The morning news reports that in 2004 the top 1 percent of households–$719,910 of them, with an average income of $326,720– had almost 20 percent of the entire nation’s pretax income according to Kevin G. Hall of McClatchy Newspapers. This is up 17.8 percent since 2001. The article reports the results of a study by UC Berkeley professor Emmanuel Saez. The research study also reports that the richest one-tenth of 1 percent of Americans–129,584 households in 2004–reported income equal to 9.5 percent of national pre-tax income. From these troubling figures, Saez goes on to report the really grim news. The income of the median household over the same period increased only 1.6 percent (adjusted for inflation). This contrasts with income growth over the 1998-2001 period when median family net wealth increased by 10.5 percent, and median household income increased by 9.5 percent.

The results in this morning’s news are just the most recent report of rising income and wealth inequality in America. The number of Americans living in poverty (37 million) is static. The number of the nation’s working poor continues to grow. In 2003 the Center for Budget and Policy Priorities reported 13.1 million people, including 7 million children, are working and yet unable to rise above the poverty line. Thus about 50 million Americans do not make enough money to afford even the basics. What does this mean for the nation’s outlook?

The America Dream is no longer just being deferred it is being eliminated for many people who work hard, play by the rules, and yet nonetheless see themselves falling further behind. Our national income picture is an embarrassment when we compare ourselves to other industrialized and developed countries in Europe, Asia, and North America.

Why are the rich getting richer? Kevin Hall’s article makes an important point: research studies report why incomes are declining for the majority of Americans, but they say little about why the rich are becoming richer. We know that stagnating incomes for the majority of Americans are due to a host of factors including: changing job composition, off shoring of work, the growth of low paying jobs, and the decline in the number of jobs requireing a college education.

Of some surprise, education, once the great guarantor of economic mobility is increasingly unable to deliver on its promise. We are seeing a decline in returns to a college education. Since 2000, wages of college educated persons declined 3.1 percent. Exceptions were seen by individuals with PhDs and specialty degrees like law and medicine.

Ok, so we know why incomes are stagnant, this still doesn’t tell us why the nation is experiencing a growth in wealth disparity. Hall’s thorough assessment points out the real explanation for why the rich are getting richer; they simply own more assets and control a greater share of the nation’s wealth. Owning stocks is a key to economic security today. Stocks paid 10 percent annually over the last five years. If you are wealthy you simply have more wealth to invest. As Hall reports, the top ten percent of the population–the nation’s wealthiest families–had investments of $110,000 while the remaining 90 percent of Americans average less than $10,000 of investment income. Simple math makes the consequences plain: if you have income and you can invest it you will become wealthier because you are able to invest.

In America owning stocks is a luxury that only the very few can afford. For many middle class Americans their concern today is not about being able to invest their savings, but the fear of losing a pension and their retirement security. Today only half of working Americans are covered by any pension benefit at all. These Americans are completely dependent on Social Security when they retire. The other half is covered by pensions or 401K investment plans. Twice as many people are covered by 401Ks compared with private pensions. For these people, the size of their retirement income is dependent on how well the funds of their 401K are invested and how well the stocks do in the stock market. The bottom line is Americans’ retirement incomes are more uncertain than at any other time since the 1940s. While there are some benefits associated with moving to a retirement economy based on 401Ks, there also are huge liabilities associated with the requirement that the individual manages his or her retirement income upon completion of their working years.

Income inequality has been creeping up in the US for some time. The current situation has been building since the 1980s. As Hall notes, what is really stark these days is by how much the tax cuts of the past five years have added to rising inequality. The tax cuts for the rich have certainly made the top one percent wealthier, but they have done nothing for those of us who do not have a large stash of investment income or accumulated wealth. That comes to about 270 million Americans. Not a small crowd, but a very vulnerable one today.