faster in the United States than other countries because of shocks to the economy that favor the wealthy. These include the decrease in wages for the unskilled workers as automation spreads, low tax rates on the rich during the 1980s, low minimum wage along with the decline of trade unions and finally the rise of the stock and bond markets in the 1980s.

 

A New Economy

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A “New Economy” was necessary to combat the economic struggles in the late 1970s by attempting to make the wealthy better off to increase investment and help generate new businesses to create additional investment for the United States. This idea was created to help make the job market larger with the creation of more salaries. Reagan at the time believed the answer to the income gap was to invest on the supply side of the basic economic model and then demand will fall into equilibrium with the number of people looking for jobs. The idea was to give people more money in their pockets that would give them more money to spend and contribute to the circular flow of the United States. This model was to help heal the wealth gap in the United States; however, it failed because businesses were overburdened with taxation and government regulation and that the government should operate in a free market capitalism. This caused problems for lower-income families because they lacked the resources to be backed financially by the government through the buying of loans, thus keeping them in a cycle of poverty.

The Great Divide: Wealthy Inequality in America

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This personal account of the wealth inequality in America that begins with the Occupy Wall Street Movement to shed light on the issue of extreme wealth inequality in the United States. The speaker describes his reasoning for entering the movement as a teen living in New York City and his experience understanding how unequal the opportunities are in the city. The Great Divergence in the 1970s showed how the income gap grew as income growth for households in the middle and lower parties stagnated and were increasing at a decreasing rate, while incomes at the top grew. Furthermore, the unemployment rate and the neighborhoods with the largest income gap ranging between $200,000 and $7,000 a year.

How to Narrow the Gap of Inequality

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Bill Gates discusses how to narrow the wealth gap within the United States and compares it to poorer countries that have had success with increasing their wealth growth across all levels of income. He brings the focus towards the United States and the need for progressive taxation and higher taxes for a country that accrues high levels of wealth. The need for equal opportunity in the United States is a theme in the video and uses the example of different inner-city schools and how some may be performing well and have access to health services that other schools may not, limiting the students in the less wealthy school to have the equal chance of becoming a doctor or lawyer. The United States still has a growing wealth gap that is transferring to the education and benefits students and families can receive based off of their position in society and the opportunities they may or may not have been given.

Why America Must Revive Its Middle Class

Through political measures, it is possible and important to bring back the middle-class society and close the gap between rich and poor. One way to increase the size of the middle class is to use the tax code to fight the effects of wage stagnation and tie the tax rates to measures of income inequality. Another mention to revive the middle class is to facilitate the restructuring of long-term debt to keep the generation of students paying back loans not to be constrained to this debt. The passage describes the acceleration of globalization in the U.S. industries such as apparel, auto, and textiles which have lowered the level of middle-class employees in low skill occupations. The American working class has experienced wage cuts and higher unemployment through the high purchasing power of Chinese products.

America was once the great middle-class society. Now we are divided between rich and poor, with the greatest degree of inequality among high-income democracies. The top 1% of households take almost a quarter of all household income–a share not seen since 1929. An economy this lopsided cannot prosper. The poor and working classes are squeezed. The rich are increasingly absenting themselves from the country’s troubles. Their businesses sell goods and outsource jobs to China; their homes are behind gated walls; much of their corporate income is in offshore tax havens.

Bibliography

Primary Sources:

“America Becomes Less Equal.” New Republic 192 (February 18, 1985): 7–8.

A New Economy. Directed by Julia Dyer. Produced by Julia Dyer. Dallas County Community College District, 2005.

“An Unchanging Gap.” Time 103, no. 6 (February 11, 1974): 75.

August 11, 1932. Produced by Universal Pictures Company.

Bill Gates: How to Narrow the Gap of Inequality. Produced by Bloomberg. 2015.

By, KEITH BRADSHER. “Gap in Wealth in U.S. Called Widest in West.” New York Times (1923-Current File), Apr 17, 1995.

Crosby, Bing. Brother, can you spare a dime. Brunswick Records, 1, 1932.

DeVincent-Hayes, Nan, and John E. Jacob. Ocean City: Volume One. Charleston, SC: Arcadia Publishing, 1999, 39-45.

Goldston, Robert C. The Great Depression; the United States in the Thirties. Indianapolis : Bobbs-Merrill, 1968, 43-50.

Huey Long Describes His “Share Our Wealth” Program Ca. 1935. 1935. Accessed December 14, 2018.

Riis, Jacobs. How the Other Half Lives: Studies Among the Tenements of New York, New York: Charles Scribner’s Sons, 1890.

Sachs, Jeffrey D. “Why America Must Revive Its Middle Class. (Cover Story).” Time 178 (14): 30-32, 2011.

The Great Divide: Wealth Inequality in America. Produced by Educational Video Center. 2012.

United States Census Bureau, Bureau of Labor Statistics. 2018, September 4. Consumer Expenditures: Managers and Professionals | Category: Income after taxes | Socioeconomic Indicator*: Income after taxes, 1984 – 2016. Data Planet™ Statistical Datasets: A SAGE Publishing Resource. https://doi.org/10.6068/DP166F65846CA70

United States Census Bureau, Bureau of Labor Statistics. 2018, September 4. Consumer Expenditures: Construction Workers and Mechanics | Category: Income after taxes | Socioeconomic Indicator*: Income after taxes, 1984 – 2016. Data Planet™ Statistical Datasets: A SAGE Publishing Resource. https://doi.org/10.6068/DP1670AB8E0918

 

Secondary Sources:

Eames, Edwin, and Judith Granich. Goode. Urban Poverty in a Cross-cultural Context. New York, the Free Press: Free Press, 1978.

Allen, Frederick. “America’s Wealth Gap.” Saturday Evening Post 284, no.6 (November 2012): 28-76.

Gonzalez, Jason M. Economics of Wealth in the 21st Century. Economic Issues, Problems and Perspectives. New York: Nova Science, Inc, 2011, 121-45.

Graham, Hugh Davis. Huey Long. Great Lives Observed. Englewood Cliffs, N.J. : Prentice-Hall, 1970, 69-71.

Hays, Sharon. Flat Broke with Children: Women in the Age of Welfare Reform. Oxford: Oxford University Press, 2004.

Hillier, Amy E. “Residential Security Maps and Neighborhood Appraisals: The Home Owners’ Loan Corporation and the Case of Philadelphia.” Social Science History 29, no. 2 (2005): 207-33.

Madrick, Jeffrey G. Age of Greed : The Triumph of Finance and the Decline of America, 1970 to the Present. New York : Alfred A. Knopf, 2011., 110-18.

McCall, Leslie. The Underserving Rich: American Beliefs about Inequality, Opportunity, and Redistribution. New York: Cambridge University Press, 2013.

 

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