What was the Great Prosperity?

Answer 1

"The Great Prosperity" is a term some use to refer to the post-WWII period, from the mid-40s to the late-70s, when the economy in the US was strong and the middle class was thriving. Robert Reich uses the term in his 2010 book Aftershock.

The Great Prosperity was a time when the US was making massive taxpayer funded investments in America, from the building of the interstate highway system to the GI Bill which promoted home ownership and subsidized college tuition for returning veterans. This ambitions set of programs were funded by a very progressive tax system with top income tax rates in the 80 to 90% range, which were also used to pay off the war debt. Unions were also still strong during these years and globalization had not yet taken hold.

According to Census Bureau data, from 1947 to 1979 the bottom 20% of Americans saw a 116% growth in their income after adjusting for inflation, the middle 20% saw growth of 111%, and the top 5% saw their incomes grow by 86%. It's a period when prosperity was clearly shared across the board and the middle class was growing.

This stands in stark contrast to the period Reich calls "The Great Divergence," from the late-70s onward when the US radically shifted courses and began dismantling many of those former programs while giving large scale tax cuts to the wealthiest premised on the concept of "trickle-down" benefits. Instead, the income growth that did take place went almost entirely to the wealthiest Americans while the wages for most Americans remained stagnant.

During this period, 1979 to 2008, the bottom 20% actually saw their incomes decline by 4% after adjusting for inflation, the middle 20% of income earners saw their incomes grow by only 14%, while the top 5% realized income growth of 73%. By 2008, income disparities had reached their highest level since 1928, just before the Great Depression.