Why the rich should support strong economic recoveries

Brad DeLong cites Peter Orzag's report of recent findings that the top 1% of the households in the U.S. experienced about half of the total income loss during the recent resession.  Orzag's conclusion is that rational high income families should support vigorous policies aimed at returning the economy to full employment, since they would benefit significantly from this.

What struck me about this is something I found when I was preparing to teach my economic history class last year.  Income losses during the great depression were also much larger among the highest income groups than among lower income groups.  (I found this from data in the Historical Statistics of the United States; all income figures have been adjusted to 2005 dollars):

..................................Average Family Income In
.....................................1929                    1935
Lowest 40%
of Households.............$5,000.................$5,000

Middle Quintile..........$15,000...............$14,800

Next Higher
Quintile......................$20,500...............$21,000

Top 20%....................$59,500................$54,000

This all suggests that the income losses between 1929 and 1935 were very concentrated in the top 20% of the households--98%, actually, if these numbers are accurate.

What I wasn't aware of is that this would have come as a surprise to anyone...