Prosperity in George Bush's Economy
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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.
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.
The headline is that the unemployment rate is low and holding steady at around 5 percent. But it's a tricky statistic: people who give up trying to find a job aren't counted, nor are people who are underemployed. Private sector jobs have increased by only about 1 percent since the start of the current economic recovery. Four years into previous recoveries, private sector job growth had averaged almost 9 percent and it's never been less than 6 percent. According to EPI, "The percent of the population that has a job has never recovered since the recession and is still 1.3 percent lower than in March 2001."
The data tell the tale. While one can spin all day long according to his or her worldview and offer up grand theories about Americans' pessimism, the truth is that for about eight out of 10 people on American payrolls, the economy sucks.
Add in high fuel costs and large, highly visible rounds of layoffs in some of America's leading firms, especially in the auto industry. Then consider the latest tactic sweeping across corporate America: using bankruptcy to "seek relief" from pension and health care obligations. As the Wall Street Journal reported:
Whether an assembly-line worker or middle manager, an employee can no longer assume that promises made earlier -- health benefits or fully funded pensions -- will be there when he or she retires. The loss of security arising from Chapter 11 reorganizations has introduced a new element of anxiety into the lives of baby boomers who are approaching 60, not to mention younger workers just starting out in their careers.
That's just part of a growing trend. Of course, last year's bankruptcy reform bill will prevent most working families from enjoying similar "relief."
None of these issues are of any concern to people earning a couple of hundred grand to discuss the economy on Fox or MSNBC. Contra the right's liberal media conspiracy theories, the major media from across the spectrum are reporting the good news about America's booming economy with zeal.
That endless drumbeat comes with social costs.
First, it fuels the bubble mentality. If the economy's going gangbusters but you're struggling, of course you want to get in on the latest billionaire-creating wealth machine. That mentality infected anyone who bought tech stocks in 1999 hoping to become a "dot-com millionaire," just as it has them running around today buying houses at any price with the expectation that they'll get a 10 percent annual return. Alan Greenspan characterized the mindset as being one of "irrational exuberance." But what could be more rational than piling onto the latest bandwagon after watching a half-hour of CNBC's economic triumphalism?
Less easy to quantify is the psychic cost this has on us. The message we get all the time is that our unrivalled, dynamic economy affords opportunities for us all. So, if you're one of the majority who is not doing so well, it must be your fault. It is you, and not any external economic factor, that is keeping you from profiting from the Ownership Society. You are a loser.
A while back, I wrote an article about how the job outsourcing trend has happened at the same time, as deep cuts in transitional training and assistance came down from Washington. A reader sent me an email about how her middle-aged brother had been laid off by the aircraft parts manufacturer where he had worked for 20 years. "You know the hardest part," she wrote, "has been how he's internalized everything. He has such a low sense of self-worth."
Despite our great wealth, we're an unhappy people; we lead the world in mental health problems year in and year out. It's impossible to know to what degree that results from failing to live up to the economic expectations drummed into our heads every time we hear about the wonders of the American economy. But the message to all those families struggling to get by should be: You're not alone, it's all of us.