Trouble on the horizon

The working class in the United States is struggling. Statistics showing that the economic gap between the rich in the United States and the workers is wider than ever – and growing. The typical U.S. household saw its income fall in 2011 to 1989 levels, according to a 2012 Census Bureau report. The number of Americans living under the poverty line has been steadily at 15% for a number of years. It is the sixth year in a row that the rate failed to improve, despite the US being out of recession since 2009. The Standard & Poor's 500 index gained 16% on a total return basis last year. The poverty threshold last year was income below $23,492 (£14,700) for a family of four.

Even the rich are beginning to fret about the implications.  Jeremy Grantham says the only way the U.S. economy can return to health is to “divide the pie more evenly,” adding that “years of inequality have destroyed this country’s growth machine and forced the average American worker to go into debt to feel prosperous.” (Grantham’s letter to investors, Aug. 22, 2011.)  In May, Warren Buffett told “CNN Money” that “the rich have come back strong from the 2008 panic and the middle class haven’t. . . . We don’t need to have the extremes of inequality that we have. The people at the bottom end should be doing better. I think it behooves this very rich country to have less inequality than we have.”