http://www.commondreams.org/views05/1127-25.htm
For more than 25 years, Business Week has conducted an annual survey of the earnings of chief executive officers of the largest U.S. corporations. In 1980, those executives earned 42 times as much as the average American worker, a ratio larger than the corresponding ratios for such countries as Japan and Germany even today. By 2000, however, American CEOs were earning 531 times the average worker's salary. The gains have been even larger for those above CEOs on the income ladder.
With corporate malfeasance much in the news, we know that at least some of the spectacular corporate pay packages were not won on merit. Most of them, however, are a simple consequence of market forces. As local markets have given way to regional, then national, and now global markets, even a few slightly improved executive decisions can now add hundreds of millions of dollars to the bottom line.
More generally, rapid pay growth at the top owes much to the spread of reward structures once confined largely to markets for sports and entertainment. In these "winner-take-all markets," small differences in performance often translate into enormous differences in economic reward. Now that we listen mostly to recorded music, the world's best musicians can literally be everywhere at once. The electronic news wire has allowed a small number of syndicated columnists to displace a host of local journalists. And the proliferation of personal computers has enabled a handful of software developers to replace thousands of local tax accountants. Each change has benefited consumers but has also led to greater inequality.
Around the globe, income inequality has been growing for essentially similar reasons. In most countries, public policy has attempted to counter this trend. Not in the United States. With the market's push toward greater inequality already apparent, for example, Congress reduced the top marginal income tax rate from 50 percent to 28 percent during the 1980s.
These tax cuts have increased inequality not only through their direct effects on after-tax incomes, but also through indirect effects on federal spending policies. Although supply-side economists predicted that the cuts would increase tax revenues by stimulating more than enough income growth to offset the lower rates, this did not happen, and hence the large budget deficits of the 1980s.
Those deficits were eliminated during the Clinton years but have reappeared, larger than ever, under President Bush, who has reduced tax rates on earnings, dividends and large inheritances. Once the enabling legislation is fully phased in, more than half of the resulting cuts - 52.5 percent, according to one recent estimate - will go to the top 5 percent of earners. The nonpartisan Congressional Budget Office now forecasts deficits larger than $300 billion for each of the next six years.