🌱 How This All Happened · Collaborative Fund

The defining characteristic of economics in the 1950s is that the country got rich by making the poor less poor.

Average wages doubled from 1940 to 1948, then doubled again by 1963.

Between 1993 and 2012, the top 1 percent saw their incomes grow 86.1 percent, while the bottom 99 percent saw just 6.6 percent growth.

Joe, an investment banker making $900,000 a year, buys a 4,000 square foot house with two Mercedes and sends three of his kids to Pepperdine. He can afford it.

Peter, a bank branch manager making $80,000 a year, sees Joe and feels a subconscious sense of entitlement to live a similar lifestyle, because Peter’s parents believed – and instilled in him – that Americans’ lifestyles weren’t that different even if they had different jobs. His parents were right during their era, because incomes fell into a tight distribution. But that was then. Peter lives in a different world. But his expectations haven’t changed much from his parents, even if the facts have.

So what does Peter do?

He takes out a huge mortgage. He has $45,000 of credit card debt. He leases two cars. His kids will graduate with heavy student loans. He can’t afford the stuff Joe can, but he’s pushed to stretch for the same lifestyle. It is a big stretch.

Tax cuts over the last 20 years have predominantly gone to those with higher incomes. People with higher incomes send their kids to the best colleges. Those kids can go on to earn higher incomes and invest in corporate debt that will be backstopped by the Fed, own stocks that will be supported by various government policies, and so on. Economist Bhashkar Mazumder has shown that incomes among brothers are more correlated than height or weight. If you are rich and tall, your brother is more likely to also be rich than he is tall.

You can scoff at linking the rise of Trump to income inequality alone. And you should. These things are always layers of complexity deep. But it’s a key part of what drives people to think, “I don’t live in the world I expected. That pisses me off. So screw this. And screw you! I’m going to fight for something totally different, because this – whatever it is – isn’t working.”

Take that mentality and raise it to the power of Facebook, Instagram, and cable news – where people are more keenly aware of how other people live than ever before. It’s gasoline on a flame.

a central theme of this story is that expectations move slower than reality on the ground