(0 comments)The typical American household made less money last year than the typical household made a full decade ago.To me, that’s the big news from the Census Bureau’s annual report on income, poverty and health insurance, which was released this morning. Median household fell to $50,303 last year, from $52,163 in 2007. In 1998, median income was $51,295. All these numbers are adjusted for inflation.
***
What’s going on here? It’s a combination of two trends. One, economic growth in the current decade has been slower than in any decade since before World War II. Two, inequality has risen sharply, so much of the bounty from our growth has gone to a relatively small slice of the population.
P.S. Bear with me this week — I’m out of town closing a deal. I miss you!
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Fast Food
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DOWN THE VINE
Syndication
What a load of crock and lying with statistics. Read the update linked at the bottom of the post: total compensation has RISEN in these same real (inflation-adjusted) terms. Not as fast as we'd like it to have, but then these haven't been the best of times, and its far from clear that the blame for that lies with "conservanomics" (whatever we're taking that to mean).
Additionally, disregarding increased healthcare spending as a "waste" is nonsensical, given all the other things that could be considered a "waste", as readers helpfully explain in some of the top comments.
And finally, pinning this sort of macroeconomic trend on Bush is giving the man a ludicrous amount of blame/credit. Perspective, please.
For better or for worse, the person at the helm gets too much blame
and too much credit during their term in office. So its a wash. Bush
enacted a swath of dramatic conservative policies over the last
decade, including an insane tax cut for the first time during a time
of war that skewed income inequality even further up the ladder. So,
Bush had a huge effect on the economy and most of it was horrible. I'm
on blackberry now but the deeper data from the census bureau on the
financial stability of the average american family over the last
decade is truly shocking
Corporate compensation may have risen, but the average person has to have both husband and wife working just to afford a house. This is one of the major reasons that the middle class is shrinking. It does very little good if the corporate robber barons (you know the CEOs) are making about 270 times the worker wadge while the worker is losing ground.
Yeah, the middle class is shrinking--more people are advancing to the upper class. Horror of horrors. INEQUALITY, EEK EEK EEK!
People are not losing ground, they are ever better off measuring across the business cycle. And the boneheaded idea that anyone could afford a house is what got us in this shitstorm to begin with.
Sigh, but the innumerate left is discouraging. Blogs like Economix that should know better are even more so. But, like Fox News, it's what gets readership. There's a cottage industry around coming up with novel ways to argue economies do better under Democratic presidents than Republican ones. It's bunk.
The only thing that I can agree with you about is on Bush. It took a Republican controlled congress to do this damage, lead by Bush but started by the Republican controlled congress before his election.
Well, that's a pretty shrieky dismissal of viewpoints you don't agree with.
Looking at income rather than total compensation was completely misleading. I can handle different viewpoints, but you have to look at economically relevant facts.
Some props to Economix for adding the update to address reader concerns (though that update has its own flaws). But this is not what you quoted. Instead you choose to leap from reduced income to omg Bush destroyed the economy, which is so bogus as to be worthy of a shrieky dismissal.
More to the point, I don't hold the ideal of shared prosperity in as low esteem
as you do. Income inequality is a serious concern, at least as far as
I'm concerned.
Whatever flaws you saw in the post, I just gave it a quick read and posted an excerpt. Not much time to fact check everything. Anyway, I assume you'll do that for me ;-P
As for "Bush destroyed the economy" — yeah, he kinda did (see, e.g., horribly irresponsible tax cuts during a time of war and lax regulation of the financial sector)
Sure he did horrid things, but those things have nothing to do with income/compensation levels and to introduce them in the context of what we've been talking about is a red hering.
Furthermore, the funny thing is that the actual harm from Bush Republicansim isn't being felt yet. At all. Treasury rates are low due to the recession. Once those rates go up to normal levels, debt becomes a burden.
In the medium term, post-recession, recovering from Bush's tax-cuts-in-a-time-of (irresponsible) war combined with fixing the structural problems with Medicare and Social Security to restoring fiscal soundness is going to require some combination of spending cuts (economically good, politically very painful) as well as tax raises (economically painful and somewhat difficult politically).
The idea that lax regulation of the financial sector was a significant contributor to the housing bubble is nonsensical. There was a confluence of factors, but most notable and regrettable are all the bad regulations designed to increase homeownership. Such things were enacted because they were politically popular, but are economically unsound. Phasing out Fannie & Freddie and removing the mortgage tax exemption would do a lot more good than a Matt Taibbi-esque crusade for stricter financial regulation.
"the actual harm from Bush Republicansim isn't being felt yet"
You're kidding me, right? From that statement, someone might conclude that you don't ascribe blame to "Bush Republicanism" for the worst recession since the Great Depression we're going through right now. Or is it that we aren't "feeling" the recession yet?
Correct, Bush Republicanism is not to blame for the recession, at least not more so than anyone else…notably Democrats, who are at least equally to blame for unduly subsidizing homeownership and fomenting the housing bubble.
Also, the language "worst since the Great Depression" is pretty damn misleading
oh jeez, well this conversation is over for the time being if you don't even assign a large part of blame for the current recession on bush Republicanism. not much to go from there
What do you mean "large part" ? It's pretty much been a bipartisan endeavor. Bush Republicanism is not uniquely to blame, nor are Democrats uniquely to blame. People who think it's a good idea for the government to mess with housing markets are to blame, and these people exist everywhere.
And yes, I will keep beating my horse: political popularity rarely equates to economic soundness. We're learning that the hard way--or at least those of us who are listening and thinking about this are learning.
Others--the Matt Taibbis of the world--are more interested in pretending that Bush and lax regulation caused all our problems, when in fact they are not uniquely to blame for any of the shit that's been happening over the last year. Dealing with "the destruction Bush wrought" is something you can look forward to over the next few years, not right now. Hopefully doing so will go hand in hand with dealing with what Democrats wrought--i.e. the structural problems of Medicare and (to a lesser extent) Social Security.
gotta run for the evening, ttyl
thanks for the interchange. ttyl
P.S. Mankiw is only quibbling about employment numbers in connection with the recession. In terms of the actual drop in economic activity (i.e., what really defines a recession), this is the worst recession since the great depression.
The comparison of -3.9% from 2008-09 to the -26.7% of 1929-33 is why I linked to his post. One value is 1/7th the size of the other, and saying "worst since the Great Depression", while true, is damn misleading.
back to work
"recovering from Bush's tax-cuts-in-a-time-of (irresponsible) war and restoring fiscal soundness is going to require some combination of spending cuts (economically good, politically very painful) as well as tax raises (economically painful and somewhat difficult politically)."
Agreed. Including the highlighted bit. Reversing the Bush tax cuts (passed through reconciliation) on top earners (which created an enormous hole in revenues while we're fighting two wars) would be a great start
It may be the only politically feasible way, but that does not make it the best way to raise the needed revenue. However explaining why I support flatter taxes would take too much time/space to be worth it here.
"to introduce them in the context of what we've been talking about is a red thing"
awesome. what is this red thing you speak of? :)
meant herring
i like thing better :-P
I would really like to see the stats on you opinion that more people are moving up from the middle class and into the rich. From what I have seen more people are moving down from the middle class to the poor class. And the idea that you could own a house is not what caused the mess we are in, but the lowering of standards by the leaning corporations so that they could make more money on the commissions
Instead of sarcasm how about some figures. If you really want to exchange abuse maybe you can deal with the deadheads at AOL. I come here to exchange ideas.
Offhand, here's data from 1980 to 2006. That's Reaganism for you.
(I wish it looked at total compensation rather than income, but such figures are harder to get so far back due to the stupidity of employer-based healthcare--which of course is a legacy of government price controls in the 40s.)
Corporations were encouraged to lower their standards by the backing of Fannie & Freddie, regulations forcing them to lend to poor communities at below-market rates (passed by Democrats), GWB's misguided "ownership society", and the government's hatred of renters through the tax code.
The left's notion that most corporations arbitrarily decided to lower their lending standards out of sheer greed, irresponsibility, and lax regulation is patently silly. There was some of that (see: Washington Mutual), but it's far from being one of the principal contributing factors to the housing bubble and financial crisis. Those who took on more risk were in more trouble sooner than those who behaved better, but the housing bubble shitstorm was in no way originated by such behavior. It was merely a byproduct, one you'll find in any bubble throughout economic history.
That might explain the housing failure, along with run a way building, and inter linking mortgage bundles, and we will still disagree about the causes of a very complicated system. But it does not address the other statement about how the middle class is moving up to the rich and not down. From what I have seen it is the case of a few rich getting even richer.
Anyway, I will be back in a couple of days, I have to beat my head against intermediate algebra, something that I have not played since 1966!
See the link at the top of my comment, which addresses your statement.
To summarize, the number of people making 75K (in 2006 dollars) has risen by 11.5%, while the number of people making less has gone down by between 6.1% and 5.4%.
So the the middle class and lower class have shrunk.
The number of people in the upper class--including what you might call "upper middle", has gone up.
If this is what you mean by the rich getting richer, it looks great to me.
But no, you're really just concerned about people at the very top making seemingly-obscene amounts of money, with no regard for how that is an expected and desirable result of a successful capitalist economy. To the extent that you wish to redistribute that new wealth downward by government fiat, you are an anti-capitalist whose desired policies will slow growth and make us all worse off in the long run.
Oh the power of language and code words. Any progressive tax system(like in nearly all western countrier) is by definitionredistributivist. People making more get taxed more and the revenue isused to provide services to all. Conservatives whinging on aboutredistribution when the current plan is to reset tax rates on thosemaking over 250k to the rates they were under Clinton (which were farhigher than those under bush senior or reagan) is just uselesssloganeering
Eh, I support a flat tax. The extent to which a tax is progressive or regressive is the extent to which it is anti-capitalist, and (I would argue) bad for democratic decision-making and an affront to property rights we should be respecting (if we want strong economy). If my saying so is full of sloganeering and code words, whatever. But as I mentioned making the case for this is complicated and I don't think it would be a good use of time/space to talk about it here.
I can try to collect my thoughts in a post if you like; so far I haven't bothered to do much other than affirm my support for a flat tax because I'm under no illusions about its political viability.
I've never bothered to pay much attention to the idea of a flat tax because the chances of such a thing ever becoming law in this country are lower than the probability that Sarah Palin will ever write a treatise on quantum mechanics.
At least with a flat tax you could easily see what you pay and could figure out your return by yourself, putting a lot of tax preparers and advisers out of business.