If the Economy Is So Great, Why Are You Broke?

How the Myth of Shared Prosperity Keeps Failing Ordinary Americans

TL;DR

Why Wealth Inequality Is Everyone’s Problem—Including Yours

America’s economy might look strong on paper, but a small slice of wealthy earners now drives nearly half of all consumer spending. Wages for everyone else barely keep up with rising prices, and that threatens the long-term stability of the middle class. Far from just being a moral issue about who has more or less, extreme wealth inequality destabilizes the entire economy and undercuts democracy itself. If you think it can’t affect you, think again: unchecked inequality jeopardizes your job, your wages, your taxes, and even your retirement.

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The Illusion of a Strong Economy

-Blood Bank by Mr Fish

If you’ve been watching the news or scrolling through social media lately, you’ve probably come across proclamations about how “strong” the U.S. economy is right now. Corporate profits are soaring, the stock market seems high, and unemployment rates are low. On the surface, it sounds like things are going great for everyone. Yet beneath these optimistic headlines, there’s a quiet but profound shift in who actually benefits.

Nearly half of all consumer spending in the United States now comes from just the richest ten percent of households, according to an analysis by Moody’s Analytics. Decades ago, that same group accounted for closer to a third of all spending; today, it’s inching toward fifty percent. At first glance, that might not seem alarming—some people earn more than others, right? But if the economy has grown so reliant on the spending of a small sliver of Americans, it suggests that any notion of broadly shared prosperity is fading fast. Instead, wealth increasingly concentrates among those who already hold ample income and assets, while wages for the majority barely keep pace with inflation.

Many assume that a growing economy naturally lifts everyone, even if some rise higher than others. But what if this growth largely accumulates at the top, leaving the typical worker or small business owner to scrape by with minimal gains? We need to consider the long-term consequences if we want to keep a robust middle class and protect the stability of our democracy.

To understand why our prosperity is so unevenly distributed, we need to look back at an era when the economy worked very differently for working- and middle-class Americans.

How We Got Here

To understand the current predicament, it helps to revisit the mid-20th century, when the top marginal tax rate sometimes exceeded ninety percent. Corporate taxes were significantly higher than they are today, and strong labor unions ensured that productivity gains filtered down into real wage growth. The government invested heavily in infrastructure—think of the interstate highway system—and used programs like the GI Bill to make affordable home ownership and college degrees accessible to millions of veterans. While these benefits were not distributed equally across racial lines, for a wide swath of working- and middle-class Americans, those decades were marked by steady upward mobility and financial security.

In the 1980s, however, the philosophy shifted. Policymakers enacted significant tax cuts for the wealthy, paired with deregulation and austerity measures that reduced public investment. At the same time, unions lost political power, and wages for average workers began to stagnate. If you lived through that period, you might recall the hopeful claims of “trickle-down economics”—the idea that lower taxes on top earners would eventually benefit everyone. Yet in the four decades since, we’ve seen wages flatten for many, while fortunes at the top ballooned. The wealth gap widened, and with each economic crisis—from the savings and loan scandals to the 2008 Great Recession—ordinary households bore the brunt of the fallout.

A quick look at historical tax rates, corporate contributions, and wage trends shows just how dramatically our economic structure has shifted over time.

Looking Back: How Strong Public Investment Powered Wages and Growth

The periods of greatest economic growth and middle-class prosperity in the United States weren’t accidents. They were built on high taxes on the wealthy, strong labor protections, and broad public investments. In the 1950s and 1960s, the top marginal tax rate on the richest Americans hovered around 91 percent, while corporations contributed a far larger share of federal revenue—often 30 to 40 percent, compared to around 7 percent today. This revenue funded massive public works, affordable education, and robust public health programs, all of which helped wages rise and productivity soar. By contrast, since the Reagan-era tax cuts and austerity measures, wealth has largely pooled at the top, and the middle class has increasingly struggled.

So what exactly happens when policy shifts away from shared investments? To see the practical effects, we can examine how the push for austerity and lower taxes on corporations drained public resources and widened the gap.

The Austerity Spiral

After the 1980s, the push for austerity and low taxes on corporations and the rich set off a spiral of weakening public services and widening inequality. Wages stagnated, despite rising productivity, and many corporations shifted jobs overseas or gutted pensions to cut costs. With public investment reduced, education, healthcare, and housing grew more expensive. Rather than channeling funds into factories or innovations that create lasting jobs, much of the wealthy elite pursued financial speculation—buying back stocks, fueling asset bubbles, and reaping short-term gains. This transformation left an ever-larger share of Americans struggling with unstable employment and dwindling safety nets.

Historically, extreme inequality also carries political risks. We’ve seen parallels in past societies—from the fall of the Roman Republic to the Gilded Age—where wealth amassed in fewer and fewer hands, fueling resentment and sometimes violent upheaval. Ignoring these lessons can set us on a path where economic growth is real only for the top, while everyone else experiences rising costs, stagnant wages, and weakening democratic norms.

These aren’t just distant historical echoes. The question is: why does this matter to you personally? The short answer is that when the economy is stacked in favor of a tiny elite, everyone else pays the price.

Why It Matters to You

It’s tempting to view the wealth gap as an issue primarily affecting the very poor. In reality, a consumer economy depends on widespread purchasing power, and if large segments of the population cannot afford goods and services, everyone eventually suffers. When nearly two-thirds of all economic activity relies on consumer spending, concentrating that spending power in a tiny elite makes the system more fragile. A sudden contraction in affluent spending—triggered by a market downturn or global crisis—could quickly drag the entire economy into recession.

Moreover, when most profits go to top earners, social mobility withers. Opportunities for a better life become harder for the average person to reach, and disenchantment spreads. This kind of polarization often leads to political instability, disinformation, and even authoritarianism, because people feel the existing system no longer serves their interests.

In fact, wealth inequality hits closer to home than you might think. Even if you’re reasonably comfortable now, rising inequality can threaten your salary, your taxes, your retirement, and the power of your vote.

This Is About Your Own Self-Preservation

Even if you’re comfortably middle class now, rising inequality threatens your future. When the rich hoard profits, lower- and middle-income wages do not keep pace, and corporate taxes shift onto individual taxpayers. Retirement becomes riskier, as the stock market turns into a casino driven by speculative booms and busts. Meanwhile, billionaires pump money into lobbying and think tanks to preserve their wealth, weakening democratic accountability. In short, wealth inequality isn’t just about “someone else” getting a raw deal—it’s about the continued health of an economy and government you depend on.

One way to protect that economy—and shift the balance back to ordinary workers—is to reconsider our tax structure. Right now, we tax people’s labor more heavily than we tax the growth of massive fortunes.

Rethinking Taxes: More on Wealth, Less on Working People

When people hear talk of raising taxes, a common reaction is: “Don’t tax me more—I’m already struggling.” If you’re an ordinary wage earner, you’re likely correct that your taxes shouldn’t rise. The better approach is to capture the massive flows of wealth accumulating at the top, especially unearned income from stock dividends, capital gains, real estate speculation, or inheritances. This isn’t about punishing success; it’s about recognizing that our current system taxes labor more heavily than passive asset growth.

Consider a progressive wealth tax that only applies to fortunes above a certain level—say, fifty million dollars. For those with hundreds of millions or billions, a small annual levy on these vast sums could be invested in infrastructure, education, healthcare, or even shoring up Social Security. You may never pay this tax if your assets are below the threshold, yet you’d reap the benefits of a more stable and equitable economy.

The Bigger Picture: Investing in Shared Prosperity

Viewed in isolation, ideas like progressive taxation or a federal jobs program may sound extreme—especially if you’ve been told that “government is the problem.” Yet consider the transformative power of 20th-century public investment, from interstate highways to Medicare and public universities. Those projects didn’t just help the poor; they catalyzed monumental economic growth and bolstered the middle class. Paired with fair labor policies and a tax structure that did not overburden ordinary workers, such initiatives made the United States a global leader in prosperity.

If we stand by and do nothing, the middle class will continue to shrink, and the number of Americans living in precarious conditions will grow. History shows that extreme polarization often breeds social tension, financial bubbles, and political tumult.

So how do we turn the tide? There are concrete policies we can enact—many of which helped create the middle-class boom of the mid-20th century. Let’s look at some practical steps.

What We Can Do

Tax the Rich, Heavily. Restoring high marginal rates on ultra-wealthy households, along with corporate tax increases, could generate the revenue needed to reinvest in public goods. This also helps prevent the rise of dynastic wealth that can dominate politics.

Invest in Public Goods. Universal healthcare, affordable housing, and low-cost education aren’t luxuries; they are foundational to a healthy society. Past generations funded massive infrastructure projects and reaped huge rewards in economic growth.

Empower Workers. Strengthening labor unions, encouraging worker cooperatives, and promoting workplace democracy can distribute wealth more fairly. When workers have real bargaining power, productivity gains translate into better wages.

Break Up Monopolies. Highly concentrated corporate power threatens both competition and democracy. Scrutinizing big tech, finance, and other sectors ensures smaller businesses can thrive and consumers have choices.

Guarantee Jobs, Not Just Cash. A federal jobs guarantee (FJG) would ensure that anyone willing to work has access to a decent-paying job in infrastructure, green energy, or public service—setting a wage floor without mandating private-sector increases. Unlike universal basic income (UBI), which provides cash without job creation, an FJG ties public investment to meaningful work while allowing small businesses to remain competitive through targeted tax credits.

Decommodify Essential Services. Housing, healthcare, water, and energy shouldn’t be governed purely by profit motives. Making them more accessible to all stabilizes the broader economy.

What Happens If Wealth Inequality Goes Unchecked?

If we continue on our current trajectory, the wealth gap could rival or exceed levels seen during the Gilded Age. In the future, this might result in a permanent oligarchy, where a small, hereditary class owns most of the wealth and political influence. Economic stagnation becomes a real threat: as fewer people share in prosperity, consumer demand diminishes and growth stalls. Meanwhile, political instability tends to rise when ordinary citizens feel the system is rigged against them. Precedents—ranging from the collapse of the Roman Republic to modern nations with stark divides—remind us that extreme inequality can unravel advanced societies.

The environmental cost is also significant. Wealthy interests might block or slow climate action to protect near-term profits, putting the planet’s future in peril. In short, letting the gap widen isn’t just unfair—it’s unsustainable. Eventually, economies that concentrate wealth at the top collapse under their own weight.

With the stakes so high, it’s clear that we’re not just talking about bleeding heart morality or envy. The core issue is whether our society and democracy can survive an economic order that benefits only a fraction of its people.

Why It Matters to All of Us

If you find yourself thinking, “The economy seems fine; why worry?” remember that headline figures like GDP or corporate profits do not necessarily translate into better lives for most people. Rising costs, stagnant wages, and shrinking chances for mobility tell a more nuanced story—one that directly impacts families across the socioeconomic spectrum.

Revisiting our assumptions about taxes, government programs, and public investments doesn’t have to be a partisan battle. Rather, it’s a question of how to keep an economy vibrant and a society cohesive. Decades of historical data and real-world examples illustrate that when the wealth gap becomes too wide, the middle class erodes, social tensions rise, and the future becomes uncertain for everyone.

If past generations could fund interstate highways, higher education, and Medicare under higher tax rates, then it’s worth asking why we settle for a system today that allows billionaires to dodge taxes while working families bear more of the burden. Whether we follow their lead or continue funneling wealth into fewer and fewer hands will define not just our economy, but our democracy for generations to come. The choice is in our hands—and the stakes couldn’t be higher.

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For more on what wealth inequality really is and exactly how it impacts you and everyone you know check out this video from Gary Stevenson. Gary is an economist trained at the London School of Economics and became the most successful trader in the world at CitiBank by betting that wealth inequality would continue to explode.

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Mark Zandi (Chief Economist, Moody’s Analytics). Consumer spending analysis indicating top 10% of earners account for approximately one-third of GDP. Accessed October 5, 2025. https://www.moodysanalytics.com.

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