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):