At 8:30 a.m. Tuesday, the Commerce Department released its revised figure for third-quarter economic growth. The number was an eye-popping 5 percent—the sharpest GDP gain in more than a decade.
An hour later, trading began on Wall Street and within minutes the Dow Jones Industrial Average broke through the 18,000 mark for the first time.
Admittedly, the Dow milestone was largely symbolic; few people think this index is a particularly good gauge of the market, let alone the broader economy. But the third-quarter GDP increase is a clear signal the recovery from the Great Recession is gaining real momentum.
Yet many Americans are unconvinced. Half of respondents to Gallup’s Economic Confidence Survey this week still think the economy is “getting worse.” And a recent New York Times poll found that only 64 percent of Americans believe in the American dream—the lowest percentage in some 20 years.
Why is this so? A new study by the Pew Research Center suggests at least a partial answer.
The Pew researchers, who examined Federal Reserve data, found that the wealth gap between the nation’s upper-income and middle-income families is the biggest since Fed data collection began 30 years ago. The same was true of the gap between wealthy families and those classified as lower-income.
Upper-income families in 2013 had a median net worth that was nearly seven times that of middle-income families—and nearly 70 times that of lower-income households.
The median wealth of all three income groups declined during the 2007-09 downturn, the researchers say, but the wealthy “were not hit nearly as hard” and have seen a bigger rebound. In fact, “middle- and lower-income families’ wealth levels in 2013 (were) comparable to where they were in the early 1990s.”
Fairness is surely a reason to care about the increasing wealth gap. But let’s not forget it also harms the economy when purchasing power is so concentrated.
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