U.S. Misery in Inequality: Ignoring the Grim Truths : Economy: While wealthy Americans are rewarded with tax cuts, workers fall deeper in debt. Family income has been static since 1973.

Four years before the ancien regime fell in France, the new American ambassador observed: “The property in this country is absolutely concentered in a very few hands.”

This enormous inequality produced so much misery, Thomas Jefferson wrote to James Madison on Oct. 28, 1785, “it is clear that the laws of property have been so far extended as to violate natural right.”

If Jefferson returned to America today, he would find a powder keg of “enormous inequality producing so much misery.”

The Bush Administration ignores this grim reality, as do too many politicians and pundits. They prefer self-congratulatory celebrations of the “collapse of communism” and the “triumph of capitalism.” Some even unblushingly claim that “the egalitarianism of modern America represents the essential achievement of the classless society envisioned by Marx.” Resurrecting this notion of a “classless” merica--it was a favorite marketing theme from the 1950s through the 1970s--is grotesque.

During the ‘80s, this classless refrain, to be sure, was muted. Equality was relentlessly assaulted by the right, the rich and organized big business. Unions were busted, plants closed, workers intimidated into giving back wage gains. Meanwhile, Congress slashed the “safety net” while rewarding the nation’s wealthiest with generous tax cuts. All this in the name of a theory that these measures would make workers work harder and capitalists invest more. General prosperity was sure to follow, went the theory, even at the expense of more inequality.

The smart money flowed not into productive investment but into corporate takeovers. Raiders and financiers made fortunes; America’s basic industries rotted. A handful of companies now dominate our economic life. In manufacturing, the top 20 corporations control more than one-third of the assets and make 40% of the profits. Among the nation’s 14,000 or so commercial banks, the top 100 hold roughly one-half the deposits, the largest 14, one-quarter.

Despite what Republicans promised, the economy grew at about the same rate during the Reagan regime as it did during the previous eight years. Fewer new jobs were created (of which 85% are in the lowest-paying industries). The number of employed workers living in poverty rose. Workers’ real weekly wages fell (by about 10% from 1972 to 1987). The median real family income has barely changed since 1973; many more of us are now deeply in debt.

In the 1950s and 1960s, workers in America could look forward to earning one-third more than their dads. Today, they can expect to earn one-sixth less .

Far from the advent of a “classless society,” America in the ‘80s underwent dramatic class polarization. The income gap between top and bottom widened significantly: Not since 1950 has the country’s upper one-fifth enjoyed such a large share of all personal income. The lowest fifth were big contributors to the good life of those at the top--it lost the equivalent of $25 billion to them. Except for France, the income gap in America is larger than in any of the other dozen leading capitalist countries.

Moreover, while the real income of the top fifth of America’s families jumped 32%, their effective federal tax rate dropped by 5.5%. As for the bottom fifth, the tax bite on their real income growth of 3% increased by 16%.

The shift of income to the tip of the top has been even greater. According to the Congressional Budget Office, in the past decade the share of income received by the top 1% rose by more than one-third: in 1977, the ultra-rich got 9.2% of all pretax personal income; by 1988, they were getting 12.5%. In real dollars, their pretax income leaped more than 50%, from an average of $301,000 in 1977 to $452,000 in 1988.

So who owns America? Not many of us.

Out of modesty or to avoid taxes, wealth is deliberately hidden. But an ingenious method, using Internal Revenue Service data on estate-tax returns, makes the dead disclose what the living conceal.

Of the Rose Bowl’s 104,696 seats, two-thirds would be empty if only Americans with a net worth of $5 million or more--averaging about $11 million apiece, $538,000 of it in cash--came to cheer. Another 20,000 seats would be taken if everyone owning $1 million in corporate stock got in. These 58,200 individuals alone own roughly one-fifth of the value of all the corporate stock and two-fifths of the bonds and notes. Glancing downward a bit, the richest 1% own one-quarter of the net worth of all adults.

This is what’s owned by wealthy individuals. But, especially in the upper reaches, wealth is jointly owned and controlled by the family. A host of legal devices (e.g., trusts and estates) are used to control a family fortune. Family members share in its benefits (yachts, planes, retreats), receive income from it and are the potential heirs of each other’s holdings, which are slices from the same property pie.

The “family” among the wealthy typically extends, through ties of blood and marriage, far beyond the immediate family. Sometimes, even its members don’t know exactly where its boundary is. That’s why the wealthy take care to define inheritance rights with exquisite precision--to the fifth degree. No one knows how much of America is really owned by a few interwoven opulent families.

Counting only what the immediate family owns, a special survey for the Federal Reserve Board reveals that the families of the “super-rich” (the top 0.5% of all families) own 30% of all commercial real estate, half the corporate stock and a bit more of the bonds and trusts. All told, the “super-rich” own 24.6% and the “very rich” (the 0.5% just beneath them) another 7.2% of the net worth of all families. Just beneath them, the next 9% own another 35.1%. Altogether, the top tenth of the nation’s families own 67 cents of every dollar’s worth of everything owned by every family in America.

Contrast this with what ordinary people own. The families of the bottom half own less than 3% of America’s wealth. If they’re lucky, they have some “equity” in their home. But that’s it. The net worth of more than a quarter (26.3%) of all families (as of 1984) is less than $5,000; another 6.4% have under $10,000; and another 12.4% under $25,000. Summed up, nearly half (45.1%) of all families have less than $25,000 to their name, counting everything they own, minus debts.

Let’s say it plainly. A small, privileged class owns America. So long as we deny this unpalatable truth, preferring to hang on to the illusion that this country is “classless” or its economic life has been democratized, no real political struggle to achieve those aims is possible.

When it comes, its guiding principle should be, as Jefferson observed, that “the earth is given as a common stock for man to labor and live on . . . (So) legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand-in-hand with the natural affections of the human mind.”