Once upon a time, the American economy worked for everybody, and even the middle class got richer. But this story has only been a fairy tale for almost 30 years now. The new, harsh reality is that the bottom 90 percent of households are poorer today than they were in 1987.
This is actually a much more dramatic statement than it sounds. While the Federal Reserve has already told us that the median households is worth less now than it was in 1989 -- that's the household right in the middle -- it turns out that everybody but the richest 10 percent of Americans are worst off. That includes the poor, the entire middle class, and even what we would consider much of the upper class.
You can see this troubling finding in the chart above, based on data from Emmanuel Saez and Gabriel Zucman's new paper on U.S. wealth inequality, which itself is based on tax data. In this chart, I've taken each group's inflation-adjusted net worth from 1945 and indexed that to 100, so we can compare how wealth has grown for people with lots or little of it. The answer, as you can see, is that the bottom 90 percent actually did very well during the first few decades of the postwar period -- adding more wealth, in percentage terms, than those at the top.
But these days of shared prosperity have come to an end, gradually and then suddenly. It started in the 1980s when the top 1 percent awoke from their long postwar slumber, thanks to the combination of lower taxes, financial deregulation, and new technology. It wasn't a total disaster for the bottom 90 percent. Even as most Americans saved much less, accumulating far less wealth, stock markets and housing prices continued to rise. Until they didn't, coming crash down in 2007 and 2008.