Vast Income Disparity is Destroying the Middle Class

As the summer twilight dwindles and we approach Labor Day, many Americans will find themselves working longer hours for less pay than they made before the start of the Great Recession in 2008.

Income inequality is greater today than at any time since the roaring 20's with 95 percent of income gains since the Great Recession having gone to the top 1 percent.

A shrinking middle class has profound implications for the economy.

During this year's State of the Union, President Obama argued that income inequality is the "defining challenge of our time." John Lawrence Allen thinks so too - just not in the same sense that President Obama meant it. (Image Source: AP Photo/Evan Vucci) 

Let's put things into perspective. In a bad year, top hedge fund managers and corporate CEO's make $100 million per year. David Simon of Simon Property received a pay package of more than $137 million last year.

A minimum wage worker earning $7.25 per hour, as many workers at Simon malls are paid, would have to work 9,095 years to make what Simon made last year. A person earning the national median salary of $39,312 by AP calculations, would have to work 3,489 years. Sound fair?

If Simon worked a 60 hour work week, his pay was $43,963 per hour or $732.73 per minute. A minimum wage worker would have to work nearly three years to make what Simon earns in an hour.

More perspective: If you add all of the salaries of President Barack Obama, the vice president, the Cabinet, the Supreme Court justices, all members of the Senate and the House of Representatives and all 50 governors, Simon still made $37 million more than all of them combined.

[sharequote align="center"]It is questionable how our capitalist system can survive if we don't reverse this trend. [/sharequote]

Bill Gross, the most powerful bond manager of his generation, co-head of the $2 trillion investment firm, Pimco, is one of the richest people on the planet.

Gross recently said, "...Wall Street interests are producing one world for the rich and an entirely different world for the working class...It can't go on like this, either from the standpoint of the capitalist system itself or the health of individuals and families."

It is questionable how our capitalist system can survive if we don't reverse this trend. Capital has moved away from labor and towards corporations and investors. Gross questions whether capitalism can thrive in a system in which labor has a declining interest. Ultimately the pie itself can't grow because consumption can't be supported says Gross.

Traders work on the floor of the New York Stock Exchange before the closing bell on August 4, 2011 in New York City. (Photo by Mario Tama/Getty Images)

An odd twist of irony: We broke the Soviet Union through a massive weapons buildup. Now we are a debtor nation and they are a creditor nation. We are moving towards socialism and they are moving towards capitalism.

The president's policies of higher taxes. more regulations, and re-distribution of wealth only exacerbates the problem.

Taking money from people who create jobs and giving it to people who don't work isn't going to help the middle class grow more affluent. Although Mr. Obama claims to be a man of the people, the people he has helped the most are the super rich who have done fabulously under his administration.

We need policies that reduce regulation, increase the incentive of millions on unemployment to get off of the welfare system and go into the work force, and reduce the onerous taxes levied on the middle class.

If we don't make significant policy changes now, we will find ourselves stuck in the quagmire of socialism, where innovation and creativity are stymied by a reduction in capital formation with a class of citizens who produce nothing and consume more and more of our precious resources.

Feature Photo Credit: Getty Images

John Lawrence Allen, a nationally recognized legal expert, represents investors nationwide in securities arbitration. Mr. Allen’s second book, “Make Wall Street Pay You Back,” was just released. For more information visit MakeWallStreetPayYouBack.com.

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