Republicans scratch their heads and can’t figure out why the average American is so sour on the economy. Growth’s been solid, they point out. Corporations are profitable. Inflation is still relatively low. There are lots of indicators that point to a solid, healthy economy. So other than blaming a mythical liberal media, they can’t understand why all the uncertainty about the economy, which is also translating into anger at Congress before a mid term election.
Now Paul Krugman, in his Friday New York Times column has the numbers that show what most real Americans on Main Street have long sensed. The growth of the economy has been good and has solidly benefited the already wealthy. But it has left behind the average middle class American who works very hard for a living.
Krugman examined the economic indicators for 2004, which, as he explains, are the latest numbers available for an economist to get a complete picture of what went on. He extrapolates from the 2004 model that today’s economic picture wouldn’t be too different. Well, if a picture is worth a thousand words, here’s what the 2004 picture showed Krugman.
In 2004, the economy grew by 4.2%. That’s a healthy surge. The problem is that this economic growth largely benefited the elite. If you exclude capital gains from a rising stock market (which would have put the income figure even higher), the richest 1% experienced a 12.5% growth of their income.
Meanwhile, average income for the bottom 99% only rose 1.5%. But it wasn’t only the poor, the working class and the lower middle class who lost ground. The 95 percentile of people richer than 19 out of 20 Americans gained only modestly.
Last August, the Census Bureau reported that real median family income fell. Poverty increased and the number of Americans without health insurance also went up.
And Krugman also points out that education did not necessarily shield Americans from losing economic ground. Despite the insistence of economists (who he claims should know better) and some politicians who also should be wiser, Americans can’t educate themselves out of the inequality gap. Krugman cites Thomas Picketty and Emanuel Saez, whose long term estimates he terms “the gold standard for research on this topic.” According to Picketty and Saez, the biggest increases went to those already in the economic stratosphere with higher education being no guarantee of greater earning power. In fact, the real earnings of the typical college graduate actually fell in 2004.
Krugman was just talking about wages. But most educated Americans have experienced other indicators that their economic well-being has been eroding. While wages are down, Americans are working more hours now than they have since the forties and they’re taking less home in real dollars relative to prices.
But other tangible benefits also have been lost. More Americans’ pensions are in trouble. There has also been an erosion of health benefits. And while inflation looks modest on paper, the price of food, gas, fuel for home heating and air conditioning have all gone sky high.
Most of us don’t buy the large ticket items every day. But everybody buys groceries and fills up his car weekly. We all experience sticker shock every time we get utility bill for electricity to heat or cool our homes.
Americans just aren’t keeping up. And add the insecurity of layoffs and outsourcing woes and it’s no wonder the average American is in a sour mood and is looking for some new answers. When asked, the majority of Americans say we are headed in the wrong direction. And what scares the Republicans is that the voter may indeed vent his anger at the polls come election day and vote to take the country in a new direction without them at the helm.
The problem is most of the people – Republicans and otherwise – who can’t figure out why America is in such a sour mood are part of the problem. They are the ones in that upper 1%. They are corporate executives, large investors, rich politicians, prosperous newspaper publishers, and generally wealthy people who are responsible for writing the rules to benefit themselves at everybody else’s expense. For them, life’s been good.