Prosperity in George Bush's Economy

By Joshua Holland, AlterNet. Posted January 6, 2006.

The economy the cable news networks gush about is going gangbusters. We're hearing about 10 straight quarters of strong growth in gross domestic product, and jobs being created at a clip of over 2 million per year. Unemployment is down, and more Americans own their homes than ever before. And don't forget, Americans' net worth is at an all-time high! And all this prosperity, the corporate media will tell you, is thanks to five years of President George Bush.

But that's an economic picture you won't find hanging on the wall in any normal American house. Most of us know that we're not doing as well today as we were a few years ago. According to a recent Gallup Poll, almost two-thirds of those asked said the economy was "fair" or "poor," and almost six in 10 thought it was getting worse.

That disconnect has left many commentators -- especially on the right -- either scratching their heads with befuddlement or raging apoplectically at the bias of the "liberal media."

National Review author Victor Davis Hanson scolded those who read the New York Times for living "in an alternate universe where everything is supposedly going to hell." In "the real adult world," Hanson wrote, "the economy is red-hot, not mired in joblessness or relegating millions to poverty." But in fact, there are 5 million more Americans living in poverty today than there were four years ago.

Gerard Baker, the U.S. editor for Rupert Murdoch's Times of London wrote, "when it comes to economics, all but America's most fervent critics can still only marvel."

"Everything in the American garden is lovely," Baker continued, "So why the long face, buddy?"

I'll tell you why the long face: The economy most of us experience from day to day has been nothing short of painful over the past five years.

Consider these numbers from the Economic Policy Institute -- a left-leaning think-tank (this essay leans heavily on EPI's excellent research):

• Salaries are still below where they were at the start of the recovery in November 2001. That, while productivity -- the growth of the economic pie -- is up by almost 15 percent. Meaning we're working harder, producing more, for the same money as five years ago.
• Since the recession ended in 2001, 50 percent more of the growth in corporate income was sucked up as profits than after past recessions. That's left less for those of us who work for a living.
• As a result, median household income has now fallen for five years in a row. It was 4 percent, or $2,000, lower in 2004 than it was in 1999.

That last figure means that Joe and Jane Average American -- the household smack in the middle of the booming go-go American economy -- have gotten a pay cut for five years in a row. Small wonder they're sporting long faces.

And that hasn't occurred in a bubble; health care costs for that same family (with kids) rose over 40 percent -- yeah, 40 percent --between 2000 and 2003.

Here's a brief guide for sorting out the economy we live in versus the one we're supposed to feel fuzzy and warm about.

Go-go GDP

It's not just that the growth in GDP over the past four years has been skewed towards investors -- it has -- it's that much of it is a chimera. Defense spending, consumer spending -- financed largely by debt -- and rising home values have been the growth engines for the current recovery. Author James Howard Kunstler estimates that from "2001 through 2005, consumer spending and residential construction had together accounted for 90 percent of the total growth in GDP." [italics mine]

That growth hasn't been free and isn't sustainable. U.S. household debt, adjusted for inflation, rose by more than a third over the last four years. Mortgage and consumer debt equals 115 percent of after-tax income, and the amount American families spend paying off those debts is at an all-time high of almost 14 percent of their paychecks. In other words Americans are all paying a hefty monthly debt tax to banks and creditors on top of what we already pay the government.

Wealth, wealth everywhere

The National Review's Jerry Bowyer blames the "mainstream media" for "obsessing over the level of debt of the average American family, which they only look at in a vacuum, [and] completely ignoring the growth of family net worth." If they were honest, he argues, they'd have to acknowledge "the highest level of household wealth in our nation's history."

But much of that newfound wealth is in our homes, and all signs point to a bubble in the sky-high housing market (although it varies widely by region). According to the Center for Economic Policy Research [PDF] -- a progressive think tank -- the current market "has created more than $5 trillion in bubble wealth, the equivalent of $70,000 per average family of four." Housing prices are way above their historic pattern when you look at demand, population and earnings. What's more, the price for home sales has been way out of step with the rental market -- something one wouldn't expect to see if the high prices were based on economic fundamentals. The estate might be real, but its value isn't.

Joshua Holland is an AlterNet staff writer.

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