Contradictions Regarding U.S. Economy
Eliot Rosewater
Posts: 2,659
http://alternet.org/workplace/57180/
If This Is Such a Rich Country, Why Are We Getting Squeezed?
By Heather Boushey and Joshua Holland, AlterNet. Posted July 18, 2007.
While the rich are getting richer, they're slashing social security, medicare and other social programs for the rest of us. What gives?
The commercial media is telling us two perfectly contradictory stories about the American economy. The first is how wonderfully rich we are in the United States. The stock market's booming -- some analysts predict the Dow will break the 15,000 this year -- the economy is expanding at a healthy clip, productivity growth is up and unemployment and inflation are relatively low.
But, at the same time, we're also told that we don't have the money to pay for a robust social safety net. When it comes to paying for universal health coverage, affording retirement security for our elderly, investing in programs for the poor or educating our children, we need to pinch pennies. According to this storyline, we face a looming "entitlement crisis" -- we won't be able to afford to keep the Baby Boomers in good health and out of poverty, we're told, unless we slash their benefits and privatize the programs that their elderly parents enjoy today.
This is the line we hear from the Administration when it talks about entitlement "reform": Treasury Secretary Henry Paulson says that "The biggest economic issue facing our country is the growth in spending on the major entitlement programs: Medicare, Medicaid, and Social Security." The solution, according to the Heritage Foundation, is to cut entitlement spending: "Reforming Social Security, Medicare, and Medicaid is the only way to get the budget under control."
How can two narratives that are so clearly at odds with each other be so pervasive? Are we seriously supposed to believe that Paris Hilton has to dig between the cushions of her sofa to buy a can of tuna?
What reconciles these two themes is absent from our mainstream economic discourse: we "can't afford" all sorts of programs that are clearly in the common good because most of the benefits of our growing economy have gone to a very small group of Americans, who have, in turn, seen their taxes slashed again and again in the past six years. It's a story that isn't told as often as it should in the commercial press because it's a supposedly "liberal" narrative -- never mind that über-conservative former Fed Chairman Alan Greenspan told Congress that there is a "really serious problem here, as I've mentioned many times … in the consequent concentration of income that is rising."
Saying that the majority of the country's economic gains in recent years have gone to the top one percent of the income ladder understates the trend. You have to cut the pie into even smaller slices to get the full picture. Because while the bottom half of the top one percent of the income distribution have done far better than the average wage slaves, it is a smaller slice still -- the top .01 percent -- that has grabbed most of the gains--seeing an impressive 250 percent increase in income between 1973 and 2005 -- from an economy that's grown by 160 percent.
An analysis by economists Thomas Piketty and Emmanuel Saez gives us the best perspective of what's going on for everyone else. They found that despite several periods of healthy growth between 1973 and 2005, the average income of all but the top ten percent of the income ladder -- nine out of ten American families - fell by 11 percent when adjusted for inflation. For three decades, economic growth in the United States has gone first and foremost to building today's modern Gilded Age. The recipients of those gains don't care about a fully funded Social Security system or a healthy Medicare program -- they don't need them.
Meanwhile, even as the top earners' incomes have gone through the roof, their tax burden has shriveled. At the same time, the share of federal revenues contributed by corporations has declined -- by two-thirds since 1962.
It's important to understand how that plays out in our national economic discourse. When people tell us that our economy cannot "afford" things like universal health care or paid sick days, it fits with the economic experience that most Americans have had in their real lives -- the benefits of our boom-boom economy have not gone to the great masses, but to "someplace else."
Americans feel pinched. Polls show that they feel a time crunch--not having enough time for family and friends--and that they're anxious about getting into or staying in the middle class. Over the past generation, the economy has not been good to the typical, married-couple family (let along single-parent families) and families feel, rightly, that they need to be careful about where their dollars go.
It's not that they're not working hard. The typical U.S. family puts in more time at work than ever before. The typical married couple works an additional 13.3 weeks per year--533 hours--compared to a generation ago. But even though families are working more, their incomes have grown by only a third between 1973 and the present. That's much worse than the generation before -- between 1947 and 1973, the typical married-couple family saw their income rise by 115 percent. And that was often just one parent's income -- this was a period when most families could afford a stay-at-home mother. Of course, fewer families have that luxury today -- those with stay-at-home moms have the same inflation-adjusted median income in 2007 as they did in 1973 -- they haven't gained a penny from three decades of growth.
When we talk about the slow growth of family income, economists like to mention globalization, mechanization, or other factors that require us to be lean and mean and more "competitive." The storyline is that U.S. families have not seen their income grow because America has had to fight it out in a wide-open global economy, and these are lean times for workers.
But that's simply not true.
The economy--as measured by gross domestic product (GDP)--has grown by over 160 percent since 1973 (PDF). This is only slightly less than the period from 1947 to 1973 when GDP grew by 176 percent. That's come as Americans have become much more productive -- productivity has grown by over 80 percent since 1973 -- meaning it now takes fewer workers to produce the same number of widgets as it did in the past.
As each worker in the U.S. economy produces more "stuff" per hour, be that DVD players or clients served, those goods and services are being sold in greater numbers. In a healthy economy, that growth is shared between workers and investors and wage growth should rise with productivity. This was the case in the decades between World War II and the early 1970s, when productivity and median wages both increased by an average of two to three percent every year. But since 1973, productivity increased sharply, especially after the late 1990s, but median wage growth has been flat. So firms are getting much more output per worker, but they're not paying for it. They've pocketed the difference in executive compensation and corporate profits. The share of national income going to wages is at the lowest level ever recorded, while the piece of the pie gobbled up by corporate profits is at its highest point since 1960.
But when the masses ask for help paying for health insurance or child care, or request that everyone be given the right to paid sick days, we're told we cannot afford it. "Afford" seems to be a very special term in the current American context: letting the wealthy take ever-bigger pieces of our national product is something we always seem able to afford.
We work hard. We--the 99.9 percent-- and deserve a bigger piece of the pie. With a growing economy, we can afford it and we all know just where to look for how to pay for it.
If This Is Such a Rich Country, Why Are We Getting Squeezed?
By Heather Boushey and Joshua Holland, AlterNet. Posted July 18, 2007.
While the rich are getting richer, they're slashing social security, medicare and other social programs for the rest of us. What gives?
The commercial media is telling us two perfectly contradictory stories about the American economy. The first is how wonderfully rich we are in the United States. The stock market's booming -- some analysts predict the Dow will break the 15,000 this year -- the economy is expanding at a healthy clip, productivity growth is up and unemployment and inflation are relatively low.
But, at the same time, we're also told that we don't have the money to pay for a robust social safety net. When it comes to paying for universal health coverage, affording retirement security for our elderly, investing in programs for the poor or educating our children, we need to pinch pennies. According to this storyline, we face a looming "entitlement crisis" -- we won't be able to afford to keep the Baby Boomers in good health and out of poverty, we're told, unless we slash their benefits and privatize the programs that their elderly parents enjoy today.
This is the line we hear from the Administration when it talks about entitlement "reform": Treasury Secretary Henry Paulson says that "The biggest economic issue facing our country is the growth in spending on the major entitlement programs: Medicare, Medicaid, and Social Security." The solution, according to the Heritage Foundation, is to cut entitlement spending: "Reforming Social Security, Medicare, and Medicaid is the only way to get the budget under control."
How can two narratives that are so clearly at odds with each other be so pervasive? Are we seriously supposed to believe that Paris Hilton has to dig between the cushions of her sofa to buy a can of tuna?
What reconciles these two themes is absent from our mainstream economic discourse: we "can't afford" all sorts of programs that are clearly in the common good because most of the benefits of our growing economy have gone to a very small group of Americans, who have, in turn, seen their taxes slashed again and again in the past six years. It's a story that isn't told as often as it should in the commercial press because it's a supposedly "liberal" narrative -- never mind that über-conservative former Fed Chairman Alan Greenspan told Congress that there is a "really serious problem here, as I've mentioned many times … in the consequent concentration of income that is rising."
Saying that the majority of the country's economic gains in recent years have gone to the top one percent of the income ladder understates the trend. You have to cut the pie into even smaller slices to get the full picture. Because while the bottom half of the top one percent of the income distribution have done far better than the average wage slaves, it is a smaller slice still -- the top .01 percent -- that has grabbed most of the gains--seeing an impressive 250 percent increase in income between 1973 and 2005 -- from an economy that's grown by 160 percent.
An analysis by economists Thomas Piketty and Emmanuel Saez gives us the best perspective of what's going on for everyone else. They found that despite several periods of healthy growth between 1973 and 2005, the average income of all but the top ten percent of the income ladder -- nine out of ten American families - fell by 11 percent when adjusted for inflation. For three decades, economic growth in the United States has gone first and foremost to building today's modern Gilded Age. The recipients of those gains don't care about a fully funded Social Security system or a healthy Medicare program -- they don't need them.
Meanwhile, even as the top earners' incomes have gone through the roof, their tax burden has shriveled. At the same time, the share of federal revenues contributed by corporations has declined -- by two-thirds since 1962.
It's important to understand how that plays out in our national economic discourse. When people tell us that our economy cannot "afford" things like universal health care or paid sick days, it fits with the economic experience that most Americans have had in their real lives -- the benefits of our boom-boom economy have not gone to the great masses, but to "someplace else."
Americans feel pinched. Polls show that they feel a time crunch--not having enough time for family and friends--and that they're anxious about getting into or staying in the middle class. Over the past generation, the economy has not been good to the typical, married-couple family (let along single-parent families) and families feel, rightly, that they need to be careful about where their dollars go.
It's not that they're not working hard. The typical U.S. family puts in more time at work than ever before. The typical married couple works an additional 13.3 weeks per year--533 hours--compared to a generation ago. But even though families are working more, their incomes have grown by only a third between 1973 and the present. That's much worse than the generation before -- between 1947 and 1973, the typical married-couple family saw their income rise by 115 percent. And that was often just one parent's income -- this was a period when most families could afford a stay-at-home mother. Of course, fewer families have that luxury today -- those with stay-at-home moms have the same inflation-adjusted median income in 2007 as they did in 1973 -- they haven't gained a penny from three decades of growth.
When we talk about the slow growth of family income, economists like to mention globalization, mechanization, or other factors that require us to be lean and mean and more "competitive." The storyline is that U.S. families have not seen their income grow because America has had to fight it out in a wide-open global economy, and these are lean times for workers.
But that's simply not true.
The economy--as measured by gross domestic product (GDP)--has grown by over 160 percent since 1973 (PDF). This is only slightly less than the period from 1947 to 1973 when GDP grew by 176 percent. That's come as Americans have become much more productive -- productivity has grown by over 80 percent since 1973 -- meaning it now takes fewer workers to produce the same number of widgets as it did in the past.
As each worker in the U.S. economy produces more "stuff" per hour, be that DVD players or clients served, those goods and services are being sold in greater numbers. In a healthy economy, that growth is shared between workers and investors and wage growth should rise with productivity. This was the case in the decades between World War II and the early 1970s, when productivity and median wages both increased by an average of two to three percent every year. But since 1973, productivity increased sharply, especially after the late 1990s, but median wage growth has been flat. So firms are getting much more output per worker, but they're not paying for it. They've pocketed the difference in executive compensation and corporate profits. The share of national income going to wages is at the lowest level ever recorded, while the piece of the pie gobbled up by corporate profits is at its highest point since 1960.
But when the masses ask for help paying for health insurance or child care, or request that everyone be given the right to paid sick days, we're told we cannot afford it. "Afford" seems to be a very special term in the current American context: letting the wealthy take ever-bigger pieces of our national product is something we always seem able to afford.
We work hard. We--the 99.9 percent-- and deserve a bigger piece of the pie. With a growing economy, we can afford it and we all know just where to look for how to pay for it.
Post edited by Unknown User on
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Comments
Are you sure we can afford it? Or does the writer just assume the few can afford it for all?
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
Remember, INFLATION isn't just randomly rising prices ... it is prices rising due to an INCREASE IN CIRCULATING MONEY ... because the Federal Reserve ... which is NOT federal and HAS NO RESERVES is printing up baseless, unbacked, money and issuing more and more in to circulation every year.
! ! !
(sorry i'm on a REAL Anti- Federal Reserve kick lately)
IT IS THE SOVERING CONSTITUTIONAL RIGHT AND DUTY OF OUR GOVERNMENT TO PRINT INTERST FREE GOLD OR SILVER BACKED CURRENCY. actually it should be MINTING COIN if you follow the LETTER OF THE CONSTITUTION!
If I opened it now would you not understand?
legally; we're buying goods from china and japan and enriching them. you work; then send your money overseas instead of reinvesting it in the economy. before travel became an easy part of life; americans bought american goods and we became the richest nation. we had the money to pull europes arse out of the fire twice in the last century. and we still thrived.
illegally; money is pouring out of the country in the drug and illegal gun trade.
say a colombian processes a kilo of cocaine. it cost him maybe 5 cents to do it. he sneaks it into the country and can sell it (in pieces) for $98,560.00. that's $100/gram. the going street price. BUT, he will cut it and add about 28 grams per kilo which is another $2800.00. that money goes back to colombia.
one of my best friends is mexican. we call eachother hermano. he has a wife and 3 kids here and a wife and kids in mexico. he sends half of his earnings back to mexico to support his farm outside of acapoco (sp?). his 2 brothers; and their families live in the same house. each works a different shift and the bedroom is divided into shifts. 8 hour shifts. i can't see this working but they've been doing it since 1988. a neighbor turned them in because it was a single family dwelling so they moved and continued on.
these are a few examples of where american money is going but you get the point.
I want a better income distribution system not because people deserve it, deserve it means they've done something to earn it. Most haven't. I want a better income distribution system because I think it will make our society a better place to live, purely selfish reasoning.
I wonder if you critically assessed what was written and took time to think about what it really means.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
1) because i'm smart enough to get it.
2) from your taxes.
beginning sept 12; the government will start sending me over $1800.00/month and i now have medicare. look back at the micheal moore thread to see how. btw; i'm 51.
Who said aristocracy was gone?
I feel (in my own and personal opinion) that the vast majority of workers are getting less than they deserve. When your economy is blooming, and such a small amount is distributed to the mass workers (who actually produce something), it's fair to say that some people are getting more than is decently acceptable while the majortity can kill themselves to work.
I'm going to keep doing what I'm doing - which isn't making me rich - and I should be able to retire with or without Social Security in 30 years. I'd love the government to privatize part of it or just give me money that I can invest on my own.
Personally, I think if Americans actually knew how to save money, not live on credit cards, and live on a budget, everyone would have a little less to worry about. But that's beside the point I guess.
I heard yesterday that only 3% of the people in the US who work full time over the course of a few years stay in the poverty category. Interesting stat, though I don't know where it comes from.
So if I - as a public school teacher - continue to work hard, save money, invest well, and leave a large portion to my kids - will that money not have been "earned"?
yeah, your right, fuck homeless children... the dude from exxon needs a few more million, just in case :rolleyes:
Too many workers act like spolied rich kids. Kids who think that because their parents are working harder or making prudent investments that they should be pampered and spoiled just because of who they are. F-that. You work for your money, you make educated and prudent investments with your money, you continually invest in yourself through education or pooring money back into your own small business.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
once again you're spot on dude. when i buy a new CNC lathe; i pay at minimun; $500K. a farmer could pay $1.5 million for a combine to harvest his crops. but i've got a story that may put the CEO debate to rest.
a nuclear power plant was on the verge of meltdown. a large city was down wind and evacuating the city was not an option at that point. the NRC called the top nuclear scientist in. he walked up to the control panel; hit a button; and the meltdown was averted. 2 weeks later the power plant received a bill for $100,000. they called the scientist and complained. how can you charge us $100K when you spent less than 10 minutes in our plant? the scientist agreed to send another bill and 2 weeks later the second bill arrived.
$1.00 for pushing the button
$99999.00 for knowing which button to press.
companies where CEOs earn outragous salaries also employ thousands of people. they trade on the stock market and reinvest profits to hire more people. not one person on this board can walk into a company and replace one of those CEOs. they've worked years to learn the business and are doing what they're paid to do; and that's to know what button to push. in the story above; the scientists knowledge saved millions of people and thousands of acres of land that would've been a nuclear wasteland for the next 500 years.
so as you piss and moan about how much someone else is making; remember that CEO is making you money by hiring you and also in the stock market when you invest there.
Whatever you leave to your kids will have no more been earned by them than was the millions that Paris Hilton has just for being Paris Hilton. If it is true that most wealth in the country is inherited as opposed to earned (I don't know that I buy that), I assure you it is not because of people with jobs like yours. Your kids will have to earn most of their wealth, unless you have a spouse bringing in huge bucks or or making a lot of money in some other way.
As for the thread...
If CEOs are making 450 times what their employees are (that came up in another thread) and were only making 200 times their employees in 1982 (I totally made this up, but none of us deny the gap is growing), does that mean they have found a way to more than double the "working hard" gap in that period of time. I don't think that anyone really thinks there is a 1:1 relationship between "hard/smart work" and income/wealth.
Government intervenes where the market fails (i.e the market would not provide for a military, roads, or schools for low income kids). So the question is whether or not the growing income gap, the fact (and this is pretty tough to deny) that fewer and fewer people are benefiting from the over all growing economy constitutes a maket failure, or, more particularly, a market failure that needs to be addressed.
I am going to be ripped by a certain third or so of the board, but I will say yes. One of the great things about the United States is the ability to get rich. However, with perhaps a few exceptions, you are going to get there on the backs of a lot of the people who are not rich (who we percieve as lazy). You can't make millions selling cars without lazy people to put them together. You can't make millions running a news channel without lazy people to shoot the film. You get rich on the backs, and with the help, of others that in some cases can barely feed their kids.
Do we want taxes to pay for the military, schools, roads, the coining of money? Yes (for most of us, anyway). We tend to agree that these are essential services that the market does not provide well. I happen to think the market misses the boat on health care, retirement for blue collar people and other things. It's almost like insurance (though, I realize, taxes are not voluntary). I also think that things could be paid for without raising taxes and without even addressing quagmires overseas--just by cutting much the current government inefficiancy. But I guess those are two different topics.
Flame on--I won't be here to watch it (I did not inherit money and am not hard working enough to take a longer break from work)
Yes and no.
(Yes), most people have the tools to do so (though any implication that we all have an equal opportunity is almost comical). So you can say to any one person "the only thing stopping you from being one of those people is YOU." And that is not entirely untrue.
(No) However, if everyone wakes up tomorrow and says "I'm gonna be the hard workingest motherfucker out there" and proceeds to take the steps to become rich, the market will still shift some of them to the position of diswasher, factory worker, unemployed, part timer trying to become full time, etc. And we would still be blaming these people and calling them stupid and lazy. The good thing would be that perhaps some people that are getting to comfortable would get a wake up call from some hungry competition.
Well, my point is that even as public school teacher, with sound investing and a Roth IRA, I should be able to retire as a millionaire. (barring a market collapse) And if I leave $250,000 to my kids (or whatever the amount) and they invest that wisely, my family could very easily be wealthy in a few generations through compound interest. I
It's not impossible, and I would say that inherited money was earned. The "Paris Hilton" question is not if it's earned, I'd say if it's deserved. I think a lot of people who may complain about her being rich think, basically, because they dont' think she or others deserve it. They don't think it's fair and that attitude doesn't seem to do much good for me. I don't care about uber rich people. I don't care if they make 1000 times more than me.
Now, granted many people are not born with a same amount of chance to succeed statistically. But that doesn't mean it's the faulf of an evil CEO. Statisically, a broken family is by far more important than almost anything else in determining if a child will get a "fair" shake. So what do we do about that? What can the state do?
I think more market-friendly candidates on either side should get together with their rich business partners and come up with a massive plan to spread financial education in communities that really need it. Those kind of things can truly spread wealth. People need to be empowered to not fall into the trap of spending more money than they have, which is a truly American trademark. I know, I know, "how can you invest when you can barely pay the bills?" That, to me, is not the problem. If people truly knew how to manage money, not fall victim to compound interest and make it work FOR you over time, they could make huge strides over shorter periods of time.
Sure the rich are getting richer.
The poor are getting richer too.
It's all semantics.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
I've been in the workforce about 10 years. My income has ranged from pretty low to above average.
I've invested the maximum into 401Ks since day 1 and honestly could stop investing in it already and still have a million at retirement due to compound interest.
It's not difficult to be a millionaire. It just takes a bit of self-control.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
Everyone can invest in a Roth and an IRA, though. It's essentially the same thing without the matching. My companies have never matched that much anyway.
You're fixating on the details and not the main point that there is plenty of opportunity out there for people willing to forego debt and interest payments and just do a bit of regular investing.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
i agree with you. all you need is a start. i worked 2 to 3 jobs for 20 years to get ahead. i really didn't HAVE to work but i did. my grandfather made a killing making illegal wiskey during prohibition. when walgreens was about to go public on the stock market; he bought thousands of shares.
some people take pride in doing something themselves. you don't see that much anymore. people would rather complain. boo hoo; i can't succeed because i'm black. yet hospitals are full of black doctors; courtrooms full of black lawyers; and yes; a black man running for president. so it seems a black man can be successful if he puts his mind to it.
you'll never get rich by working alone. working is a poor mans game. you either need to find people to do the work and pay them a percentage of what you collect for the work; or you need to have your money work for you. now and then people will get lucky; but that's not very often.
I don't think so. My Roth basically cost $35 to open and then you pay the load (about 5%) out of what you are investing. That wouldn't seem to favor the rich very much.
The cool thing with the Roth is that you can pull out the money you put into it when/if you need it. It's the growth that would get penalized if withdrawn. Put it in growth stock mutual funds with long track records and pull in about 12% interest per year. The money doubles in under 7 years without even adding to it.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
All I am saying is that your kids did not earn that $250,000 any more than your kids' friends "earned" their finanically inept parents who are going to leave them nothing but a funeral bill. I don't begrudge your kids that. Hell, my parents paid for my entire college tuition.
I seriously couldn't come within $10K of guessing how much I make. Not that I make a lot but that I don't care. I make enought for the lifestyle I want, which is far from extravagant. I don't have cable, I drive a very basic car that friends tell me is beneath me, I try to stay in hostels or camp while travelling. I know I could make a lot more than I do but am not willing to make the sacrifice to my life outside of work to do so. I make enough to be happy. I live within my means. I save for retirement. I laugh lots. At that point I don't care what the CEO makes. My esteem is not found in comparing income or consumption patterns with anyone else.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
If they are getting "richer" at a slower rate, the are most likely getting poorer. Yes their nominal earnings are going up, but if they are going up slower than all other classes, they are losing money relatively.
Is their Standare of living going up?
While I am not an economist, I would guess that their "slower speed of getting richer" indicates that they are going up slower than inflation. If so, then they are really getting poorer.
i really like your posts dude. you've got a grip about what is really going on.
i'd like to ask the others something.
who do you think would be happier:
bill gates in the final stages of cancer; or someone making enough to enjoy their life and in perfect health?
I taught my son at age 5 about spending decisions. He wanted cable at about $50/month. I showed him how much that equaled a year. I then showed him how little a week in Disneyland goes for. Even at age 5 he choose a life changing travel experience once a year over sitting on his ass watching tv.
All this said I think all governments should do more to help those unable to help themselves and possibly a little less for those who can help themselves. Open ended help for those able to help themselves is crazy. For the able bodied help should be time limited.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley