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Response to marmar (Original post)

Fri Apr 29, 2016, 11:00 AM

37. Historically, income inequality goes down during recessions/depressions and rises coming out of them



http://www.theepochtimes.com/n3/1390437-income-inequality-the-reasons-the-consequences/

The percent of total income earned by the 1% hit its historic high at 24% in 1928 just before the stock market crash and the onset of the Great Depression. It fell to 15.5% by 1932 even before FDR was inaugurated because of the Great Depression.

Then income inequality rose for the first 4 years of FDR's presidency by a little less than 4% peaking at 19.3% in 1936. While the economy was recovering and the middle class was doing better than in the 1920's the rich gained more than I would have expected in those first 4 years of FDR. After 1936 income inequality started a long and fairly steady decline thanks to New Deal policies until 1978 when its low of under 9% of income going to the top 1%.

The onset of the Great Recession saw income inequality go down (largely due to the dive in the stock market and its effect on the 1%) more than 5% from 23% in 2007 to 18% in 2009 of total income going to the top 1%. Coming out of the Great Recession income inequality increased by a little over 4% in the first 4 years of Obama's presidency from 18.1% to 22.5%.

I suspect that most of this improvement in income inequality going into recessions/depressions is caused by declines in the values of stocks owned by the 1%. And the initial increase in income inequality coming out of recessions/depressions is caused by increases in the value of those stocks. The real value of the New Deal was that it continued to lower income inequality for decades after 1936 when there were no great depressions or great recessions. And then, of course, we largely abandoned New Deal policies.

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