Tuesday, August 21, 2007

It's Still the Economy, Stupid!

In the world according to the GOP, we are in a good economy and have been for the past six years of the Bush administration. Of course, the housing bubble just burst and the credit crunch is roiling the markets on Wall Street and making investors on Main Street nervous too. Even the Bushies have temporarily suspended the happy talk so they don’t appear completely out of touch with reality, as they frequently do on the topic of Iraq.

But the truth is the economy has been a worry to ordinary working Americans for a lot longer than the recent mortgage and housing bust. This report in the New York Times shows what everybody has known for a long time, that wages have been flat for years. Here’s what David Cay Johnston writes:

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.
It looks like that moisture you feel dropping on your head isn’t just much needed rain ending the recent drought. It’s actually the trickle down theory of economics pissing on your hopes and aspirations.

While ordinary Americans have been experiencing flat wage growth, reductions or outright loss of pensions, and loss of health care coverage, here’s how the upper class has been making out like bandits.
The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent to 303,817 in 2005, from 389,685 in 2000.

These individual who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
Those with incomes over $1 million received 62 percent of savings from tax reductions on long-term capital gains and dividends. Those tax reductions were signed into law by President Bush and a Republican Congress.

Predictably, Republicans are actually arguing that it’s not their elitist economic policies and failure to invest in tax cuts targeted to the middle class, which would have created real job growth, that have caused wage stagnation for ordinary Americans. They are actually still blaming it on the bursting of the Internet bubble back in 2000. Honest, here’s Tony Fratto, a White House spokesman who should be ashamed of himself:

Tony Fratto, a White House spokesman, attributed the drop in average incomes to “the significant wrenching hits that our economy took in 2001 and 2002, so no one should be surprised that what a bubble economy created in the late 1990s and 2000, where economic data were skewed, would take some time to recover.”
As I already said, Fratto, who once served as spokesman for the U.S Treasury should be ashamed of putting out such junk economics. But that would require some intellectual honesty, not to mention human decency. Let me see, this administration has been in office seven years now and they still think they can get mileage out of blaming the Clinton administration for flat wages?

Simple truth is that good jobs were more plentiful and wages actually grew under Clinton. Here’s the real record, taken from the White House under the Clinton administration, with sources such as the Bureau of Labor statistics, Council of Economic Advisors, and the Census Bureau. All sources sited in the quote:

Longest Economic Expansion in U.S. History. In February 2000, the United States entered the 107th consecutive month of economic expansion -- the longest economic expansion in history. [National Bureau of Economic Research and Council of Economic Advisors]

More Than 22 Million New Jobs. 22.2 million new jobs have been created since 1993, the most jobs ever created under a single Administration -- and more new jobs than Presidents Reagan and Bush created during their three terms. 92 percent (20 million) of the new jobs have been created in the private sector, the highest percentage in 50 years. Under President Clinton and Vice President Gore, the economy has added an average of 248,000 jobs per month, the highest under any President. This compares to 52,000 per month under President Bush and 167,000 per month under President Reagan. [Bureau of Labor Statistics]

Fastest and Longest Real Wage Growth in Over Three Decades. In the last 12 months, average hourly earnings have increased 3.8 percent -- faster than the rate of inflation. The United States has had five consecutive years of real wage growth -- the longest consecutive increase since the 1960s. Since 1993, real wages are up 6.5 percent, after declining 4.3 percent during the Reagan and Bush years. [National Economic Council, 6/00]

Household Income Breaks $40,000 for First Time in History. Income for median households rose $1,072, or 2.7 percent, from $39,744 in 1998 to $40,816, marking an unprecedented fifth year of significant growth in income. In 1999, the median income of African American households increased from $25,911 in 1998 to $27,910 -- an increase of $1,999, or 7.7 percent, which is the largest one-year increase ever recorded. The income of the median Hispanic household, adjusted for inflation, increased from $28,956 in 1998 to $30,735 in 1999 -- an increase of $1,779, or 6.1 percent, which is the largest one-year increase ever recorded. [Census Bureau, Money Income in the United States: 1999, 9/26/00]

Lowest Poverty Rate Since 1979. In 1999, the poverty rate dropped from 12.7 percent to 11.8 percent, the lowest rate in two decades. Since President Clinton and Vice President Gore passed their Economic Plan in 1993, the poverty rate has declined from 15.1 percent in 1993 to 11.8 percent in 1999 – the largest six-year drop in poverty in nearly 30 years (1964-1970). There are now 7 million fewer people in poverty than in 1993, and over 2.2 million, or over 30 percent, of this decline occurred during the past year. [Census Bureau, Poverty in the United States: 1999, 9/26/00

Kind of makes you long for the good old days, doesn’t it?

Of course, Fratto’s response begs another question: If we are still not recovered from a bubble that took place seven years ago – although the wealthy actually rallied from it admirably – what’s going to happen to working people now that we have a new burst bubble, this time in the mortgage and credit industry?

There will be the calls to tighten our belts as these people try to tell us, “we’re all in this downturn together.” Of course, we’re all in the same boat when it runs aground in economic bad times. But the rising tide sure didn’t lift all the boats when the rich were rolling in those good times.

But, I’ll let the NYT have the last word with this quote that sums it up best:

Robert S. McIntyre, the director of Citizens for Tax Justice, said that even though he expected a few very wealthy people to reap most of the tax savings generated by lower tax rates on dividends and capital gains, the size of the savings “still takes your breath away.”

He said the tax savings at the top, combined with lower average incomes after five years, “shows that trickle down doesn’t work.”


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