The Gap Between the Rich and Middle Class Grew During Recession

It turns out that the gap between the rich and the middle class is larger than it's been in recorded American history. Much of the growth in the gap is due to the recent housing crisis taking place over the past three years.

According to the Economic Policy Institute, the wealthiest 1% had an average net worth that was 225 greater than the average American. That's higher than the previous record, which was 190 times in 2004.

An intriguing aspect of the divide is that it occurred while the wealth of all Americans declined on average. The richest households lost 27% of their wealth between 2007 and 2009, while middle class Americans lost 47% of their wealth during the same time period. So, the growth in the gap was mainly due to the fact that the middle class and poor suffered more during the recent recession than the wealthy.

The decline in wealth was primarily driven by declines in real estate values. Most middle class Americans have the bulk of their wealth tied up in their homes. Wealthy Americans, on the other hand, are likely to have other forms of wealth, including stocks bonds and investment real estate. Additionally, changes in tax laws during the 1980s led to the wealthy paying lower taxes on investment income than they've paid in the past.

http://xml.channel.aol.com/xmlpublisher/fetch.v2.xml?option=expand_relative_urls&dataUrlNodes=uiConfig,feedConfig,entry&id=969043&pid=969042&uts=1293723622

http://cdn.channel.aol.com/cs_feed_v1_6/csfeedwrapper.swf

Smart Money Tips

$5.00 Easily Spent:
A five spot can easily buy a value meal from any one of your favorite fast food joints or a hoity toity coffee from a barista named Genevieve. But think about what that fast, fried, sodium and/or sugar-laden junk is actually doing to your health.

Getty Images

BlackVoices.com

Smart Money Tips

$5.00 Spent Wisely:
Why not take the five bucks to the grocery store? You can easily prepare a tuna casserole; fritatta with leftovers; Mexican/Caribbean dinner containing rice, beans/peas, plantains & salad; rotelle or any fun-shaped pasta with frozen veggies (add olive oil, seasoning & a little cheese) to make your family a nutritious meal. Quality family time is worth far more than a #2, don't you think?

Smart Money Tips

$10.00 Admits One:
A dimesky (a name someone gives it when he wants to borrow -- somehow lessening the ask) will get you in to see the newest flick 'At a Theater Near You.' But it will only get you ONE ticket. Anyone going with you is on their own.

Smart Money Tips

$10.00 Stretched to the Limit:
If you wait a bit, the 'newest flick' can usually be seen on DVD within a month or two. It may/may not be available for $10.00 but if you head to the bargain bin at a Walmart, Target and other similar stores, you may just snag two or three really good DVDs for the price of ONE $10 movie ticket!

Smart Money Tips

$20.00 Bucks to Betterment:
Who doesn't like to ride in style? Doesn't your car just seem to handle better when it's squeaky clean with a vacuuming, high-gloss wax, tire treatment and under chassis cleaning? Suuuuure it does. But do you want to spend $20 on that?!

Smart Money Tips

$20.00 Better Spent Elsewhere:
If Palmolive dish detergent is 'tough on grease, yet gentle on hands' that means it should be perfect for cleaning one's car. Your car deserve a little more pampering? Head to the auto parts store and buy a few supplies. But the big plus here is you can take your son, daughter or significant other along with you to the coin car wash. Better yet, if you're set up for it at home with a hose, bucket and sponge, all can enjoy some real fun along with the promised benefits of cardio activity.

Smart Money Tips

$50.00 to Feel Good:
Let's analyze pampering. 'Fiddy' might get you a 30 minute massage or the manicure/pedicure works from the nail salon. Everyone who works hard deserves to spoil themselves from time to time. But if this really isn't your bag and you'd prefer weighing other options...

Smart Money Tips

$50.00 You Can Keep:
Buy your own products, most of which you may already have in your closet -- you junkie! Invite friends over for a pampering party OR -- why not plan a special evening for you and your mate to pamper each other? You can even throw in a bottle of wine. The Pinot Grigio Santa Margherita is less than $20.00 and "c'est magnifique"! Disclaimer: Cost of a babysitter not included.

Smart Money Tips

$100.00 Wasted:
One hundred, or in rap lingo, a Benjamin, used to mean something back in the day. But in terms of transportation today, you may be able to fill your SUV's gas tank with it. Emphasis on MAY. Depending on where you live, this may be a necessary evil. However let's weigh the options...

Smart Money Tips

$100.00 Put to Work:
You can buy a tank of gas for your SUV and possibly eke out 200 miles on that investment OR you can purchase the bike that you've been promising yourself and hit the road, Jack. (Great cardio.) Walking and/or public transportation works as an alternative as well.

Smart Money Tips

The poorest Americans struggle the most. In every study on net worth since 1962, the poor have had a negative net worth.

The results of the study are interesting in light of the recent debate on Capitol Hill regarding the extension of the Bush Tax Cuts. The Republicans, who've successfully branded themselves as the party of the rich, fought hard to preserve tax cuts for the wealthy in spite of the fact that these tax cuts would substantially increase the nation's budget deficit and lead to dramatic costs for the poor and unemployed. The bottom line is that neither the Republican Party, nor most of our other political leaders, care much about what happens to the poor in America. In fact, while you consistently hear political leaders in Washington make reference to the middle class, you hear almost no reference whatsoever to the poor. These numbers are a reflection of that fact.

On another note, there is a strong racial dimension to these numbers as well. The average African American family has a net worth that is roughly one-tenth that of the average white family. Therefore, when we talk about the nation's poor, African Americans are disproportionately represented within that particular demographic. So, when our nation's political leaders fail to mention the poor in their rhetoric, they are continuing to leave black folks behind. This is unfortunate, and I am not sure we should support any political leader who doesn't have our best interests at heart.