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Americans see rich-poor gap worsening

Thursday, December 14, 2006

By MATTHEW BENJAMIN
BLOOMBERG NEWS

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.

Nearly 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 Bush is managing the economy, with nearly 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.

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 ultrarich and the rich continue to have mechanisms to make money, like the stock market and executive salaries," Kevin Godsea, an employee with the Fish and 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, Fla., who considers himself middle class.

Income growth has begun to pick up, with average hourly wages gaining 4.1 percent over the past 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, said 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, N.Y.

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.

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 past several months and the burst of wage growth, analysts say.

About one in five of those surveyed said they expect to spend a lot less money on gifts this year. Nearly 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."

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

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