I was honored to learn that Thom Hartmann, the thoughtful progressive author, columnist and syndicated radio and Web television host selected It Could Happen Here as his “Independent thinker of the Month” book review. An excerpt from his extensive review follows:

The United States “is not immune from history,” Judson says, and lays out the factors that he believes could well lead us to a collapse/revolution that would permanently alter the landscape of this nation. The most important of these factors, he suggests, is that revolutions are likely to happen not when people experience the most privation (which is what conventional wisdom suggests) but, instead, when people’s expectations for the quality of their lives are dashed quickly, unfairly, and without recourse.

The American Dream is, for most Americans, no longer viable, as Judson documents in frightening detail in this book. It’s been replaced by underwater home values, massive credit card debt, the most rigid economic/social order in the industrialized world (for the first time in two centuries, in America today the most reliable predictor of a child’s economic future is his parents’ economic status), and a growing certainty that the political game has been rigged by big wealthy interests at the expense of average working people.

Over the next week, I will distill, in writing, some of the meaningful discussion that took place. You can click the picture to hear the interview:

The Huffington Post featured this “New Agenda For America” on its front page and posted a giant graphic on the front page of the Business Section.

I was honored to be included in this list of distinguished Progressive thinkers, and a copy of my article, which originally appeared on the New Deal 2.0 Web site, appears below:

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Today, we have the highest level of income inequality in our nation’s recorded history. We must address the structural flaws in our economy that created, and continue to widen, this divide. History teaches that extreme inequality leads to political instability. We cannot assume that we are immune.

In President Obama’s words, the middle class is experiencing “the American Dream in reverse.” Rising long-term joblessness and the possibility of 13 million foreclosures (more than one in every four American mortgages) create the potential for the former middle class to move from frustration to anger — an anger sparked by reduced circumstances and the belief that they have been treated unfairly.

With each job loss or foreclosure, another family — now on a down-ward spiral — potentially loses its faith in our basic economic system and our basic system of governance. America’s ongoing vitality requires that people trust that these systems work, and that our democracy is self-correcting. With rising income inequality, this trust is now at risk.

America has never been a nation of haves and have nots. If the gulf widens, it’s hard to imagine that our future will be marked either by a healthy economy or a healthy democracy.

The only other time in our nation’s recorded history that income inequality approached current levels was 1928, just before the Great Crash. The New Deal eliminated the excesses of an unsustainable system. It was not easy then, and it will not be easy now. But, it is essential.

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The transcript below raises an increasingly important issue: All of the discussion of economic inequality essentially presumes that people continue to view the existing economic system as legitimate. As foreclosures rise, jobs disappear, and the divide between the have’s and have not’s increases, our ability to take this for granted becomes far less certain.

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Last week, It Could Happen Here was the subject of a 45-minute segment of Tom Asbrook’s OnPoint, which airs nationally on NPR. To demonstrate, how inequality can divide a nation, It Could Happen Here, which is a nonfiction book, opens with a fictional scenario involving American terrorists who threaten the nation with dirty bombs demanding an end to foreclosures by “vulture banks,” and free access to healthcare and higher education for all. Tom Ashbrook asked hard questions about this scenario. I said to him think of a laid off engineer who works with radioactivity to create medical devices…

Here’s the transcript of the discussion:

BRUCE JUDSON: First off, here’s a flash point for you. In the scenario, in the fictional scenario, I talk about…It is very easy to imagine that an engineer, or someone else with the necessary knowledge who works on, let’s say, medical devices and has used radioactivity to create a better world…. to save lives, is laid off. You can imagine that he suddenly is facing foreclosure. He’s an educated person unable to put his kids through college.

A few minutes later the show took calls. The show received a chilling call from an out of work nuclear engineer–who had helped to build 13 nuclear power plants but had not worked in two years. You can read the transcript of his call below, or click to listen to his call here.

Click player below to listen to out of work Nuclear Engineer:

TOM ASHBROOK: Certainly inequality’s a big issue. Let me get a call right here from New London, Connecticut. And

Don. Hi, Don. You’re on the air.

CALLER: Hi.

TOM ASHBROOK: Hi.

CALLER: I think you should be listening to this guy, Judson. I’m an unemployed nuclear engineer. I’ve worked on 13 nuclear power plants. Making a dirty bomb is not a big deal. I’m not going to go out and tell everybody now to do it, but I’m just saying things like that can happen. And it sounds like you’re just being dismissive of all his ideas and what he’s saying. Because there’s a lot of anger out here, and there are a lot of people who feel that the American Dream is slipping away from them, they don’t have a chance. And the only entrepreneurial opportunity for them is to sell drugs and to be an outlaw. It’s happening.

TOM ASHBROOK: [OVERLAPPING] I hear you, [PH] Don. We’ve got Bruce on for an hour. So, I can’t say we’re not listening to him. But let me ask you, you’ve got a lot of expertise in your field, nuclear engineering. But does that mean you’re unhappy if you’re unemployed? Do you really feel like the country’s ready to revolt?

CALLER: I’m not an expert in revolution, and I don’t really know how they happen. All I know is I’m 60 years old. There’s not a lot of people who want to hire a nuclear engineer who’s 60 years old. And there are a lot of people out there like me who are out there who, you know, once you have so much gray hair, you’re out of here. And there’s just a lot of people that are just not happy with the way that the country’s going right now.
And I don’t know…where it’s going to take it, or what’s going to be its spark, or what’s going to be the event. But people feel like there’s just no way to climb out of the hole. Like there’s just nothing that’s going to get them out. This attitude, that I’ve seen, over 60 years, I’ve never seen anything like it. It scares me.

TOM ASHBROOK: Up against it. And with an education, a particular education. Don, thank you for your call.

You can listen to the full OnPoint segment by clicking the player below:

In It Could Happen Here the terrorists, the American for Economic Equality, communicate with the nation, and educate America about economic inequality through a Website, located at www.A-E-E.org. This fictional Web site actually exists, as described in the book. Through the lens of the fictional terrorist group, it links to serious articles and videos on issues associated with economic inequality.  It also provides the back-story for the formation of the terrorist group (which does not appear in the book). An engineer who creates medical devices using nuclear materials is laid-off, unable to find work, faces foreclosure, can’t afford to send his children to college, and snaps.  While the URL for the site is on the book, the site was not publicly available at the time of the OnPoint interview.

In today’s New York Times column Safety Nets for the Rich, Bob Herbert, details our emerging have and have not society, where two-thirds of  the entire income gains of the nation between 2002 and 2007 went to the top 1% of Americans. Herbert writes:

And we still don’t seem to have learned the proper lessons. We’ve allowed so many people to fall into the terrible abyss of unemployment that no one — not the Obama administration, not the labor unions and most certainly no one in the Republican Party — has a clue about how to put them back to work.

Meanwhile, Wall Street is living it up. I’m amazed at how passive the population has remained in the face of this sustained outrage.

Unfortunately if we do not change course, Herbert’s amazement may end in circumstances that we do not want to contemplate.  We are witnessing the unfolding of a chain of dangerous events associated with our collapsing middle class and increasingly two-tier economy. Sadly, the dynamics outlined in It Could Happen Here that lead to political instability are occurring  with increasing ferocity. More on this in my next post..

The recession has hit middle-income and poor families hardest, widening the economic gap between the richest and poorest Americans as rippling job layoffs ravaged household budgets.

The article, which then discussed the Census statistics that led to this conclusion, failed to mention that the Census Bureau considered the differences between 2007 and 2008, with regard to economic inequality, statistically insignificant.

But, whether the Census Data shows a meaningful increase, or not. is irrelevant. The Census Data reports that, contrary to the almost universal expectations of economists, economic inequality most likely did not decrease in 2008. Experts had anticipated that the declines in income of the rich would lead to a reversal in this groups ever–widening share of our national income. Instead, the Census reported that the 2008 income losses by the top 10% of Americans were offset by larger losses among middle class and poorer Americans.

MIT economist Simon Johnston appears to have been one notable exception to this expectation of a shrinking income gap.

Let’s review what we know about the measurement of income inequality before discussing the disturbing implications of this newest government report.

About two weeks ago, I critiqued a Sept 10, 2009 front page story in the Wall Street Journal titled, Income Gap Shrinks in Slump at the Expense of the Wealthy. My critique had three central points:

First, economists have, with few exceptions, agreed that Census Data is inappropriate for measuring income inequality because it consistently understates the income of the wealthiest families. To protect the privacy of reporting individuals, the Census “top-codes” income, which means that no one is ever recorded as making more than about $1.1 million in a single year. So, oil traders, hedge fund executives and anyone else at the super-high end of the income strata who might earn $100, $50 or $5 million in a single year, always earn $1.1 million or less in this Census Data. In addition, the Census Data does not include capital gains income, which is typically a large source of income for the wealthiest Americans.

Two economists, Professors Emmanuel Saez and Thomas Piketty, developed a method for measuring income inequality using IRS data, which avoided the problems inherent in using Census Data. This data was recently updated in response to the IRS release of 2007 information, and found that: Economic inequality in 2006 was, by some measures at the highest levels, ever found in the data available for the past 95 years. In 2007, these same measure showed a further jump further bringing America to it it’s highest levels of economic inequality in recorded history.

As a consequence of Census top-coding and the lack of capital gains data, the Saez-Piketty methodology has consistently shown that the Census substantially understates the extent of economic inequality in the nation. This means that, there is a real possibility that the the new Census Data understated the extent to which income inequality grew in 2008, and that the relative losses of the wealthiest families, versus less fortunate Americans, will be more than statistically insignificant.

It is possible that losses in reported capital income by the wealthiest Americans, if captured by the Saez-Piketty methodology, will be larger than the the incomes above $1.1 million that were not reported and offset the Census findings, leading as economists anticipated to a decline in the share of income going to the rich. However, I view this as unlikely. In considering this possibility, its important to remember that the IRS works on reported income gains, not gains which were never captured as taxable income. For income reporting purposes, the question is not whether the market value of capital assets declined but whether they were sold at an actual loss from their purchase price.

We will not know the answer to this question until July or August 2010, but in weighing the available evidence my working hypothesis is that as demonstrated by this new Census Report, income inequality did not decrease from 2008 to 2007.

Second, the original Journal article expressed a strong expectation that, as a result of the Great Recession, the ongoing growth of income inequality would decline substantially through 201o. My critique indicated that this was “far from clear.” The conventional economic wisdom, based on historical data, is that income inequality decreases, at least temporarily, as the richest Americans lose income faster than less-well-off Americans during a downturn. In contrast, this new data suggests that the dangerous cycle toward increasing income at the top of America has become even more self-reinforcing than previously recognized. We are now at the point where the pure market forces, which many economists told us would eliminate this issue, are no longer effective.

Third, the Journal article implied that the decrease in economic inequality it incorrectly predicted might be the start of a long-term trend. Instead, I demonstrated that, even if income inequality did decline in 2008 and 2009, it would almost certainly be “temporary.” The historical evidence shows that economic inequality frequently declines in a downturn, in the absence of strong government action, but that it will almost inevitably rebound and continue its march forward.

Now, let’s return to our main point:

Early next week, my new book It Could Happen Here will be released by HarperCollins. The book is an in-depth look , based on a historical analysis, of the implications of our historically high levels of economic inequality for the nation’s ultimate, long-term political stability. As economic inequality grows, nations invariably become increasingly politically unstable: Should we complacently believe that America will be different?

A central conclusion of the book is that once economic inequality reaches a self-reinforcing cycle it is halted only by inevitably controversial, hard-fought, bitterly opposed government action. Senator Jim Webb encapsulated this idea, when he wrote in his book, A Time to Fight: Reclaiming A Fair and Just America:

“No aristocracy in history has decided to give up any portion of its power willingly.”

In 1928, economic inequality was near today’s levels. Franklin Roosevelt succeeded in reversing the trend toward the continuing concentration of wealth, but it was a turbulent battle. In 1936, while campaigning for his second term and speaking at Madison Square Garden, FDR told the crowd:

“Never before in all our history have these forces [Organized Money] been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said, wait a minute, I should like to have it said of my second Administration that in it these forces met their master.”

In FDR’s era and in our own, money brings power: both explicitly and implicitly, in hundreds of different ways, both large and small. Today, the wealthiest Americans, together with a number of financial and corporate interests that act on their behalf, protect their ever-increasing influence through activities that include, among others, lobbying, supplying expertise to the councils of government, casual conversation at dinner parties, the potential for jobs after government service, the power to run media advertisements that influence public opinion. Indeed, MIT economist Simon Johnston, writing in The Atlantic asserted that the U.S. is now run by an oligarchy:

The great wealth that the financial sector created and concentrated [ from 1983 to 2007] gave bankers enormous political weight–a weight not seen in the U.S. since the era of J.P. Morgan (the man) … Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.

The new inequality data suggests that the potential problems for the nation associated with the concentration of wealth and power are even more severe than previously recognized. Two weeks ago, I wrote that “Once income concentration becomes a reinforcing cycle of the kind we are witnessing, it is never stopped by pure market forces.” This mechanism is now in full swing. The market forces associated with the Great Recession, which many economist had expected to stem the growing, corrosive gap between the rich and the poor, appear to have become ineffective.

The great strength of American democracy has always been its capacity for self-correction. However, Robert Dahl, the eminent political scientist, recognized that political power fueled by wealth may ultimately neutralize this central aspect of our democracy. In his 2006 book, On Political Equality, Dahl wrote:

As numerous studies have shown, inequalities in income and wealth are likely to produce other inequalities..

The unequal accumulation of political resources points to an ominous possibility: political inequalities may be ratcheted up, so to speak, to a level from which they cannot be ratcheted down. The cumulative advantages in power, influence, and authority of the more privileged strata may become so great that even if less privileged Americans compose a majority of citizens they are simply unable, and perhaps even unwilling, to make the effort it would require to overcome the forces of inequality arrayed against them.

In the chapter following this quote, Dahl notes “that we should not assume this future is inevitable.” He’s right. But, was clearly concerned. Three years late, we should be even more concerned.

Many current Executive Branch initiatives deserve our support and praise: However, nothing proposed to date will effectively halt growing economic inequality, and its corrosive impact on our economy and the long-term future of the nation. (In a future post, I will explicitly discuss the proposed regulatory reform of the financial sector.)

My analysis in It Could Happen Here concludes that without a vibrant middle class, the the American democracy as we know it, is not sustainable. Before the Great Recession, the middle class was in far worse shape than was generally acknowledged. In an economy with a record number of job seekers for every available job, the potential for nearly one-half of all home mortgages to be underwater, and increasing foreclosures, the collapse of the middle class will accelerate. With each job loss and each foreclosure, another family becomes a member of the former middle class.

America has never been a society sharply divided between have’s and have not’s. Unfortunately, this new data says to me we continue to head in that direction. Economists assumed that the Great Recession would be a circuit breaker that would halt this advance, at least temporarily. It did not.

With no new legislation, it appears we are potentially on course for 13 million foreclosures, almost one in every four mortgages in the nation, from the end of 2008 through 2014. Do we really believe that we can turn such huge numbers of Americans out of their homes with no consequences for the health of our system of governance? Could our democracy survive a transformation into a nation composed principally of a privileged upper class and an underclass which struggles from paycheck to paycheck and lacks basic economic security?

We will only stop the growth of economic inequality if the President and the Congress are ready to fight in the style of Franklin Roosevelt. FDR was a divider not a conciliator. Before World War II, he fought an all-out war at home. Today, “There’s class warfare, all right,” as Warren Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

I fervently hoped that we have not passed the point of no return, described by Professor Dahl. The recent news shows we are one step further on this road. If we continue down it, our nation may be on the path to becoming a House divided against itself, which ultimately cannot stand.

The Journal article effectively leads the reader to two conclusions: First, any issues that may exist around economic inequality are disappearing, because of the likely decline in the outsize incomes of the top 1% of Americans, those with a minimum income of $400,000. Second, the problem was never really that bad in the first place. Using Census Bureau data, which has been widely discredited for this type of analysis, the article asserts that growth at the top of our society was only slightly higher than for the nation as a whole, saying

The gains at the top didn’t necessarily come at the expense of others, because the economy expanded greatly after 1980, letting incomes grow across the spectrum. But those at the top end rose more rapidly. In 1980, for instance, the income of the top 5% of households was 2.86 times median incomes; by 2007, it was 3.52 times the median. In other words, the gap widened by 23%, Census data show.

Unfortunately, few conclusions could be further off the mark.

In some eras, when America did well everyone did well. However, this has been far from true for the past thirty years. Moreover, as a result of the Great Recession we may have to worry more about economic inequality rather than less.

First, let’s start with what we know about economic inequality.  Scholars have, with few exceptions, reached a consensus that Census Data is not appropriate for measuring high incomes. To ensure the privacy of individuals, the census assumes a maximum individual income of $999,000 or less.  So, it does not capture the true income of oil traders or anyone else earning $100 million, $50 million or five million per year. Second, the Census data does not include capital gains, a central source of the wealth created in private equity and hedge funds. Finally, the Census is based on samples, and the small proportion of wealthy Americans, as compared to the total proportion, further limits the accuracy of its projections.

In response to these limitations, two economists, Professor Emanuel Saez at  Berkeley and Professor Thomas Pickety  at the Paris School of Economic developed a highly regarded technique for measuring the distribution of income, including capital gains, by using IRS data. So, the Saez-Pickety data goes back to 1913, when the modern income tax was introduced. Saez updates the data each year, and the analysis of the most recent data, for 2007, was released in early August of this year.

The validity of Census Data for measuring economic inequality was the subject of intense discussion several years ago, when Alan Reynolds. of the Cato Institute, wrote an article in The Wall Street Journal, titled The Top 1%… of What? in December, 2006 similarly asserting that economic inequality had been overstated.  In response, Saez  posted a detailed open letter on his Web site, explaining  why Census Data was entirely inadequate for measuring income inequality and refuting Reynold’s claims.  In the open from Saez and Pickety, they state:

“The … Census Bureau estimates are based on survey data which are not suitable to study high incomes… In contrast, tax return data provide a very accurate picture… Our key contribution was precisely to use those tax data to construct better inequality estimates.”

“In sum, our work has shown the top 1% income share has increased dramatically in recent decades… [C]onservatives like Alan Reynolds … prefer to dismiss the facts about growing income inequality rather than face the debate on income tax progressivity at a time of growing economic disparity.”

Before joining the Obama Administration, an independent study by Larry Summers based on Congressional Budget Office data, similarly concluded that economic inequality had increased massively in past decades. In a June 2007 article in the Financial Times Summers wrote:

Indeed, in a recent paper on tax policy prepared for the Hamilton project, my collaborators and I concluded from Congressional Budget Office data that, since 1979, changes in income distribution had raised the pre-tax incomes of the top 1 per cent of the population by $664bn or $600,000 per family – an increase of 43 per cent.By definition what one group gains from changes in the distribution of income another group must lose. The lower 80 per cent of families are $664bn poorer than they would be with a static income distribution, which works out to $7,000 less in income per family or a 14 per cent loss.

To put this in some perspective, the total gain in median family incomes adjusted for inflation between 1979 and 2004 was only 14 per cent. If middle income families had shared fully in the economy’s income growth over the past generation their incomes would have risen twice as rapidly!

With few exceptions, scholars have concluded the Saez-Pickety data is correct.   The basic conclusion of this data, that the nation suffers from extreme and growing income inequality is essentially irrefutable.  Moreover, when the latest data was released a few weeks ago, Paul Krugman called the findings of growing income inequality “truly amazing” in a blog post titled Even More Guilded.

So, the Journal based it’s claims on data that is, with very few exceptions, considered essentially worthless for measuring income inequality.

Now, where do we really stand: The data released in August showed that, by some measures, the nation was at its highest level of income inequality in its history.

In 2007, the percent of total income received by the top 10% of families was 49.74%, or effectively one-half of the nation’s total. This compares to 1980, when the top 10% received 34.63%, or about one-third of all income.

By looking at Census data, the Journal article finds that “the gap” in median income between the top 5% of households and all U.S. households “widened by 23%” since 1980. Such a finding may not be good, but it does not seem so extreme. This supports the unconscionable conclusion that “The gains at the top didn’t necessarily come at the expense of others, because the economy expanded greatly after 1980, letting incomes grow across the spectrum.”  Of course, as already noted, the Census Data is completely unreliable for measuring these types of changes.

The Pickety-Saez data paints a very different picture. It shows that the average income in 2007 dollars (which adjusts for inflation) for the top 5% of households grew from $134,800 in 1980 to $220,100 in 2007; an increase of 63%. In contrast, over this 27 year period, the average real household income of the bottom 90% of families increased from $29,800 to $32,400; less than 9%.

So, real income among the top 5% grew at seven times the rate of income of the bottom 90% (63% as compared to less than 9%), an extraordinary difference of 600%.  Second, these percentage increases reflect much higher absolute numbers. The average income growth of the top 5% in a single year between 1980 and 2007 was almost $3,200, which is more than the $2,600 average income growth of the bottom 90% for the entire 27 years. As others such as Joseph Stiglitz have noted, the vast majority of Americans have been waiting three decades for a decent raise.

It is also impossible to understand how The Journal could seriously assert that the income gains at the top occurred because of a widely shared growing pie, as opposed to one group taking a far larger piece of the growth.

Once again this is at odds with the Saez-Pickety data, whose conclusions are  far more consistent with the real life experience of today’s struggling middle income households.  The data released by Saez in August shows that between 1993 and 2007, the top 1% of Americans received 50% of the entire income gains in the nation. In the shorter period between 2002 and 2007, the top 1% received an even more concentrated 65% of the entire income gains in the nation. In fact, on September 9th, the day before the Wall Street Journal article ran, the Council on Budget Priorities and Policies, released a detailed analysis of this data, titled, Top 1 Percent of Americans Reaped Two-Thirds of Income Gains in Last Economic Expansion. This analysis, or its implications, was nowhere to be found in the Journal story.

In addition, I am forced to wonder about what interviews the reporters conducted before releasing the story.  The central argument in the article, that the percentage of total income received by the top 1% will decline,  gains enormous legitimacy by stating near the start of the piece that  “Mr. Saez and other economists expect income going to the top 1% of taxpayers…will drop..by 2010.” I cannot speak for Professor Saez, and I don’t know whether he was interviewed for the Journal article, but any reading of his work suggests that the article provides a skewed representation of his views.

In a short paper accompanying the updated August data, Professor Saez concludes that “the most likely outcome is that income concentration will fall in 2008 and 2009.” But, he follows this conclusion by stating that in the absence of significant policy actions such declines will be temporary:

“Based on the US historical record, falls in income concentration due to recessions are temporary unless drastic policy changes, such as financial regulation or significantly more progressive taxation, are implemented and prevent income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced income concentration till the 1970s. In contrast, recent downturns, such as the 2001 recession, lead to only very temporary drops in income concentration.” (references to charts omitted).

My  intense study of past history, which will soon be released in It Could Happen Here is in line with Professor Saez’s conclusion.  Once  income concentration becomes a reinforcing cycle of the kind we are witnessing, it is never stopped by pure market forces. Only extensive government intervention, of the kind that will inevitably create high controversy, reverses this trend. Indeed, the policies of the New Deal, which led to the rapid decline of inequality, reflected bitter and hard fights.  Time magazine reported in April 1936, that:

Certainly no President in recent times has so bitterly aroused the enmity of a whole class as Franklin Roosevelt has aroused the economically substantial element of the U. S. Regardless of party and regardless of region, today, with few exceptions, members of the so-called Upper Class frankly hate Franklin Roosevelt.

It’s possible that the growth in income concentration may take a brief respite, but without substantial intervention the long-term trend toward ever greater concentration will march forward.

When the historians Will and Ariel Durant completed their massive multi-volume study of history, encompassing the broad sweep of time from ancient Greece to the modern United States, they subsequently wrote a short book of 102 pages titled The Lessons of History, in which they sought to identify the broad trends that are common to civilizations.  The chapter economics and history is all of six pages, and the bulk of it addresses the inevitable concentration of income that occurs in societies over time. The Durant’s bluntly conclude that such concentration ultimately leads to redistribution of some type, by “violent or peaceable” means.

We conclude that the concentration of wealth is natural and inevitable and is periodically alleviated by violent or peacable partial redistribution. In this view, all economic history is the slow heartbeat of the social organism, a vast systolic and diastole of concentrating wealth and compulsive recirculation.

The Journal article give us the false impression that, counter to all historical evidence, we no longer need to worry about economic inequality. It will take care of itself.

Finally,  it is not even clear that the central point of the article is correct. Yes, the rich are suffering relative to the past. However, the middle class and underclass are suffering as well. Jobs continue to disappear and housing could still decline substantially. With each job loss or foreclosure, another family joins the ranks of the former middle class. Simon Johnston, in a New York Times blog post, The Two-Track Economy: Inequality Emerging From Today’s Recession, among others, has pointed out that the Great Recession may be creating an even less economically equal society:

The overall numbers on outcomes by groups can get complicated (here’s a partial guide), but the simple version is: The top 10 percent of people are going to do fine, those in the middle of the income distribution have been hard hit by overborrowing, and poorer people will continue to struggle with unstable jobs and low wages.

Can the richest people spend enough to power a recovery in overall G.D.P.? Perhaps, but is that really the kind of economy you want to live in?

The United States has, over the past two decades, started to take on characteristics more traditionally associated with Latin America: extreme income inequality, rising poverty levels and worsening health conditions for many. The elite live well and seem not to mind repeated cycles of economic-financial crisis. In fact, if you want to be cynical, you might start to think that the most powerful of the well-to-do actually don’t lose much from a banking sector run amok — providing the government can afford to provide repeated bailouts (paid for presumably through various impositions on people outside the uppermost elite strata).

All of this suggests that we have a lot to worry about. On its front page, The Wall Street Journal may say that it never happened, and even if it did it is fixing itself. Everything we know suggest that this reading of the past is wrong, and such a future –without determined government action — is unlikely. The larger worry is that we will emerge from the Great Recession as a society sharply divided between a small privileged upper class, and an underclass that lacks basic economic security. What happens then?