If You Didn't Hear It, Was It Really a Boom?

From 2000 to 2007, the typical household lost income:

For Many, a Boom That Wasn’t, by David Leonhardt, NY Times: ...The ... now-finished boom was, for most Americans, nothing of the sort. In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to ... inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.

This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew... You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens? ...

“We have had expansions before where the bottom end didn’t do well,” said Lawrence F. Katz, a Harvard economist who studies the job market. “But we’ve never had an expansion in which the middle of income distribution had no wage growth.”

More than anything else — more than even the war in Iraq — the stagnation of the great American middle-class machine explains the glum national mood today. As part of a poll that will be released Wednesday, the Pew Research Center asked people how they had done over the last five years. During that time, remember, the overall economy grew every year, often at a good pace.

Yet most respondents said they had either been stuck in place or fallen backward. Pew says this is the most downbeat short-term assessment of personal progress in almost a half century of polling. ...

Anxiety about the income slowdown has flared at various times over the past three decades. It seemed to crescendo in the first half of the 1990s, when voters first threw George H. W. Bush out of office, then, two years later, did the same to the Democratic leaders of Congress. ...

Then came a technology bubble that made everything seem better, for a time. Record-low oil prices in the 1990s helped, too. So did the recent housing bubble, allowing families to supplement their incomes by taking equity out of their homes.

Now, though, we appear to be out of bubbles. It’s hard to see how the economy will get back on track without some fundamental changes. This, I think, can fairly be considered the No. 1 economic project awaiting the next president.

Fortunately, there is an obvious model waiting to be dusted off. The income gains of the postwar period didn’t just happen. They were the product of a deliberate program to build up the middle class, through the Interstate highway system, the G. I. Bill and other measures.

It’s easy enough to imagine a new version of that program, with job-creating investments in biomedical research, alternative energy, roads, railroads and education. ...

The tax code, meanwhile, has become far more favorable to high-income workers at the same time that they — and they alone — have received large pretax raises. ...

It’s a pretty big to-do list. But it’s a pretty big problem. Since the economy now seems to be in recession, and since recessions inevitably bring their own pay cuts, my guess is that the problem will look even bigger by the time the next president takes office.

The article also says:

The causes of the wage slowdown have been building for a long time. They have relatively little to do with President Bush or any other individual politician (though it is true that the Bush administration has shown scant interest in addressing the problem).

There are arguments about how the political environment could have affected wage growth, e.g. by changing rules and enforcement practices regarding unionization. But I want to focus on the second part of the statement, the lack of attention to domestic issues and the fortunes of lower and middle class households by this administration.

It could be that the administration's lack of attention to domestic issues and the troubles that working families face is one of the costs of war - there wasn't time to address these issues and run a war too. But there was plenty of time to cut taxes on capital gains and dividends, plenty of time to try and remove the estate tax (even in the aftermath of Katrina), there was plenty of time to do things that benefited those at the upper end of the income distribution, so that argument doesn't stand up to closer inspection. There was time to address these issues - there was time to find a way to share the gains from the boom across a wider swath of the population - but the administration and congress, a congress that was controlled by Republicans for most of this time period, had no desire to do so.

Update: Graph of the Pew survey results mentioned in the article (from the WSJ Economics Blog):

Comments

[James Kroeger]

From the article you cited by David Leonhardt:In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.

This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens?

In the second half of the 20th century, the United States passed the test in a way that arguably no other country ever has. It became, as the cliché goes, the richest country on earth. Now, though, most families aren’t getting any richer.So what can be done to make the Poor and Middle-Class richer while also making the Rich richer at the same time?

Make The American People Richer

[save_the_rustbelt]

Ah, the spectre of globalization rears its ugly head.

Since globalization is the pet project of the economics profession we will not hear about the problems it is causing, well maybe a little.

And the container ships sailing from China are lining up outside Los Angeles, full of corporate profits.

[evagrius]

"And the container ships sailing from China are lining up outside Los Angeles, full of corporate profits."

They won't be if no one can afford to buy.

[odograph]

We saw it in the savings rate, right?

It wasn't just stagnant earnings, it was consumption out of balance.

[jr66]

The wealth effect of rising asset prices kept the middle quiet. Now they realise that along with substituting their normal share of profits for illusory and unrealisable asset price gains they have also assumed a greater share of risk. This'll break out in wage claims where such power still exists.

Everyone heard the whistling sound, they just pretended the missile was going out when it was coming in. Whether they'll hear the boom just depends on how close they are to it.

Globalisation is a local issue, greed is a universal phenomenon.

[spencer]

All we have to do is wait for Don Boudreaux's letter to the editor explaining that this is all just a liberal plot and that under his economic theory this could not have happened.

[oops]

love that title "if you didn't hear it was it really a boom"

[James]

Remember the study "Republican Presidents and Income Disparity? Clinton wasn't much better because the surplus and growth under Clinton-Rubin was a child of the manipulation of inflation data and other economic ledgerdemain. But still, there are reasons for why these things happen, and there are the inevitable reactions after they do. Let's hope this time we get at least another FDR.

http://jessescrossroadscafe.blogspot.com/2008/04/republican-presidents-and-income.html

[James]

That was a pun by the way, and not a misspelling.

I wonder how angry the middle class is going to be. Bonfire of the vanities time I suspect for the pigmen.

Let's hope there are no Huey Longs out there, slouching towards Washington DC and the imperial presidency.

Of course, even Mussolini and Huey need economists, right?

[anne]

Ah, thank you for helping me understand.

Me, I had thought the problem was limiting social spending, while wildly increasing military spending, and cutting taxes repeatedly especially for the wealthiest, and administratively and judicially increasingly favoring corporate management interests at the expense of employees, and deterioriating benefits such as health care insurance for employees, and relative price increases for necessities such as even tuition costs....

Now I know the problem has nothing to do with American policy and everything to do with Argentina and I am going to carry my Red Sox bat when I run this morning in case I run into any Argentine children and, well, you know....

The problem is Argentina, and we will deal with Argentine children right after being done with Iraqis.

[anne]

"Clinton wasn't much better because the surplus and growth under Clinton-Rubin was a child of the manipulation of inflation data and other economic ledgerdemain."

This is a rotten lie.

[paine]

"the administration and..a congress.. controlled by Republicans ... had no desire to do so."

and why pray tell should they ???

its up to the people's party
to champion the people's interests

the question ought to be ..i think ...
why can't the jobbled majority "elect "
a majority congress
clearly carved in its own image ???

i suggest u can
look to the corporate wing of the dembotry
for your answers
them and the class quislings in the dembot prog pond
unwilling or unable to brake free

the dems need a convention like the convention of 1896
---where the gold dembots
appeared to be summarily
hurled out of "the big tent"---

even a loss as severe
as bryan took in the subsequent election
(out pursed by ten to one )
at least creates
a real organized alternative
to corporate hegemony
not just a jeff to the gop mutt

[ken melvin]

Seems only fair to separate the deficit chaff from GDP and show the net on Ronnie, Clinton for sure, and GWB. Leonhardt's right to speak to the equity withdrawal, should be said every time GWB and Allan are mentioned and always subtracted from their 'success'.

Don't know where they get those numbers, but I figure a body would need to make $80k in 07 to equal $61K in 00, and I know for a fact that the working class (including the likes of engineers) is making about the same as they did in the 1980s and do believe they would need to be making twice as much to come out even.

[paine]

"
"Clinton wasn't much better because the surplus and growth under Clinton-Rubin was a child of the manipulation of inflation data and other economic ledgerdemain."

This is a rotten lie."

no its not a lie anne

its unintentional poetry

its figurative visionary thinking

the dream icons it contains
need to be carefully
unpacked
and then they reveal
the inner essence of the scandal

in 92 by a plurality like lincoln's
we elected a working family candidate
and we got ...ike clinton

that was then
and
now what ??

maaaaa---mmmmie clinton ???

or will it be
that most shrewdly obscure
outline of a figure

the hero of obamanation

[kharris]

jr66 gets close to a question that I have. Is there a mechanism at work in which rising housing values were in some way related to weak income growth? Certainly high oil prices held down real income growth, and oil revenues were recycled in a way that kept mortgage rates down. The standard assumption is that overseas goods producers and domestic productivity gains help raise real incomes through keeping inflation, even as they reduce real incomes by reducing job growth. In the case of foriegn production, as in the case of oil, earnings recycled to the US would have lowered mortgage rates and so helped drive up housing prices. This stuff isn't news. Is there any other mechanism by which a strong housing market is related, in a fairly straightforward way, to slow middle-class income growth? A concentration of resources in a sector in which productivity growth was slow, for instance?

It is pretty clear that housing and mortgages have been a factor in skewing income distribution toward the high end. Mortgage and investment bankers earn better than average, and the bubble has extended that difference. Look at the shift in Fortune 500 membership from entrepreneur to financeer for evidence of that. Anything else going on?

[paine]

"And the container ships sailing from China are lining up outside Los Angeles, full of corporate profits."

right on rusty

american coprorate arbitrage profits

castrate the trans nats

bomb the rmb /dollar bridge

[Gerard MacDonell]

Anne is right. Let's leave the xenophobia on the right where it belongs.

I hate the title of the article. It does the typical liberal thing of confusing worsening income distribution with poor macroeconomic performance.

We did have a boom. That is a fact. But the gains were taken mainly by the upper end. That latter is a serious problem. But if you destroy your credibility by denying the boom, nobody will listen to you on the more serious question of distribution. Nor should they -- if you are being intentionally misleading. So let's also be reality based.

[kharris]

"It does the typical liberal thing of confusing worsening income distribution with poor macroeconomic performance."

There is a difference between pointing out a distinction and confusing the two sides of the distinction. If you don't want us to talk about income disparity, just say so, but don't misconstrue other's intentions.

[bob]

What i love is the cons take on this which is the following (and as lame as it gets)

There really was a boom that helped you economically but you just don't realize it.

WTF ? ? ?

These people really are nuts. They will say and believe anything.

Thats the equivalent of telling you you don't know whats going on in your own life.

[bob]

A functioning brain usually tells it's host that if you have a problem (losing elections because of a lousy economy *) you fix it.

The cons act like if you have a problem you just insist that it's your imagination run wild.

Note - If you think that the war was the reason the cons lost in 2006 you weren't paying attention

---------------------------------------

NY Times

Economic View

Maybe You Did Vote Your Pocketbook

By DANIEL ALTMAN
Published: November 12, 2006

From the article -

To paraphrase a Clinton-era mantra, it really might have been the economy, stupid.

More than 80 percent of voters in an exit poll, conducted for The Associated Press and television networks by Edison Media Research/Mitofsky International, said the economy was a very important or extremely important issue.

That percentage was the highest for any issue, including Iraq and terrorism

[paine]

Gerard MacDonell
"Let's leave .... on the right where it belongs.
.... does the typical liberal thing ...."

u are sprawling your attacks
all over the political map here

man of reason in the middle i take it

btw

what does this mean to u

"We did have a boom"

the system produces
all we need do
is figure a way
to share out its bounty better ????

what if its
over all performance
and the fate of its big gainers
and big losers
are interlaced

look art that evil toy
trade simplex theory

great trade gains create
great displacements of factor employment
and often factor shares ...no ???

maybe the whole damn set up needs an overhaul
not just a pro middle income job strata
tax tweeeeeking

" ...poor macroeconomic performance..."

i'd say jobs growth is a possible macro policy aim
and on that dimension we have most assuredly not
had a boomy recovery

[save_the_rustbelt]

Now the question is this:

Will the Democrats blow the election and leave us with a cranky old man, ignorant of economics, in the White House?

[jamzo]

i don't know who leonhardt hangs out with but i don't recall a "boom feeling" among the people i encounter since the dot.com bubble

i am more interested in the expansion that many are saying just ended

there has been an increase in the monetary value of the us economy but was there an increase in the overall output of goods and services that rise to the level of expansion?

how much of an expansion was it?
what sectors of the economy expanded?

[david]

If I run for office, I want Paine as my Mark Penn. He's got all the trends!

[reason]

Gerard Macdonnell
We did have a boom. That is a fact. But the gains were taken mainly by the upper end. That latter is a serious problem. But if you destroy your credibility by denying the boom, nobody will listen to you on the more serious question of distribution

Personally I'm not so sure. GDP growth was not particularly strong, there was a large increase in net Government spending and large net imports (so how much of the growth was productive?). Plenty of people question the inflation figures on which the real growth estimates are based. And how much of the "growth" was commissions on (leveraged) asset price inflation, that disappeared overnight.

[Cyrille]

Tell me Paine, do you actually set out to be unreadable?

Now and again I force myself to try again, and invariably give up, which I guess is needed for my sanity. And so I just scroll by your posts, which makes following a conversation rather difficult though.

Isn't the idea of communication to try and be understood easily?

[bob]

>> i don't know who leonhardt hangs out with but i don't recall a "boom feeling" among the people i encounter since the dot.com bubble

My experience exactly.

The economy got real crappy in 2001 and hasn't changed since.

I even have apolitical friends that have said the same.

[hari]

Talking about political business cycyle(s), if you guys with degrees(!) and intellectual gumption - cannot come up with a better analysis of what *ails* Uncle Sam - I pity your dumb rhetorics .....

Get serious...and elect reps who can not only implement and advance *change*...but also have the gumption to recognize that politics is an *art*...and requires intellectual *guts* to compromise ... in order to progress.

Only so-called *girls* cry...when confronted by a bully (or let's name it GOP)...and know not how or what to do next.
If you're NOT ready to fight then don't raise the rhetorics;
pity those who have no morals!

[cm]

Gerard MacDonell: But, as you are yourself alluding to, "a boom for whom"?

A number of privileged professionals (myself included -- for the time being ...) in the "right" professions certainly have been benefiting from good employment opportunities. Likewise "skilled" workers in trades that experienced "multiplier" demand (construction, business services, marketing, sales, ...) have gotten some while the going was good, depending on their position in the food chain.

In "commodity" occupations, not so much.

[robertdfeinman]

I came across this lecture by Harvard professor Elizabeth Warren on YouTube yesterday:

http://youtube.com/watch?v=akVL7QY0S8A

It's title is "The Coming Collapse of the Middle Class". It was given at Berkeley last year, but everything she said is still valid. She doesn't get bogged down in politics, or what if's, but just compares the standard of living of the typical two parent, two kid family from 1970 to 2003/4. The main differences are a decline in the cost of consumer items (food, clothing, appliances,etc.) and a sharp rise in the cost of non-optional items: housing, health care, child care, transportation and education.

A typical telling point is that in 1970 most people felt that one could have a decent life with 12 years of schooling (high school grad). This was entirely paid for by the community. Now it is felt that kids need two years of pre-school and four years of college. These additional six years (one third of the education) are funded by the family itself.

The shift from a one worker family to a two worker family has also doubled the risk that the family will have economic distress if one parent gets fired. The talk is an hour long, but is worth watching. There is lots of smoke these days, but she provides the actual data.

[paine]

"Isn't the idea of communication to try and be understood easily?"

up to a point ..i guess
if easy means clarity
without un necessary baroque counterpointing

my writing is indeed bad writing
but ...what's so hard about it ???

read it out loud to yourself
if the line brakes frustrate your fast aquisition mode

its all pretty simple shit
if a bit compressed
and alas
too simple and repetitive

unreadable ???

maybe u just read to fast dear soul
or
look for what's not there

i'll admit
i speed bump on purpose

conventional thought trains
need the occasional derailing side tracking
and slowing for site seeing

we all have agends of course

but i find
reading to simply confirm or refute
is like playing tennis against a back board

[kthomas]

Duh, look at all the outsourcing and factory closures since the Decider stole office. It aint pretty.

[Callahan]

"the median family, amazingly, seems to have made less — about $60,500."

Amazing???????????

[anne]

http://www.cbpp.org/4-9-08sfp.htm

April 9, 2008

Falling Apart: A State-by-State Analysis of Income Trends

I. Executive Summary

A state-by-state examination of trends in income inequality over the past two business cycles finds that inequality has grown in most parts of the country since the late 1980s. The incomes of the country's highest-income families have climbed substantially, while middle- and lower-income families have seen only modest increases.

In fact, the long-standing trend of growing income inequality accelerated between the late 1990s and the mid-2000s (the latest period for which state data are available).

On average, incomes have declined by 2.5 percent among the bottom fifth of families since the late 1990s, while increasing by 9.1 percent among the top fifth.

In 19 states, average incomes have grown more quickly among the top fifth of families than among the bottom fifth since the late 1990s. In no state has the bottom fifth grown significantly faster than the top fifth.

For very high-income families — the richest 5 percent — income growth since the late 1990s has been especially dramatic, and much faster than among the poorest fifth of families.

Similarly, families in the middle of the income distribution have fallen farther behind upper-income families in many states since the late 1990s:

On average, incomes have grown by just 1.3 percent among the middle fifth of families since the late 1990s, well below the 9.1 percent gain among the top fifth. Income disparities between the top and middle fifths have increased significantly in Alabama, California, Florida, Illinois, Mississippi, Missouri, New Mexico, and Texas. Income disparities did not decline significantly in any state.

The benefits of economic growth were broadly shared for a few years in the late 1990s — the only period in the past two decades for which this was true — but this broad-based growth ended with the 2001 downturn. Once the effects of the recession were left behind, the trend toward greater inequality quickened, as the incomes of the richest families climbed while those of low- and moderate-income families stagnated or declined....

[paine]

the clinton miracle book ended :

"The benefits of economic growth were broadly shared...."

" .. a few years in the late 1990s "

a fluke ???

dumb luck ???

alan's doing ???

an over sight ???

a tease ???

the jack asses last hurrah ???

[Masonik]

"Now, though, we appear to be out of bubbles. "

Why not do something about those previous bubbles so they can keep on bubbling?

[Bruce Wilder]

JK: "So what can be done to make the Poor and Middle-Class richer while also making the Rich richer at the same time?"

It can't be done, now. The really Rich, or a significant portion, have to be be screwed, big-time. Bring on the guillotines.

[Bruce Wilder]

MT: "the administration's lack of attention"

This administration was laser-focused on screwing the middle class, much of the time.

The California electricity crisis. The Bankruptcy Bill. Tort reform. The huge effort to reform Social Security out of existence.

The Republicans are not neglectful stewards of a common cause.

[ken melvin]

Anne - Great link and the PDF is well worth reading.

[Callahan]

It was a boom allright, I heard it, ekonomy fall down go boom, ... about 8 years ago in Michigan. If it ever gits back up it's gonna need a real, real good crutch.

Please, no more fast track Georges, please.

[paine]

" The really Rich,
or a significant portion,
have to be screwed, big-time.
Bring on the guillotines....."

why ?

" The California electricity crisis. The Bankruptcy Bill. Tort reform. The huge effort to reform Social Security out of existence."

moral

"The Republicans are not neglectful stewards
of a common cause. "
they are to the contrary
the ever at the ready and service
once and for always
the bound class champions
of the uber plutos

--- or is it ...just petty bag men ??? --

[Patricia Shannon]

James Kroeger says...

So what can be done to make the Poor and Middle-Class richer while also making the Rich richer at the same time?

I'm sorry, I'm too dumb to understand why the rich need to be or should be richer than they already are.

[Adam]

Post WWII boom - was caused by more public spending projects. Some of the causes: decreased competition from destroyed countries focused on rebuilding their infrastructure, favorable trade status due to victory spoils, increased participation in work force by women -- aren't likely to be repeated.

[Hbro]

How exactly do Governments create wealth?

Please explain?

Throughout history peoples standard of living are raised by fundamental technological breakthroughs.

We have not had one of these since the transistor was invented 60 years!!

Why no breakthroughs in the last 60 years?

[Callahan]

Hey hbro, where you been the last 7 years man???

Geo made the rich richer with tax cuts, thereby creating MORE wealth. He made the rich richer with fast track outsourcing, thereby creating MORE wealth. He helps make the rich richer with cheap labor from Mexico, thereby creating MORE wealth. Now these efforts by Geo were hard, hard, very hard, hard wirk, but by god, Geo got it done.

[Dirk van Dijk]

We have not had one of these since the transistor was invented 60 years!!

Why no breakthroughs in the last 60 years?

You can't be serious, no breakthroughs? What about sequencing the Human genome? Fibre optics? The internet?

[Callahan]

How bout bottled drinking water, now that is a break through, it breaks through right from the tap.

[James Kroeger]

Patricia Shannon:I'm sorry, I'm too dumb to understand why the rich need to be or should be richer than they already are.What I'm actually alluding to here, Patricia, is the little understood difference between money wealth and real wealth. From the link I provided above:Members of America's Privileged Class misperceive their true interests primarily because they do not understand the very important distinction that must be made between Financial Wealth and Real Wealth. To better understand this distinction, simply imagine what it would be like if everyone were to somehow become extremely rich in dollars one day and then we all decided to retire and live off of our accumulated 'wealth.' What we would soon discover is that we would actually possess no real wealth at all, because no one would be producing anything of value that we could buy.

The only reason why money has any value to us is because it gives us a claim on the productive efforts of others. How wealthy you actually are depends more on what others are doing than it does on your personal accumulations of paper notes. The Real economy is the productive behavior of people; it is the actual goods & services that people are producing and trading and consuming. When we speak of the "Wealth of Nations", we are not talking about the amount of currency they have in circulation; we are talking about their productive output. The only economic question that should ever matter to us, as a society, is how might we act to increase our production of real wealth?

First, let us acknowledge that individual income earners can become wealthier---in real terms---if they can manage to increase the amount of dollars they have at their disposal compared to everyone else within the hierarchy of national money-wealth distribution. If you can do this---either by working for it or by stealing it or by winning the lottery---you will enjoy a dramatic increase in your purchasing power as long as not everyone else also experiences the same increase in money. We must always remember that it is exceptional achievement that is rewarded by the marketplace. When one individual achieves a dramatic gain in dollar wealth, the economic gain she experiences is at the expense of some other income earners who used to have a slightly higher ranking in the economy's overall distribution of disposable income before being displaced by you.

For those who care about the welfare of all Working Families, this individualistic way to gain real wealth is of no interest. Why? Because we are really only interested in policy options that will improve the welfare of all. It's a given that each of us will do whatever we can to improve our positions as individuals within the hierarchy of disposable dollar incomes, but the important thing we need to understand that it is impossible for all of us to improve our Purchasing Power Rankings relative to each other. If you, as an individual, want to become a member of a higher economic class, then you need to do more than just increase your income; you need to increase your money income more than your peers.

The problem with the prescription that the Republican Party offers to America's privileged class is they do not actually become better off in real terms, even they they do end up with more money wealth. But because the Republican Party throws more disposable dollars at all of them, none of them actually experiences an increase in household purchasing power. The purchasing power of all those extra dollars simply gets burned up in a round of [mostly asset] price inflation.

In market economies, if an individual household---or only a few---were to experience a significant increase in disposable income, then the members of that household will experience a significant increase in its purchasing power, compared to all other households. But if all households experience the same increase in disposable dollar income, then none of them is able to experience an increase in purchasing power, since the comparative purchasing power of all households is maintained.

If, however, the government were to increase the tax rates of the Uber Wealthy and use that money to increase spending on improved infrastructure, they would actually become wealthier in real terms even though they've experienced a decline in money wealth. (They would discover that their smaller disposable incomes would buy just as much in the marketplace as their higher disposables incomes would have been able to buy them if they had not been required to pay any income taxes at all.) Their purchasing power is maintained through the progressive income tax while at the same time they become richer in real terms due to the improvement in the nation's infrastructure.

That's what I'm talking about...

[Holly W.]

Reason, in response to Gerard: GDP growth was not particularly strong ...

In December 2006, Calculated Risk posted some scary graphs showing that once MEW -- mortgage equity withdrawal -- was subtracted from those "booming" numbers, GDP was either negative or extremely anemic.

[save_the_rustbelt]

When retail gasoline hits $4.00 per gallon that should do wonders for the American middle class.

Or, I wonder if there will be an American middle class.

[James Kroeger]

How exactly do Governments create wealth?
Please explain?The first thing you need to understand is the difference between financial wealth and real wealth. Any time the government employs human resources to produce desirable services, it is producing REAL WEALTH.

If the government spends money on cleaning up the environment, it is producing real wealth (= a cleaner, less toxic environment, less blight, etc.). Whenever the government spends money on education, it is producing more highly educated citizens, which is a net benefit to all who live in this society, and is therefore an increase in the real wealth enjoyed by the nation.

Fire and police protection are both enhancements in the real wealth enjoyed by communities provided by the government. (if you paid a private security firm to protect your property, the money paid for the service would be included in the private sector's production of real wealth; why wouldn't enhancements in security provided by the government be viewed any differently?). I could go on and on, and will if you need further examples.

I'm actually amazed that you don't realize that the government is a major producer of real wealth.

[TigerPaw]

Cyrille says...
Tell me Paine, do you actually set out to be unreadable?

I agree totally. I suppose it's "cute" but frankly it's a pain in the butt and 99% of the time I just scroll right on by and look for sentences.

[Holly W.]

RDF: The shift from a one worker family to a two worker family has also doubled the risk that the family will have economic distress if one parent gets fired.

Actually, I see this quite the opposite way: Having both adults in a household working is a form of insurance, guaranteeing that there will still be income even if one of them loses their job.

IMO, this is one reason why the social-conservative push to get mothers to stay home has generally gone over like a lead balloon with most middle and working class families. Plenty of women (and men, too) would probably love to stay home with their kids, but the fear of how vulnerable a single-income family is economically generally outweighs this desire, even if it's monetarily feasible in the first place.

[Jay]

Hbro:

The government doesn't create wealth. It redistributes wealth(through its monopoly on "legalized" theft).

[Sandman]

From YrY GDP criteria, growth needs to be up to 4% to be considered a "boom". considering we got there during a very short period when the economy had just unofficially burst from recession(Augest 2003) it wasn't a boom nationwide. The 80's didn't have a boom to 87-88 either.

Notice the 90's was around 4%(and over it quite a bit) for almost 4 years.

Nothing wrong with commenting the expansion was stable for a few years, but nothing more nothing less. If the neophytes woudln't have hyped it up as the best thing ever, we wouldn't even be talking about this now.

[paine]

the paw of the tiger

"cute "

oh i wish it were so

"sentences "

do you speak in em bro ???

sam johnson i ain't
but maybe this might help

think
of truman capote's speaking voice
as you mouth my words to yourself

then
it will all make
too too much sense

maybe too much
for u to bare

[paine]

holly w

"Actually, I see this quite the opposite way: Having both adults in a household working is a form of insurance, guaranteeing that there will still be income even if one of them loses their job"

i agree
as long as either jobs' income alone
covers the household's weekly nut

[Bruce Webb]

"A typical telling point is that in 1970 most people felt that one could have a decent life with 12 years of schooling (high school grad). This was entirely paid for by the community. Now it is felt that kids need two years of pre-school and four years of college. These additional six years (one third of the education) are funded by the family itself."

RDFs point is correct but could be made stronger. In 1970 it was possible to gain an education up to and including graduate school almost entirely paid for by the community. People who couldn't afford Yale and didn't score a scholarship could generally afford UC Berkeley, Wisconsin, Indiana, or U Texas. In California at the time it was actually illegal to charge tuition at a public college or university, you could only charge fees that went directly to student services. As an example the $212.50 quarterly fees I paid at Berkeley in Fall 1974 paid for medical coverage in an on-campus hospital. Well the place where that hospital stood now houses the Business School and somehow I doubt the campus is picking up the total insurance tab for current students.

Today tuition at State Universities is a scandal and the percentage of total cost actually picked up by the State out of general revenues is constantly shrinking. Which is why I get several mailings a month asking for contributions.

There really was a time when a working glass kid could use a combination of grants and part time jobs and work your way through a Public University, get taught by Nobel prize winning professors and leave without significant debt levels. When I dropped out of college in 1977 after my Sophomore year it wasn't because I couldn't afford it, the situation was a little different by 1983 after I returned to school and graduated, and quite a bit different after my MA in 1987, and even more so after my last stint in grad school ending in 1993. Each time leaving school had left me with a progressively bigger debt load in real terms. Essentially Reagan/Bush I and their allies at the state level simply broke a social compact forged in the 50's with the GI bill and the 60's with generous state funding of Public Universities.

It is of course the cruelest irony that the Economic Right simultaneously claims that income inequality is simply due to the skill premium, explains that the solution is education, and then progressively guts any mechanism that would allow working class kids to make it to the top rung in the form of a degree from a top level public that in turn would be the key to getting into a top ten graduate program whether public or private and so lead to top level positions in the professions, finance or academia. It is almost as if they are mocking us as 'born losers'.

[An Argentinian]

Anne says:

"Now I know the problem has nothing to do with American policy and everything to do with Argentina and I am going to carry my Red Sox bat when I run this morning in case I run into any Argentine children and, well, you know....

The problem is Argentina, and we will deal with Argentine children right after being done with Iraqis."

Thank God McCain is rescuing the Argentine children from Anne's righteous wrath. By the time he's done with the Iraqis, those children will all be senior citizens.

[paine]

"monopoly on "legalized" theft"
indeed taxes prolly are
sublimated robbery

but colorful anachronisms aside

might it not be better
and cuter
to say
the state has a monopoly
on
---among other things----
defining what qualifies
as "legalized" corporate theft
vs
counterfeiting
forgery
fraud
usury
embezzlement
pick pocketing etc

[anne]

Paine; please do not worry, when I fail to understand a point I simply ask.

[anne]

An Argentinian:

"Thank God McCain is rescuing the Argentine children from Anne's righteous wrath. By the time he's done with the Iraqis, those children will all be senior citizens."

Darn, this is brilliant but I have no response other than to wonder how afraid I will have to be from here about being overrun and whether I could pass as Irish-Argentinian.

¿Que pasa?

[save_the_rustbelt]

Anne with a baseball bat?! Jogging in Cambridge will never be the same.

Nobody mess with Anne.

[save_the_rustbelt]

Paine:

I understand everything you say.

Ah, should I be worried?

[Cyrille]

Still, what's the point of making it so much harder to understand? If someone speaks very little English, of course I will make the effort to decipher the meaning from the broken sentences. But to deliberately write awfully is beyond my comprehension -and patience.

[paine]

on higher ed costs

its the market stupid
or what amounts
to a poorly simulated market

like private hospitals
pro-test-ant sects
and bar rooms
we got
too many
private colleges

their tuitions are
a function of
contrived public credit system
that allows too much lending
and too little comnpetition

students are paying for
the nut of ten thousand
chronically over capacity
and under enrolled
private higher ed institutions

putting aside
the hideously
rigged scholarship set up

hell
far as i'm concerned

the pri col cartel lobby complex
needs a joe and june three wide
bust in the mouth

free tuition at state schools is hardly the answer
though it at least could drive the pri cols under

even state school subsidy is a sick joke
played on mr and mrs three wides wallet

let em all i mean all the two and four year gigs
pri sec and pub sec
contend with each other

examples

make all credits at accredited insitutions
cross countable toward degrees anywhere
make half your credits earned here shit illegal

make tenure contracts illegal

make professional school
pre qualifications minimal not maximal

at least in the good old days
medical school students could come
straight from high school

turn the contest for students
as much as possible
into a free fire zone

do that
and watch the cost efficiency rise

while by in large
"the products " offered
may well degrade
and at best
i'm sure they'll remain
just as useless
job use wise
as ever

but
at least if they start competing on price
the total signaling costs
of our domestic
better job filtering system
will be lower

[paine]

Cyrille
i'm convinced

from hence forth
there will be
no more awwwwwfull prose
from
yours true-llly

owen christopher manfred paine
late of hingham mass

[paine]

I understand everything you say.

Ah, should I be worried?

yes check in the mirror for a pair of pre horn lumps
right about at the temples
if you don't stop reading my shit
you'll end up looking like
the st louis ram

[paine]

anne

did you bust open the lock
i put on the brandy chest ???

[anne]

http://www.nytimes.com/2004/10/14/opinion/14taylor.html?ex=1255492800&en=6f805b298f0aa5e7&ei=5090&partner=rssuserland

October 14, 2004

What Derrida Really Meant
By MARK C. TAYLOR

Along with Ludwig Wittgenstein and Martin Heidegger, Jacques Derrida, who died last week in Paris at the age of 74, will be remembered as one of the three most important philosophers of the 20th century. No thinker in the last 100 years had a greater impact than he did on people in more fields and different disciplines. Philosophers, theologians, literary and art critics, psychologists, historians, writers, artists, legal scholars and even architects have found in his writings resources for insights that have led to an extraordinary revival of the arts and humanities during the past four decades. And no thinker has been more deeply misunderstood.

To people addicted to sound bites and overnight polls, Mr. Derrida's works seem hopelessly obscure. It is undeniable that they cannot be easily summarized or reduced to one-liners. The obscurity of his writing, however, does not conceal a code that can be cracked, but reflects the density and complexity characteristic of all great works of philosophy, literature and art. Like good French wine, his works age well. The more one lingers with them, the more they reveal about our world and ourselves.

What makes Mr. Derrida's work so significant is the way he brought insights of major philosophers, writers, artists and theologians to bear on problems of urgent contemporary interest. Most of his infamously demanding texts consist of careful interpretations of canonical writers in the Western philosophical, literary and artistic traditions - from Plato to Joyce. By reading familiar works against the grain, he disclosed concealed meanings that created new possibilities for imaginative expression.

Mr. Derrida's name is most closely associated with the often cited but rarely understood term "deconstruction." Initially formulated to define a strategy for interpreting sophisticated written and visual works, deconstruction has entered everyday language. When responsibly understood, the implications of deconstruction are quite different from the misleading clichés often used to describe a process of dismantling or taking things apart. The guiding insight of deconstruction is that every structure - be it literary, psychological, social, economic, political or religious - that organizes our experience is constituted and maintained through acts of exclusion. In the process of creating something, something else inevitably gets left out.

These exclusive structures can become repressive - and that repression comes with consequences....

[Jay]

Paine:
"might it not be better
and cuter
to say
the state has a monopoly
on
---among other things----
defining what qualifies
as "legalized" corporate theft
vs
counterfeiting
forgery
fraud
usury
embezzlement
pick pocketing etc "

You can do this for about 10% of what we spend today, and it does not involve nationalizing health insurance, or having a monopoly on the indoctrination centers (public schools).

[kthomas]

paine is the Devil, masquerading as a legitimate poster.

[paine]

".... found in his writings
resources for insights
that have led
to an extraordinary revival
of the arts and humanities
during the past four decades..."

grounds for a quick trip to the memory hole i'd say

[paine]

kthomas

you are far far to kind

the devil ??

even mr mephisto ??...moi ???

its like calling
a corporal
" field marshall "

[ken melvin]

In order to play the game one must pay the fees; taxes we call'em.

[Bruce Wilder]

kt: "paine is the Devil, masquerading as a legitimate poster"

I knew he sounded familiar!

[James Killus]

James Kroeger (the other JK, I sometimes call him) has pretty much nailed it, while Jay (no relation to anyone initialed "J") again misses the point that huge amounts of governmental power and privilege have been privatized in the form of the limited-liability corporate person.

The rich really are different from you and me. Since wealth tends to shield one from the consequences of one's actions, and one learns primarily by seeing the connection between actions and consequences, the rich are basically ignorant.

This is true of all power, actually, and this phenomenon has been called "The Snafu Principle."

[paine]

really good line by kill shot :

"huge amounts of governmental power and privilege have been privatized in the form of the limited-liability corporate person."

it makes a keystone point
one that holds in place
many other points

[anne]

http://www.nytimes.com/2008/04/08/world/americas/08briefs-THOUSANDSPRO_BRF.html?hp

April 8, 2008

Thousands Protest Food Prices
By ASSOCIATED PRESS

Protesters angered by food prices flooded the streets of the capital, Port-au-Prince, forcing businesses and schools to close as unrest spread from the countryside. Witnesses said at least one person had been killed by hotel security guards during a protest in the southern city of Les Cayes, where four people died last week in food riots and clashes with United Nations peacekeepers. Thousands of people marched mostly peacefully past the National Palace in Port-au-Prince. “We’re hungry!” some called out. Haitians are particularly affected by food prices that are rising worldwide. Eighty percent of the population lives on less than $2 a day. The cost of staples like rice, beans, fruit and condensed milk has gone up 50 percent in the past year.

[robertdfeinman]

Holly:
Warren's point is that one income can't cover expenses of the typical family today. In fact most of her demographic is actually running up debt. When only the man worked and lost a job the woman could find work (at a lower wage) and help compensate. With both already working there is no reserve worker to throw into the game.

About the cost of education, I've mentioned before that I went all the way through a Ph.D. without ever paying tuition. Even in grad school my living expenses were paid for by the assistantships I received.

I suggest people view the video I cited. Elizabeth Warren does a much better job of making her point than my brief overview. Here's the link again.

http://youtube.com/watch?v=akVL7QY0S8A

One could use a standard economic argument for what she discusses. The areas that have gone up in cost the most are those where demand is essentially inelastic. One has to live someplace, pay for health care, etc.

The alternative of ending up on the street or uninsured is not reasonable and people will do almost anything to avoid it. This includes scrimping on food.

As I said before, she's not discussing the reasons for the changes or pointing at any specific political party, just laying out the facts.

[anne]

Though I had been told months ago by 2 Haitian-Americans that on visiting they were surprised by how expensive restaurant meals had become, there was no emphasis on the comment and I remembered it but passed on. I am told that Haiti imported no staple foods until recently, the story going that American emphasis was rather on trade and Haiti has become food dependent.

I am completely convinced that developing countries need to subsidize food production, as China does, and surprised there is little interest in so urging by the World Bank till now.

[anne]

There should be as little food-trade dependence as possible in developing economies. Subsidize, subsidize, subsidize.

[Patricia Shannon]

James Kroeger
Thanks for your explanation. I agree. When I've tried to explain to people that it is not possible for everyone to be rich, because to be rich means you can pay someone else to do certain tasks, and if everyone were rich, there would be no one to do those tasks, they usually get mad at me.

I'm not certain that the extremely wealthy would actually become richer in money if there were a less extreme distribution of wealth, but I can't see how they would have to really sacrifice. And they would gain in other ways. Eg., someone who might have been a waiter might instead become a medical researcher, and find a cure for all, including the rich. People would be able to afford to take all their antiobiotic medicine, and so bacteria would be slower to gain resistance.

[Patricia Shannon]

I too rarely read Pain(e_'s postings, because of their obscurity. Life is too short too spend so much time trying to figure out what he's saying,esp. for those of us who have full time jobs. I find them quite irritation. I sometimes see by other people's comments that Paine has made a good point. I guess great minds think alike :)

Maslow, who was truly brilliant, was very hard to understand, at least until you had read a lot of his work, but he didn't do it on purpose. When someone wrote a book explaining his work in understandable English, Maslow wrote in the forward that he wished he could write like that. Obscure writing is not something to be proud of.

[paine]

The areas that have gone up in cost the most are those where demand is essentially inelastic

indeed its that simple but so is the lot bubble

given the off shore onslaught and the
resultant flight to the safety of more skiller heights

mayhaps
a bubble in sheep skins
like once tulip bulbs got ???

[paine]

"There should be as little food-trade dependence as possible in developing economies. Subsidize, subsidize, subsidize"

anne has a keen point here

a low ball currency helps
it amounts to a tax on improted food and thus a subsidy to domestic production

a good reason the prc hasn't revalued rapidly

but there are other ways
to prop up small farm income
or cut
"the total cost" of small farm life

ahh this is a huge project
the really great transformation
involving not millions
but billions

billions are skidding around
on this hot griddle

[paine]

m. shannon

"obscurity" ????

now that one stumps me

compressed
telegraphic
sure
but obscure .....not hardly

i guess its maybe harder
to read
straight down the page
then i think it is

but alas
i can't change
like most long term affectations
perhaps
its a form of protective coloration
who knows after all these years

btw at
the blog site
"stop me before i vote again"
my mate and editor mj smith
at least conventionalizes my posting formats

u might see if they are less obscure

[Icarus]

Bruce Webb...

Tuition at state colleges is a scandal?

Tuition at the UC system now is close to $7000/year, I believe. Is that a scandal? The Cal State system is even less.

I attended UCLA, for both undergraduate and graduate school, and found that anyone willing to work part time could find a way to get through school (I did). Any of the UC's, and any of the Cal States are the same. Isn't this an incredibly fair experience?

What more do we want our taxpayers providing. UCLA and Berkeley are world class universities, and one can attend them at a decent cost. The other UCs are very good as well, and the Cal States are decent. Has California provided a university infrastructure which is reasonable to all?

[Icarus]

The median income of a family in 2000 was $61k, and now, it's closer to $60.5k...this is the issue?

The reason is not the conspiracy of the elites. The value of median american labor has simply gone down significantly. As we further globalize, this will continue. We should instead be pleased that the median household wage hasn't gone down more.

The value of labor is the key. I don't know if the Industrial West can maintain their expectations. Germany has the highest labor costs in the world...will they be able to justify that wage rate in 5 years? 10? etc. Once other nations catch up, and can provide comprable products and services, as their economies mature, we will see a tremendous shift in the location of production.
This is just starting to happen, and the multinationals are at the forefront, obviously.

30 years ago, a high school educated worker expected to make enough to raise a family of 4 on one income. Those days are over. There are just too many qualified people in the world, willing to provide that labor, at better wage rates (lower = better for both the producer, and the consumer, ceteris paribis).

This is the direction of neo-liberal rule. The working class in the 1st world will complain, and the academic left will uncritically support them. The right will as well trumphet their mantras on economic rationality. This battle will get violent in many places, and ultimately stabilize into 1st world enclaves within 3rd world-like larger regions.

Get ready for the world of walled, manicured, and planned cities, surrounded by megaslums.

[Bruce Wilder]

Icarus, it would be wrong to pay the workers more and the bosses less because . . . . fill this in for me, because I'm drawing a blank.

[paine]

fuck the skill free job slobs

ceteris icarus
they aren't even worth their present wage rates

[paine]

"Get ready for the world of walled, manicured, and planned cities, surrounded by megaslums "

the old wax winger
loves this shit eh ???

"here's the harsh reality bub ...
ya better learn
to live with it "

maybe ick's
the type of soul
that finds itself
later in life's journey
and yet only so far
up ambitions barber pole
only so far up that its not far enough ...

so he's gotta use this hard glare shit
poke wake up sticks at us softy types
you know
warm his hands
on our roasting illusions
as they melt away

maybe it makes him feel
"alive and in love again "
with the image of himself

worth it isn't it
amidst his stoic bitterness

[gordon]

Bruce Webb: "Essentially Reagan/Bush I and their allies at the state level simply broke a social compact forged in the 50's with the GI bill and the 60's with generous state funding of Public Universities".

I suppose we will never know for certain, but I have a sort of almost subconscious feeling that the level of highly-publicised protest against the Vietnam war and of general anti-Establishment feeling at Universities back in the 1960s led to a reaction by the ruling class against educating the children of non-elites. The protesters and "hippies" of those days attracted a level of fury and hatred which could easily lead to such a reaction, but I don't know how such a process could be documented.

And since this isn't the first post on declining living standards, I'm not embarrassed to include another link about the Genuine Progress Indicator.

[James Kroeger]

I'm not certain that the extremely wealthy would actually become richer in money if there were a less extreme distribution of wealth, but I can't see how they would have to really sacrifice.Well, they wouldn't be richer in dollar wealth, but they would lose nothing/little in terms of purchasing power. Their smaller disposable incomes (brought about by more steeply progressive income tax rates) would buy them just as much as their larger disposable incomes would have purchased for them if they had not paid any tax at all.

The reason for this is that the wealthy spend nearly all of their 'extra disposable income' on luxuries that are relatively scarce. With respect to the luxury market, generally, if/when the disposable incomes of all wealthy people are reduced in a way that preserves the 'ranking' of all wealthy households within the hierarchy of all disposable incomes (as the progressive income tax does) then none of the wealthy will actually experience a reduction in the purchasing power of their incomes. This is because suppliers of luxury goods/services would be forced by competition to reduce their prices to a level that the wealthy could afford.

There are just so many luxury goods/services. The supply is very inelastic. When dollar demand drops because all wealthy have with fewer disposable dollars to spend, prices will drop until they again become affordable. That's how markets work. There will be no reduction in the supply of luxuries and no less consumption; it's just that the prices paid for them would drop. In real terms, the wealthy are no worse off than they would be if they were not taxed at all. During the Great Depression, the wealthy as a class were no worse off than they were before the Crash. None of the mansions or yachts or beachfront property disappeared.

Suppliers will always bring luxury goods/services to market during a long term decline in the disposable incomes of rich people because even if prices are lower, the rich would still the people with the most money to spend, even when others must cut back. It is not possible to deprive the wealthy of their claim to the scarcest goods/services produced by the economy, since they will always be the highest bidders (so long as their rankings within the hierarchy of all disposable incomes is preserved, as with the progressive income tax).

[Icarus]

Bruce Wilder...

A good question, no doubt.

People are hopefully paid what they are worth, given the market for that skill at that point. That worker may not be worth enough to warrant a raise. What is the cost of replacing them? This question is at the heart of justifying a wage rate.

For those bosses, it's the same calculus, with different results.

I'm hiring a few positions at my firm now. I need a data architect with around 10 years experience, and I have a tough time finding someone for $110k. It's not enough of a wage to attract qualified applicants. I'm in the unenvious position of either accepting more junior people at that rate, or, increasing my wage offering.

I have junior positions (almost no experience), where I can offer $60k. For that wage rate, I'll only get an applicant with limited skills. (perhaps a new college grad with a few internships under her belt)

So, your question is...if the firm makes significant profit, who deserves a piece? Is it the 'worker' at the bottom, who contributed? Is it that worker's "fair share"? How do the spoils get divided, so to speak?

I'd respond with the analogy of the sports star. The Yankees don't pay A-Rod and the Peanut Vendor the same rate. You could argue that both are needed to provide the entertainment they sell. But, the market for labor easily proves how quickly one can replace the Peanut Vendor, and how tough it is to find another A-Rod.
The market for CEO's should be no different. If you want Lee Raymond's expertise, does he not deserve to negotiate a market rate...even if that entails a piece of the profit.

Now, one thing I'm against...is the collusion involved in paying oneself, or, being paid though underhanded means. I'm all for market rates...I'm not arguing for non-market collusion.

A-Rod deserves his salary, the Peanut Vendor deserves her's. And, if the Yankees make $100 million in profit, the owners deserve that profit for taking the risk required to provide that service. The owners may choose to share that, in order to better run that enterprise, but, that choice is theirs.
Now, if they don't, they suffer the market reaction. The Peanut Vendor is free to go find other labor opportunities. That is her only negotiation.

The bottom line is that the "worker" you speak of isn't really worth all that much anymore. This will offend our quasi-humanist sense of equality. But, the market has nothing to do with equality. Govt may...but, it will have attendent costs.

[paine]

in your next life ick
with all the bad karma flow over
from this life
you will not be a peanut vendor
you'll be a peanut

ps hire the 60 k co ed
she sounds bright and industrious

and oh

give your self
the walter mitty award
for that fandango
about hiring 110 k data geeps

there's no time
for blog trolling at the top
my man

[paine]

" ...worker may not be worth enough to warrant a raise"

".. What is the cost of replacing them"

worth and replacement cost
between these two poles
potential rent yields florish
to conflate the two
is to assume away the issue

note this
stagger-ing-ly jagged and conflicted meme jig :

"if the firm makes significant profit,
who deserves a piece?
Is it the 'worker' at the bottom, who contributed?
Is it that worker's "fair share"?
How do the spoils get divided, so to speak?"

jb clark's margin revenue product meets the cluster fuck of real co operative or at least collective production

replacement cost only comes to the rescue fairly
if euler applies
and in general he don't
otherwise rents arise as residuals exist
rents in no way
necessarily a necessary comp for risks
rents
ie non supply regulating income
that properly belongs to the whole people
why

because the state could take it in taxes
and still get the same output result

[Andrew]

By the by, Happy Anniversary of the New Deal.

Intellectual Underpinnings (a context, via Mike Lux)-
"Who do was the first American political figure to advocate for:

-A publicly funded Social Security system for the elderly
-A progressive estate tax and a progressive income tax system
-Welfare programs
-Employment centers for the jobless

It was not FDR or Woodrow Wilson, or even the populist movement or labor movements of the 1880s and 1890s. It was Tom Paine in the 1790s."

Methinks it is time to renegotiate our contract.

[paine]

"our quasi-humanist sense of equality"

what in god's name does that mean ick ???

and why the "our"

you have such a sense ick ??

or only simulate it
to understand others folly

[ken melvin]

Where oh why in this exchange that is economics is it writ that the working bloke isn't entitled a profit on his? Far better methinks those countries where 'tis so.