Wednesday, December 13, 2006

Americans See Widening Rich-Poor Income Gap as Cause for Alarm

By Matthew Benjamin

Dec. 13 (Bloomberg) -- Americans overwhelmingly say the growing gap between rich and poor has become a serious national concern, a sentiment that may bolster Democrats' plans to narrow the income divide when they take control of Congress.

Almost three-quarters of Americans believe inequality is a major issue, versus 24 percent who don't think so, according to a new Bloomberg/Los Angeles Times poll. Most of the concern is among Democrats and independent voters, though a majority of Republicans -- 55 percent -- also called the situation serious.

``Income inequality is widening quite rapidly,'' said Alice Rivlin, a former vice chairwoman of the Federal Reserve who's now a public policy professor at Georgetown University in Washington. ``It does matter to people that there are such unequal chances to get ahead.''

A month after Republicans lost their majority in Congress, poll respondents generally expressed optimism about the economy, with about three in five saying it's doing well. They were divided over how effectively President George W. Bush is managing the economy, with almost half saying they approve of the job he's doing and about the same number saying they disapprove.

There's little concern about a housing-market collapse, with only 15 percent of respondents saying they expect home values in their neighborhoods to fall during the next six months. And while more than a third expect to spend less money on gifts this holiday season, 68 percent called their personal finances secure.

Anxiety

Still, anxiety about the growing rich-poor divide unites Americans, crossing income and political divisions. Among those earning less than $40,000 a year, 84 percent called the gap a serious problem, with more than half saying it's ``very serious.'' Among those earning more than $100,000, more than three in five said it's a serious concern. Those in the middle- income group making between $40,000 and $60,000 were almost as concerned as the least wealthy.

``The ultra rich and the rich continue to have mechanisms to make money like the stock market and executive salaries,'' Kevin Godsea, an employee with the U.S. Fish & Wildlife Service, said in a follow-up interview. ``And the wages of middle class workers are stagnant,'' said Godsea, 30, a registered Republican in Fort Myers, Florida, who considers himself middle class.

Rich Get Richer

Income growth has begun to pick up, with average hourly wages gaining 4.1 percent over the last 12 months, the biggest increase since February 2001. Still, Census Bureau data point to a long-term trend of the rich taking home a larger slice of U.S. income every year.

The portion of national income earned by the top 20 percent of households grew to 50.4 percent last year, up from 45.6 percent 20 years ago; the bottom 60 percent of U.S. households received 26.6 percent, down from 29.9 percent in 1985, according to the Census Bureau. Meanwhile, average pay for corporate chief executive officers rose to 369 times that of the average worker last year, according to finance professor Kevin Murphy of the University of Southern California; that compares with 131 times in 1993 and 36 times in 1976.

``We are creating have and have-not classes in this country,'' said Jane Huntley, 77, a retired elementary school teacher from Brunswick, New York.

Democrats are considering proposals to shrink the income gap, such as boosting the minimum wage, scrutinizing executive pay, increasing tax credits available to the poor, and making health care and higher education more affordable.

Stagnation

Several of those ideas, if implemented, can provide immediate relief to the working poor, said Gene Sperling, a former economic adviser to President Bill Clinton and now a senior fellow at the Center for American Progress, a Democratic research group in Washington. More difficult, he said, is dealing with the ``insecurity in the middle class. People want to know where the new middle class jobs are coming from,'' said Sperling, who is a Bloomberg News contributor.

Americans have become more optimistic about the state of the economy, with those saying it's doing well rising to 61 percent from 54 percent in September. That may reflect the drop in gasoline prices in the last several months and the burst of wage growth, analysts say.

Marks Improving

Bullishness rose with household income, with more than three-quarters of those earning more than $100,000 a year saying the economy is doing well. Those earning less than $40,000 were the only group in which a majority said the economy is doing badly. About seven in 10 respondents said they expect the economy to be about the same six months from now.

The poll of 1,489 adults was taken Dec. 8 to Dec. 11 and had a margin of sampling error of plus or minus 3 percentage points.

Bush's marks on the economy also improved since September, with 48 percent of respondents saying they approve of how he's handling it, up from 43 percent three months ago. An equal percentage said they disapprove, down from 51 percent in the last poll.

``I don't take issue with his domestic policy, just his foreign policy,'' said Jon Jackson, 32, of Raleigh, North Carolina.

Jackson, a registered Republican who works as an operations manager at a snack food company, said he will spend less this holiday season than last year on gifts, mostly because he's got a new baby and health-care costs are crimping his budget.

About one in five of those surveyed said they expect to spend a lot less money on gifts this year. Almost half said they will spend the same amount and only 15 percent said they plan to increase spending.

``It's time to be really, really careful with our money because the economy is overrated,'' said Francisco Garcia, 50, a computer systems architect in Houston and an independent voter. ``With so many jobs that have been outsourced, the only thing I can compute is that a lot of people are just spending on credit cards, and that's going to cave in.''

To contact the reporter on this story: Matt Benjamin in Washington at mbenjamin2@bloomberg.net

Last Updated: December 12, 2006 18:35 EST

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