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ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

Last week, President Bush for the first time as president expressed concern about growing income inequality in the United States. It's a trend that's been with us for almost 30 years. The problem stabilized during the boom of the late 1990s, but in the past five years, the income gap has widened again. This week, we'll examine the causes of the growing income inequality, it's potential negative effects on society and what might be done about it.

NPR's John Ydstie is with us to get us started. And John, why is the income gap widening once again?

JOHN YDSTIE: Well, Michele, during the past five years, incomes in the middle have stagnated despite strong economic growth and strong productivity growth. And most of the rewards of that strong economy have gone to the wealthiest Americans. Their incomes have exploded.

NORRIS: So John, just how big are the gains that you're talking about?

YDSTIE: Well, one recent study shows that Americans on that very top rung of the economic ladder - the top one percent - now command nearly 20 percent of the nation's income. That's more than twice the share of income that they commanded just three decades ago. One small sign of the explosion of wealth at the top is the increase in the number of private jets. They're a benchmark for the uber wealthy now. Michele, I'm sure you have one.

And I began my reporting by going out to Dulles Airport, to the private jet port there, to have a look of what was going on.

NORRIS: And what did you find?

YDSTIE: Well, we found shiny small jets on the tarmac, well-dressed passengers coming and going, unhindered by security lines. And we met up with the representative of Gulfstream, Robert Baugniet, who gave us a glimpse of how the top tier travels.

Mr. ROBERT BAUGNIET (Service Operations, Gulfstream): You're sitting in a Gulfstream G200. It will easily sit four people where we are, two back in the dining area and two on the sofa.

YDSTIE: There's gleaming maple wood trim and sumptuous green leather, an owner station from which a master of the universe can control satellite communications and inflight entertainment.

Mr. BAUGNIET: For this aircraft, if you have $20 million, I'll accept it graciously, make the check out to Gulfstream Aerospace.

YDSTIE: There's a waiting list for this model, but around 1,500 private jets have been delivered to companies and wealthy clients over the past couple of years. Despite occasional squawking from shareholders, Baugniet maintains these jets have become essential for top executives. Time is money, he says.

Mr. BAUGNIET: Do they really want their chief executive sitting waiting for a connecting flight in O'Hare or Atlanta?

YDSTIE: After all, top CEOs make about 300 times what the average worker makes. As metaphorical justice would have it, their jets fly at 30,000 to 40,000 feet, too, far above the rest of us.

Among the highest fliers in the U.S. economy is Lloyd Blankfein, CEO of the Wall Street investment bank, Goldman Sachs. His $53 million bonus for 2006 and news that on average Goldman Sachs employees earned $600,000 plus last year made headlines in the tabloids and on the business pages and produced some public outrage.

The response of economist, actor and social commentator Ben Stein is typical.

Mr. BEN STEIN (Actor): All restraint of dignity and decorum and decency have been cast aside by some of the people on Wall Street and by people in the corporate boardrooms.

YDSTIE: Back in the 1960s, says Stein, CEOs were restrained by social mores.

Mr. STEIN: That's sense of restraint is gone.

YDSTIE: The Wall Street bonuses paid out last year, $24 billion in all, have helped give New York the highest income inequality of any city in the country. With one-bedroom condos routinely selling for a million dollars, it's becoming harder for the middle class to live there. The pressure is even squeezing Stuyvesant Town, a bastion of New York City's middle class. It's a 60-year-old complex of apartment buildings near Greenwich Village built around a central space of green lawns and playgrounds.

Resident Joanne Police(ph) quotes from its mission statement that used to be displayed on a plaque on the grounds.

Ms. JOANNE POLICE: "Families of moderate means might live in health, comfort, and dignity in parklike communities."

YDSTIE: That plaque is gone, and last year MetLife, the original developer of Stuyvesant Town, sold it to a big real estate firm for five billion dollars. Residents have been told they won't be forced out, but there is fear the middle class character will change. For her part, Joanne Police has been trying to buy a condo in New York City. She says prices are being forced out of her reach by the big bonuses being paid to young people on Wall Street.

Ms. POLICE: Now, what are they going to do? They're going to buy expensive apartments. And as long as people in the real estate industry feel that there are people out there who are going to spend that kind of money, is anyone going to think about creating something at a lower price point? I don't think so.

YDSTIE: So what's behind this gap between the fortunes of those in the executive suites and the rest of us? Robert Rubin, former treasury secretary in the Clinton Administration, says globalization has dramatically increased the value of some people.

Mr. ROBERT RUBIN (Former Treasury Secretary): For example, an outstanding trader who used to trade within the framework of a domestic marketplace now can trade within the framework of a global marketplace, which means that person can do a great deal more and becomes much more valuable.

YDSTIE: A CEO who runs a company with a global market instead of just national one is more valuable, too. Most economists agree technology driven globalization is the main force behind the widening income gap. The story of a company called Economy.com is one small example of how technology and globalization have supercharged the earning powers of skilled and creative workers.

Mr. MARK ZANDI (Economy.com): What oil gains on winter chill -

YDSTIE: Mark Zandi sits at the desk in his corner office, reading headlines off an Economy.com Web site.

Mr. ZANDI: Oh, and here's a good piece unraveling the employment puzzle. There's been very strong growth.

YDSTIE: You may recognize Zandi as an economist NPR's quoted often since he and a couple of partners started the new economic research firm just outside Philadelphia in the 1990s.

Mr. ZANDI: Now we have a survey we got off the Web site.

YDSTIE: About a year ago, Zandi and his partners sold Economy.com to Moody's, the venerable credit rating and research firm, for $27 million. Zandi and his partners do still manage the company. What enabled them to get the big payday was computing power and the Internet. They started 15 years, thinking they would give economic advice and analysis through a newsletter. Then the Internet blossomed, and they developed a Web site to distribute their product. At first, they couldn't figure out how to make money at it.

Mr. ZANDI: This was a free Web site. For many years, we tried to generate revenue through advertising. It did not work.

YDSTIE: So they decided to charge a $160 a month for access to the site and nervously watched to see what would happen.

Mr. ZANDI: And to see what people would pay was just fascinating to watch, just to see now people valued it.

YDSTIE: Where you watching the number of customers clicking in and deciding whether or not to subscribe?

Mr. ZANDI: Yeah. Absolutely.

YDSTIE: Were you watching it on screen?

Mr. ZANDI: Yeah. Absolutely.

We'd have a page that showed how many people have subscribed, so I'd go there every half-hour. And when things are going well and there's lots of subscribers, I go every 10 minutes. You know, it's like, when there's a lot of green on your screen. You're looking -

YDSTIE: The success of the Web site stunned Zandi, and he says it was fascinating to watch who was signing up.

Mr. ZANDI: And, oh, my goodness. You know, you're seeing, you know, I'm reading the names. I have no idea who this people are, you know.

YDSTIE: It wasn't just big institutions, like the Federal Reserve, or Bank of America, but small customers - a city manager in a Tennessee town, two churches that needed economic forecasts so they could project income in their collection plates. The Internet had made Economy.com's market nearly infinite. At the same time, it lowered the cost of collecting the data the firm relies on.

But Zandi acknowledges the very technological forces that boosted his fortunes have eroded the jobs and incomes of others through automation and outsourcing.

Mr. ZANDI: That has hurt those that are sort of the lower middle parts of the economy.

YDSTIE: And Zandi is very concerned that the widening income gap could be corrosive to American society. Those who feel left behind, he says, may feel compelled to support policies like trade barriers that could short circuit tech-based global economy.

Mr. ZANDI: We want to have as big and as flourishing economy as we can, and we can't have that unless the benefits of the growth in our economy are distributed evenly enough that we all feel comfortable with what's happening.

YDSTIE: Commentator Ben Stein sees the threat differently. He envisions the wealthy buying political influence and entrenching their economic advantage.

Mr. STEIN: If management and the top dogs of Wall Street are just going to continue to be able to get whatever they want, then this will become not a democracy any longer, but an oligarchy in which a very few, very rich people call all the shots, and we're way down the road toward that happening already.

YDSTIE: There's lots of worry about the corrosive affects of income and equality in official circles, too. The current treasury secretary and the current and former Federal Reserve chairmen have expressed concern. Congressional Democrats made it an issue in the last election, and it helped them win majorities in Congress.

And Michele, that means Washington will attempt to deal with the issue this year.

NORRIS: John, are there ways of closing this income gap, hiking the minimum wage, for instance, a measure that Congress has already approved?

YDSTIE: Well, that's one approach, though I think most economists suggest that's more symbolic than significant, but other ideas include restraining CEO pay, strengthening unions, making health care more widely accessible and increasing grants to low-income students, for instance, and then paying for it all by allowing the president's tax cuts for wealthy Americans to expire in 2010.

I talked to former Treasury Secretary Robert Rubin, who's a leading Democrat on this issue, and he argues that balancing the federal budget is necessary to build a strong foundation for economic growth. Not all Democrats would agree with him on that, but most would agree with Rubin that at the top of list should be education.

Mr. ROBERT RUBIN (Former secretary of the treasury): To equip workers to be productive and effective and also, by the way, to encourage the creation of jobs in this country because an effective, well-educated workforce leads to investment.

NORRIS: John, you know that former Treasury Secretary Robert Rubin is not in lock-step with other Democrats on this, but this is one thing you hear over and over again when you discuss closing the income gap, but it seems like that's not enough.

YDSTIE: It probably isn't enough. A college education used to be seen as the ticket, but during the past five years, even incomes for the college educated have stagnated. So economists, including Mark Zandi, say college is not enough.

Mr. ZANDI: What's required is continually going back and getting educated and trained and develop a talent in a skill, something's that unique and different, something that you can't learn at school. It could be you're great at mathematics, programming, or you've just nice, white teeth that you can display in a TV ad. You are the product that matters most, and you need to continue to work on that and market it.

NORRIS: John, if only it were that easy.

YDSTIE: Well that's true, and here's one more cautionary note. You know, we believe fervently in economic mobility in the United States, that it's easier to move up the economic ladder here than anywhere else, but recent studies suggest that the U.S. actually has less economic mobility than most big, industrialized countries.

Now, I'll leave you with one more positive note. Last year, incomes did move up across the board for the first time since the boom of the late 1990s. Now, even if those gains continue, the gap between the rich and the rest of us could keep widening, but if everyone's boat is rising, it might be a little bit more palatable.

NORRIS: Thank you, John.

YDSTIE: Thank you, Michele.

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