To me, the equality experienced by the average citizen is expressed by the percent of GDP per capita enjoyed by the mean family as income.
USA : 69.5%
Can: 89.4%
Sweden: 93.3%
While the US enjoys by far the largest GDP/cap this is not reflected by the amount of money trickling down to the people.
Even tiny Sweden, with its soul crushing socialist tax regime has a mean family income greater than the richer US
23
@cowichan Your figures don't include cost of living expenses
1
Two points that hopefully illustrate the problem in quick and understandable ways.
1. In the first quarter of 2016 GDP growth fell below 1%. And the Obama administration got roasted for it.
We also had the warmest winter in decades and a 50% reduction in the price of oil from the year before. So the reduction in GDP was, in fact, savings of tens of billions in heating costs for that winter.
It was a plus that GDP data reflected as a minus.
2. To put the "until 1980" in stark reality, in those days 99% of us had 91% of the income. It was possible to look at nationwide data and get a pretty good idea of how things were going.
America is now equivalent to a room holding 99 people who average about $40,000/year; and someone walks in who's making $1,500,000/year. The entry of that person does nothing for the 99. But too many of us think that average pay in the room has become $55,000.
We need to use basic explanations to make basic points that can show these realities to the American people.
175
@Paul’52
Thank you Paul for Clearly explaining what most of us feel every day.
We see the stock market at all time highs - and yet, after grocery shopping, bill paying, paying the way-too-much taxes on my home . . . there's nearly nothing left - certainly not enough to start a meaningful "portfolio" !
The actual current yearly income increases are nearly zero - meaning - with the cost of living going up each year - the struggling "Middle Class" is losing ground as the wealthy grab it up.
32
We need to use the median. That is, journalists need to use the median.
8
@Paul’52
I recall Bush Sr. flaunting an employment statistic using that formula: i.e. 100 thousand jobs added without that breaking it down to 99 thousand jobs at minimum wage & 1 thousand jobs at $100/ per hour, and then averaging that into a "median income" of alll those jobs added.
7
Years ago I was in a meeting in Minneapolis where developers were proposing plans for what would become the Mall of America. They were particularly proud of the hundreds of $7/hour jobs that would be created. My friend from HUD raised her hand and asked, "Where are the $7/hour apartments?" It's still the right question.
155
@Ralph
Bravo for this comment. This is indeed the question that should be repeated to politicians ad nauseam.
13
As well as where’s the $7 transportation, medical care, child care, tuition, & retirement plan.
16
RFK spoke to this in 1968.-
check YouTube "RFK 1968 GDP"
In 1.5 minutes he summarizes beautifully.
We lost a True Leader.
Excellent thought.
The crux of the American Myth.
F3
2
“What you measure is what you get.” “Are we measuring and rewarding the specific behavior we want?”
Blue collar workers who dropped out of the middle class? Blue collar workers who voted Trump out of despair? Show how they are doing worse than their fathers or grandfathers. Show who & what nicked them the most, the least, and the politics behind their pain.
You’re ailing & see your trusted doctor. You don’t expect “Doc” to be the one who infected you years ago.
2
YouTube Andrew Yang
Andrew Yang 2020
A few observations:
1 - The author seems to not comprehend the data she is citing. She says that since the 80s GDP grew by 1.3%/year, while income for the 90% (the mass of American work and middle class) grew by 1%/year.
That is actually an awesome result, showing that the 90% captured , 77% of the income growth of the country.
2 - It has always been absolutely the case that whenever GDP grows for a sustainable period of time, like now, median personal income rises for the vast majority of Americans - like we are seeing not. Conversely, when GDP declines, personal income declines for the vast majority of Americans.
So GDP remains strongly correlated with the financial well being of the vast majority of Americans. More so than GINI coefficients or any other feel good/bad measure that the left comes up with.
3 - It is amazing how those complaining about wages of the masses being low, are the same ones advocating for a near-open-borders policy, which simply means an endless supply of cheap labor, which is likely the single largest factor depressing wages in America.
Just think how much you'd be paying for a gardener, house painter, babysitter if you removed 11M illegal immigrants from the US labor market. That is your wage increase right there.
if you want low end wages to rise significantly, the last thing you do allow/encourage hundreds or thousand low skilled economic migrants in. That would tend to hold wages down and makes it difficult for poor families to get into a affordable house.
Government mandated equality measures often don't end well and backfire with unintended consequence. Poor Americans shouldn't have the value of their labor diminished by importing excessive poor economic migrants.
Try that for a few years before interfering in markets.
2
Income inequality is a problem. A perpetually growing economy is a bigger problem. Nature bats last.
5
A clearly written caveat which is needed.What and who will serve as barriers to integrating its suggestions into both more accurate assessments of “success” as well as enable a new needed mind-set of “fail-better” to be bridged?
In addition, we can/should be more aware of, sensitive to, consider the toxic constraints of binary banality’s either/or, when in reality there are continua, ranges, levels...dimensions of diversity awaiting our selection.
An expanded mind set of: “ in addition, and in addition,etc.” could help.
An additional article helping us to explore and better understand how realities’ ever-present interacting dimensions of uncertainties, unpredictabilities, randomness, outliers and lack of total control, notwithstanding what one does, timely or not, can/do influence aggregate data.
GDP measures quantity but disregards quality.
There's an inherent flaw in our chosen statistics, and it's all-together obvious what that is.
1
First, this article says people at all levels of income saw their incomes rise at about the same rate. Then it says that incomes among the poorest rose much faster.
Which is it?
So many good comments and a good article. Things could not be more in-equal at this point than the dawn of the Industrial Age or further back, the beginning of the Civil War, or perhaps Christendom and the Aristocracy during medieval times. Basically, anyone not really really connected with the top 10% are someone's serf. As I've said in this forum before, the days of the so-called "American Dream" and the ability for the majority to "pull themselves up by their bootstraps" are gone. We're all indebted to our employers, credit providers, and what good graces in the way of government safety nets (that have not already been stripped); independent business owners, unless they're in the top 10%, are also in the same boat. Those with a heart should gladly anticipate the biblical Armageddon, unless you prefer Mr. Robot's Ecorp and Whiterose to come looking for you first; don't laugh, the former is well on its way and the latter exist, by different names - or don't you read the news?
2
We've known this for decades. It became very obvious after the recession of 2008. We're told that the stock market is at record highs. We're told that unemployment is the lowest it's been since the 1960s. We're told that there are jobs out there for whoever wants one and that companies are struggling to find people. We hear that tens of thousands or hundreds of thousands of jobs are created each month. But we don't know how that applies to us when we can't find jobs in our fields or doing anything.
We hear about housing starts. But when we have to live 2 hours from work because that's where the affordable housing is (rental or otherwise) those housing starts mean nothing. And there's more: there are too many working people who can't afford housing no matter where they go in some states. Suggestions that they move elsewhere to work make no sense. Why isn't there more affordable housing?
My reaction to all the good news is this:
What kind of jobs are being created?
Do these jobs pay a living wage and are they permanent?
Who is getting the jobs?
How are the jobs being counted? (When I look at the ads I see the same jobs listed on multiple sites and by multiple recruiters.)
Why is the prime working age considered to be between 25 and 54 when we're expected to work for full SS benefits to the age of 67?
What about the fact that our wages never seem to increase in step with cost of living increases?
10/28/2019 6:27pm first submit
4
Perhaps Biden, Klobuchar, Buttigieg, Warren and Sanders can show these 10-percent swaths, over the past 40 years.
In inflation-adjusted numbers, for each 10-percent swath, show the income in 1980 and in 2020. This will show where all the wealth went.
Make separate skinny swaths for the top 1 percent and top 0.1 percent.
Then show what they project as a result of their proposals for taxes, Heath, education and government infrastructure spending — for the next 40 years.
The Gross Domestic Product was just that — gross, in every way.
3
This opinion piece is too late. The media have been complicit in claiming the economy is "booming" because market indicators keep rising - the S&P hit a new high today. But the trillions that are not being spent on climate issues will be a bigger burden than the national debt because people will start to die and already have died as a result of stronger storms and flooding. The current administration is clueless and led by ignorance at every level from the White House through the cabinet. Once we start to pay the bill that is overdue the economy will not crash but will actually boom with new jobs to save the planet. That is the real reason to vote in 2020 and get rid of the threat that hangs over all of us if we do not start to push forward to change how we power the future and cool the planet. And this can only be done in concert with every nation on earth - with wealthier nations investing in helping poorer ones to make changes. These climate battles will be as great a challenge as all the wars ever fought, but we must start yesterday. Trump's ignorance casts a dark shadow over all our lives. And the GOP is aiding and abetting that ignorance. 2020 must clean the slate of anyone incapable of facing the truth.
8
Tens of millions of American households cannot scrape together $500 on short notice to address an unanticipated medical expense or other cost. Thus the ‘payday loan’ business - relatively immune from meaningful regulation — continues to thrive. We’ve made loan sharks respectable; just as we’ve made the numbers racket a government function.
The average American family earns about $60,000 before taxes. Health insurance for that family runs about $20,000.
Retirement planners advise drawing about 4% of savings per year during retirement. To draw the average family’s income, you should have $1.5 million socked away.
The top 1% of American households by net worth controls about 30% of the nation’s wealth. The entire population that we define as ‘the middle class’ owns about 25% of the nation’s wealth.
That’s our problem. And instead of doing something sensible to address it, we do the opposite: pass more enormous tax cuts for the wealthy and watch the federal deficit blow up like a helium balloon. All the while, the "fiscally responsible, conservative" Republican Party, now hijacked by the pseudo-populist demagogue Donald Trump, sells the ludicrous myth that "the tax cuts will pay for themselves."
Ronald Reagan tried to sell that snake oil 40 years ago, and it has been tried over and over again since then, from Louisiana under Jindal to Kansas under Brownback to the U.S. Treasury. It inevitably results in huge deficits and drastic cuts in essential benefits and services.
11
This is exactly what Andrew Yang talks about. Google Andrew Yang!
3
@ellen
Exactly!
NYT has got to give Yang credit here for helping to bring this issue to light.
"What is really going on" is a massive transfer of wealth from the middle classes to the 1%, via schemes designed for this purpose and supported by both parties. The major factors have been the facilitation of this process by the Reagan tax rate cuts for the wealthy, and during the past 11 years public support for Wall Street, initiated by Obama's Fed and forcefully continued by Trump. Since wealthy politicians make the rules, it is not clear how this structural inequality can be reversed.
3
Economic statistics are data, not conclusions, not decisions, and should not be relied upon to be measures of well being, personal satisfaction, mental health, nutritious food, adequate housing, or other subjective measures of "happiness."
Regardless of how you measure the economy, having a bigger pie ALWAYS means there is more pie to divide than before. There is no way to measure "well being" or the "future" "long term benefits of economic policy without discarding the data you don't like, and keeping that which reinforces your subjective expectations. This is not managing, this is being "hopeful"
1
@Bill Clayton
Just because the pie is bigger does not mean that your piece of the pie is bigger. All I know is that over the last 30 years I have been asked to pay more taxes to subsidize the "job creators", while government protections against rapacious bankers and insurance companies have disappeared. Never mind the disappearance of corporate liabilities for pollution or hazard.
4
No, but if the pie is smaller, everyone's piece is likely to be smaller. Stop feeding those "job creators" at your peril. In any case, economic data didn't create any of your problems, it is just data.
It may also be useful to examine the relationship between GDP and corporate Debt levels.
A debt fueled boom is often a lot of puff, driven by cheap money and is at risk of rapid collapse.
The situation now is not that dissimilar to the time prior to the GFC... how a sudden collapse is avoided is anyone’s guess.
1
Averages afflict all kinds of measures of economic well being.
The average retirement savings in the US for ages 60-64 is $229,101. This sounds low but not nearly as low as the median of $16,000. In other words, half of the age group has basically no savings to contribute to their annual income.
The top 10% have a healthier $619,000 saved, which pulls the average way up from the median.
Somewhere in America there is a household that has the average figure of $229,101, but they are not in the middle.
3
How, if at all, would the new measures capture the value of unpriced work or the cost of unpriced externalities, which the author laments are omitted from current GDP measures? If the new measures don’t, they will still be grossly inadequate.
1
The critique of this critique can be summed up as "OK, what do you recommend we use to measure the economy?"
There is no satisfying alternative. GDP is the best correlate to whatever you are trying to measure (health, general well-being, etc).
One can argue that our anemic GDP growth is even worse than it appears. It is now so dominated by health care cost increases, can you even make sense of it?
Healthcare costs are approaching 20% of GDP. Health expenses have been running at a multiple of GDP literally for decades which is how we got here.
So if GDP is growing at 2% and heath care at 6%, that means, if health care costs were flat, then overall GDP would drop to .7%. Think about that for a second. Health care costs represent 65% of GDP growth.
My bet is that the right will make this very argument in fighting against Medicare for All, that is, it would cut the inflows of cash in the healthcare sector or, heavens forbid, actually turn to growth rate negative, then the US will see a huge slowdown in GDP growth. And they will make it all about what? That's right jobs!
They will argue that we can't bring down healthcare costs because it would kill that largest single jobs engine in the US.
Really, I will bet that will be the logic. You can see it coming.
1
Median data is more useful than averages, which are generally useless. Percentiles like quintiles are more useful yet.
But what we should be measuring better are the costs of living, which arrive unevenly through life and thus are minimized by traditional economic bureaus that also use averages.
It is no secret that health care and education costs are soaring, and yet low inflation figures do not reflect this. To a college graduate who spends a third of their income paying off student debt, while their parents incurred no debt because college was inexpensive back in the 1960s through 1980s, this seems like a bad joke. And the top reason for personal bankruptcy is medical expense, also a relatively recent phenomenon.
As a society, we have learned how to smear costs around so that the total impact is hard to find. College students overall might have better resisted soaring college costs by choosing schools that offered better value if not for easy student loans to make the problem disappear. And that might have slowed the administrative bloat. Instead, high tuition became a measure of quality, a poor one at that. And the for-profit diploma mills cashed in on the unsuspecting.
Similarly, first dollar medical insurance like Medicare Supplements, made seniors more vulnerable to surgeries that retrospective data shows are medically questionable or ineffective.
Health care and education could adopt lean analysis to provide better outcomes at lower cost.
1
@Look Ahead
Essentially every state university has the same tuition for residents, within 20%. The reason that college costs have gone up is that more people are trying to go to college and state support has dropped.
This does not include costs of books, which have skyrocketed because of the textbook industry gaming the system.
1
How about grouping economic data with deaths from automobile accidents, suicide, and murder; hospital admissions for asthma, homeless estimates, and number of bankruptcies.
In other words, we look not only at the wealth or the country but the health of it.
Oh yes, and track the above in real time. A society that runs on computers can certainly track many health issues as well as economic ones.
1
We also need a way to value leaving Earth's resources alone.
An unharvested tree doesn't count for anything, it's benefits are not counted at all. But cutting it down and processing it, and all the pollution and other impact involved in doing that, does count as 'growth' and is encouraged.
This is counterproductive to what we truly need now.
3
Part of the reason inequality is rising is due, I believe, to our rather poor public education system. Not necessarily poor in terms of money, but poor in terms of developing students who can get good jobs without necessarily going to college. Not everyone is interested in or qualified for higher education, but they all need jobs. Jobs that pay well require skills and good self-discipline.
1
@Thomas Smith
I agree that inequality in education is an issue, but I'd guess the biggest culprit is our tax system. If my extra money earns $50k then I pay a 20% tax rate. If I work 3 part time jobs and string together $50k I pay 30%. The rich get richer....
3
Real world measures of the economy are needed to show those lower on the food chain exactly how government policies are working for them, something honest elected representatives should want even if they already see and know the effects of policies that primarily benefit the rich and big business. Millions are struggling economically and many in the comfortable middle are being pushed downward, while politicians who cater to the rich spout meaningless GDP & unemployment numbers to cover for continued economic inequality. These are the same people who do not act to provide affordable healthcare or an economic stimulus through infrastructure jobs. They are quite happy with the way things are, but I guarantee that kitchen table discussions about paying the monthly bills give no thought to GDP or historically low unemployment data. Real world data alone is not going to solve anything, but a true picture is better than a thousand misdirections in pointing the way forward.
2
Bhutan's measures the welfare of its people as an index of GNH (Gross National Happiness). The index measures collective happiness and well-being. The U.N. General Assembly passed a resolution in 2011 urging all nations to adopt Bhutan's approach. Perhaps there are better ways to sort out collective priorities than benefits to economic output. Sounds like a great start to me.
GDP is a fallacy on many levels. Not only does it not accurately describe growth across all humans, it also omits the cost of industrial materials extraction on the environment upon which everyone of us is dependent. If our accounting system showed the true cost of restoring land to "as it was" condition after manufacturing, or energy extraction, GDP would actually be far higher, as the labor required to do so would also be considered an 'output.' It would also demonstrate the true cost of production, which in the case of gas and oil are once in a 100M year opportunities something which our feeble 1800's based accounting model has no ability to account for other than an arbitrarily assigned present 'agreed upon' day 'value.' We ignore true long term cost/benefits to both ourselves and our home at our peril. In our present day search for growth, we need look no farther than 'restoring' our planet to some form of ecological balance via responsible stewardship.
1
Nothing “trickles down”, as ever more is squeezed out of a decimated workforce, with whites, now dying deaths of despair, in numbers each year, akin to the casualties of the entire Vietnam War.
2
Causes of Growing Income Inequality and the GDP Metric:
1) From 1963 to 1979, "transfer payments" in the form of tax transfers were probably much larger than today. These transfer payments from the rich to the middle class and poor were spent by the recipients at a greater rate ( a higher marginal propensity to spend) than if they had been saved by the rich (who have a higher marginal propensity to save). When Reagan entered office in 1981, personal income tax rates were as high as 70% on the rich, and were initially cut to 50% by him.
2) Much gov. spending is financed by borrowing. And, the expenditures from these loans are treated similar to business revenue or sales by the gov., because these expenditures are treated as new production and included in GDP. Several European countries, such as Greece, and others, have experienced debt crises as their total annual gov. expenditures have exceeded the maximal 3% annual deficit limit recommended by the EU. Thus, the stability of some sovereign bonds are jeopardized, with bad repercussions for the impacted national banking systems.
3) On Wed, Oct. 30, 2019, the Fed is expected to cut the federal funds rate by 25 basis points, as a boost to the US economy. Then, the very rich with large positions in the bond markets, will reap large "paper" or "intangible" capital gains from their prior investments of their savings in these debt markets; with such gains absent for others without these savings.
[10/28 M 2:27 pm Greenville NC]
3
I remember reading about this in my Principles of Economics textbook in the early 1980s. I hope something is actually done this time.
1
Our economic culture today and it's legacy was bequeathed to us from the days of Peter Stuyvesant when the island of Manhattan itself was owned along with everyone in it by one of the World's earliest corporations. The pirates of yesterday have been replaced by the pirates of today albeit better educated and more polished but still pirates. The pirates of today really don't want the kind of statistics that Ms. Boushey is calling for. There will be no "Money Ball" statistical illumination done at least by the U.S. government. Why? Because the GOP and the corporations that own it don't want it.
3
Indeed, the old GDP model needs an update. Thank you for writing this article to bring this issue to the public. In my profession, that is basic research, we have a phrase that describes what you are reporting - "garbage in, garbage out" - the wrong measurements are the worst enemies to a scientific research project. It is time to clean up the data.
3
Trick or trickle? Trickle or trick? Here's a note about the present government's view of money by Robert Reich:
https://www.facebook.com/RBReich/videos/425992428073892/
1
Another thing that obscures the income inequality is expressing the increase in terms of percentages rather than in dollars. There is a big difference in the amount of money a person gets who is making $30,000 per year with a 1% increase in income compared to someone making $100,000 per year with the same percentage increase.
4
Excellent article. Worsening inequality has cost the middle class about $20,000 per year before tax and $4,400 after tax. These figures can be derived by recasting the 2016 income at the 1979 distribution, using the latest CBO data. That makes inequality real.
P.S. The real GDP growth 1963 to 1979 was more like 3.8%, not the 1.7% in the article.
3
Another factor in the economy is how the money is earned.
Extra money because of high interest rates vs. salaries paid to teachers for example.
Job training vs. junk food that adds to our healthcare costs.
Etc.
In addition, there is distribution.
11 people making $100,000 = $1.1 Million = average of $100,000.
10 people making $10,000 plus one person making $1 Million = $1.1 Million = average of $100,000.
Same average. Very different economies.
10
In 1947, the financial services sector (finance, insurance, and real estate) accounted for about 10% of GDP. In 2016 that sector grew to account for 20% of GDP. Much of the financial services sector is what economists call rent-seeking, that is, skimming off wealth without contributing to productivity.
Yet our economy in general, and our income tax structure in particular, rewards rent-seeking in general, and trading pieces of paper (securities) that are farther and farther removed from the production of goods and services (derivatives) in particular.
It's no surprise that when the economy collapsed in the fall of 2008 because of collateralized debt obligations, and the bets that those obligations would eventually fail (credit default swaps), that the Congress and the administration bailed out the rent-seekers instead of making mortgages whole.
Until we refocus on tax policy to end punishing labor (income on wages/salaries/tips) compared to "unearned" income (dividends, capital gains, interest), wealth and income inequality will continue to grow.
12
@Kevin Brock
Thank you for your deeply thought out comment with this one among many pearls:
"Yet our economy in general, and our income tax structure in particular, rewards rent-seeking in general, and trading pieces of paper (securities) that are farther and farther removed from the production of goods and services (derivatives) in particular."
And indeed, an opaque system is favored by hustlers of every stripe.
1
The analogy is that that with all the money hospitals, insurers and pharmaceutical companies make, the health care system must be doing great! Not.
4
I have to think that if you measure total environmental assets and their change in value each year (water table drops, topsoil erosion, forest loss, mineral reserves), we would see that actual GDP growth has been negative for several years.
5
Ms. Boushey,
Thanks for writing this. You are eminently qualified to provide this well written report. I was pleased that the Appropriations Committee provided funds to begin reporting economic performance in deciles. This will be am important tool for voters to discuss with candidates for public office and formulate public policy proposals. Eventually, I would like to see more financial and well being data reported by Congressional Districts. After all, that is what representative democracy is all about.
I hope you will continue to write about the need to access the IRS data to also sample individual tax data so we can get a better handle on income and wealth inequality.
One area that you should look into is the effect of local property taxes on incomes. These funds typically are used for public safety and the extremely important investment in the education of our children. I think you realize that the investment cost per child is quite different from poor to rich education districts.
I am a fan of the findings of Mancur Olson, who published his work in "Why Nation's Fail" in 1982 and he found that the affluent use their money to tilt the scales in their behalf so it will be rough to achieve the fairness in the tax code and incentives that would better serve most of the income distribution.
Finally, your environmental costs are important and could be measured and reported in health data and life expectancy. We must clean up our "commons" air and water.
4
I think it was Paul A. Baran, long time ago who proposed to discount the growth of the enterprises related to the pollution they produced. He was an objective economist.
2
Just wondering if the current design of data aggregation and analysis can be explained as ignorance, apathy or intentional. I always wondered why govt's do such a poor job while private institutions have to work so much harder - even in situations such as this.
Knowledge is very powerful. Once people come to know who is really gaining / loosing - it can lead to power shifts and re-imagining decades long idelogies.
I suspect this is the main reason why we don't see fundamental changes .
1
The biggest issue with your conclusions is not your arguments, but those most adversely affected.
Anyone with an understanding of Trickle Down theory knows it was a failure. But with the exception of the ACA, our policies have leaned heavily on Trickle down since Reagan. the outcome has been predictable.
Yet the right has done an exceptional job of disorientating our criticism. Those most adversely effect are more likely to blame illegal immigrants or "welfare queens" than our tax structure. In the period of economic growth after the war the wealthy were taxed as high as 78%, now its 37%.
The second myth is that the wealthy know whats good for everyone so we should let them have the money to create growth or what ever. But basic self interest says that is not true.
So collect all the statistics you like, but how do you convince 40% of the population that they have been conned by the president. His tax cuts will hurt you and be devastating to your children. They can't comprehend it. Even if the got close they would be reminded about the needs to defend their guns, and like a dog after a squirrel they would be gone.
Your real challenge is not developing the numbers but how to make stupid people understand that they have been conned
11
Inequality is not a crime nor a problem. When it become one or the other there could be a revolution. But you cannot predict it or do anything about it in advance.
Sex, lies, videotape, and economics - it's all lies and laws that privilege the few. Got worse under Reagan and every president after him with the possible except of GHW Bush. Clinton got the Fed to reduce interest rates and removed market regulation eventually resulting in the crash but the Fed has kept interest rates so favoring as doe the laws real estate developers!! The method of reporting UE figures changed in the early 90s so any comparison is meaningless.More and more outsourced to where ever including Apple, Walmart. And now the horrid Amazon. Even in NYC I need order via a catalog because what I need pottery bats for throwing does not seem to be sold anymore in NYC. We hear more about sex than income inequality and the big problem that workers are competitive with their lower paid counterparts elsewhere brought in on H2 visas because the US does not have sufficient grad programs in subjects like Physics or the cost of tuition for such programs is too high. BTW free education has to for those who qualify - pass the various exams! Greed conquers... until the day the system fails...
2
In the 90s Cliff Cobb created the Genuine Progress Indicator as an alternative to the GDP, using different indicators, and taking externalities into consideration. If anyone is interested, it was the cover story on the Atlantic, headlined "If the Economy is Up, Why is America Down?" https://www.theatlantic.com/past/docs/politics/ecbig/gdp.htm
3
Aggregated income figures not only ignore the inequality that exists, but also ignores people off the grid (or off the IRS radar) because they are jobless, homeless, or scrape by on cash from odd jobs and other means of support. I am nearing the end of a personal stint doing person-to-person charity and have found many obstacles to achieving self-support. It's too expensive for me to continue as I'm rather poor myself. But---it's hard to count the homeless and jobless, and the census bureau must do a good job of determining the population, whether working or drawing benefits or off the economic rolls entirely. My roommate's son, for example, has worked since 15, most recently as a kitchen manager, but at 19 has been jobless for months. There are personal issues involved, emotional issues (man is not just an economic being). Others may be ensnared in substance abuse and/or legal problems. Regardless, just looking at IRS tax-related data will miss the millions of people who are marginally or not at all connected to the economy via earnings that go on IRS and state tax records. Yet they need to be counted in figuring per-capita and per-decile earnings.
2
Thank you for this article and for bringing attention to Saez and Zucman, the now American based team of French economists. I just bought their new book, "The Triumph of Injustice." From reports in main stream media, these two are providing Americans with a fresh and realistic understanding of our outrageous economic inequality. I'm reading this book as a text; it's language is plain English but the concepts need thinking through, at least for this non-economist who has to hire and trust a CPA to do the tax returns.
If I'm understanding correctly, what they propose is just recognizing that national averages include the ultra rich as Bezos and Zuckerberg and so averaging these outliers skews our understanding of national income. As an alternative, Saez and Zucman break down incomes by 10 percentiles on the national income. Using this measure on the horizontal (x) axis of a graph, the vertical (y) axis can be types of taxes paid or wealth vs income. The graphs that result are startling and mind blowing.
According to a New Yorker interview. Saez and Zucman offered their ideas to both Hillary and Sanders in 2015 but without much attention paid to them. It was Warren who recognized the significance of their ideas and took them on as advisers for her financial plans. About eight months later, Sanders followed suit.
If we elect a president who understands economics, she will help Congress understand we need to report more than GDP.
1
The elephant in the room that will enter into the success of the economy in an ever growing way from this day forward will be the costs of mitigating and adapting to the effects of climate change. To date the pluses and minuses to GDP have not really begun to enter into the calculus. The transformations that will take place in industry, business and people's lives are going to be dramatic. A very different economic regime is ahead.
2
Another equally misleading statistic is the unemployment rate. It does not take into consideration those who are underemployed, i.e. working full-time but not earning enough to live. It ignores people who cannot find jobs at their level of training and must settle for much lower-paying work in order to survive. It does not differentiate among employees and contractors, nor does it count people who must work two or three jobs. Like the gross domestic product number, the current unemployment rate paints a rosy picture when, in fact, America now is a bleak place for a significant percentage of our population.
5
Everybody can’t be rich, but everybody can easily be poor. Be careful what you wish for.
2
Jack Welch pioneered income inequality. In both the short term and long my GE layoff negatively impacted my families economic wellbeing while Jack got rich GE workers lost jobs and careers. To this day I still think of him as the worst American CEO ever.
4
Economists use templates that provide statistics that fail to encompass quality of life issues that constitute gain or loss for the majority of the American population. Once identified by a stabile, thriving middle class, America over time has seen this income demographic threatened by numerical demise
as middle class life is now more and more being maintained by credit card debit. The American worker faces a job market where employers in order to conserve operating costs have appropriated various devices to avoid paying the benefits customary for full time employees. Turning full time jobs in to part time jobs, using temporary and contract workers. Figuratively speaking, the American middle class has become the filling in a sandwich held between a top upper crust slice of bread pushing their number into that lower income bottom slice. The individual prosperity that once identified the American way of life squished into an offering without sustainable sustenance. Served up is severe income inequality, what's become America's brand of daily loaf.
3
Physicists would be roundly mocked (and defunded) if they persisted in using tools and analytical techniques from nearly a century ago. Why is our government content to do this? Knowledge marches on, but not bureaucracy (or politicians), it seems.
3
A big part of the problem is how economic news is reported in most of the media. Business coverage all too often consists of reporting how much the Dow went up or down, usually in number of points, not a percentage and GDP and unemployment figures from U3. These indicators aren't totally useless in and of themselves, but without some context they are misleading at best. This author suggests some helpful changes, but without an effort on the part of the media to publicize them and provide context these expanded and more accurate measurements won't accomplish much.
1
Measures of the success of the economy should focus on the well-being of individuals and on the long-term effects of economic policy. Can all of our citizens get adequate housing, nutritious food, and medical care when they need it? Can they afford the education that their children and young adults need to live a full life? Can they look forward to a retirement that offers an adequate standard of living? Are we creating an indebtedness that will haunt our children and grandchildren? These should be the questions that every serious economist should focus on.
In this context, I am perplexed how little attention is given in economic analyses to the exploding national debt – almost $1 trillion this year. You know, I can look wealthy if I get an almost unlimited credit card and spend and spend on it. But in the end, the bill will come due and my children won’t be able to pay it. Isn’t that what we are doing now?
88
@Sam McFarland
The richest have essentially bought the government, and are only concerned with their own financial growth.
This is how Trump and most in our government are measuring “success”.
Meanwhile, people who actually work for a living are demonized and called losers, when in reality, they are an essential part of the fabric of our country.
America has embraced the exploitation of workers.
We need to understand how the corruption of our government is destroying what America was meant to be.
36
@Sam McFarland
When the GOP create this increase in the national debt they go about creating another war to take your eye off of the issues. The GOP could care less about hte national debt because they are all rich and could care less about the American people
Bush inherited a healthy economy, and we had almost a depression, Trump will do the same. however lets cut SS for seniors they are a burden to society per Trump and the GOP. Then cut food stamps we dont need healthy children.
This country is owned by the rich we are all on a giant plantation and treated like serfs.
20
@Sam McFarland I don't know. Dick Cheney famously told us deficits don't matter. 45's biggest "success" upon taking office was giving away a large tax cut to our wealthiest Americans and a temporary cut to all Americans. It seems maybe the deficits don't matter until they do.
17
The rich own the government at this point and make the rules that benefit themselves, it’s as simple as that.
There is no one to represent the working class or the poor.
It’s hard to see a righting of the ship of state under current conditions.
Money should never be equated with speech, but the rich get to decide this point, and the greedy, selfish 5-4 decision has made sure that it’s a rich man’s country.
7
Seeing as we know real incomes for middle and lower class households have been stagnant or negative for the past 40 odd years, why haven't we already seen a policy change? The data aren't really the problem, now are they? We can make the analysis easier but it hasn't changed the numbers. Whenever we get a politician working to address wealth inequality in the United States, they're shouted down as a "communist" or worse. Looking at people's tax returns isn't going to change this reality.
You fail to address the structural problem. Inequality is viewed as a feature, not a bug. Those in top 1 or top 10 percent worked very hard to make our economy this way. A few numbers are hardly likely to dissuade them. This is true on the left and the right. You look at the Democratic primaries and the wealthy are still adamantly backing Reagan era neoliberalism. The inequality is intentional. Unfortunately, money is now speech in the US. The imbalance doesn't bode well for the rest of us.
136
@Andy Those in the top 1 to 2 percent probably have lobbyists working to help them maintain or get more. Most of the remainder of us are just experiencing the general thrust of capitalism over time. The huge study done by Ths. Piketty showed pretty well that over time and without significant adjustment by law those who make the most will increasingly get more and more of the economic pie and will in addition pay for laws that make their economic situation pay even more.
This is true for all economic systems but especially for capitalism whose major goal is the production of profit and the accumulation of wealth. All you need do to see the validity of this is to see Russia and China and India — all of these have the money flow to a small percentage at the top.
If we want a fairer distribution of the profits made by ordinary people, the American voter will have to vote for legislators who favor the curbing of massive accumulations of wealth by a tiny proportion of the population. Whether we do that through healthcare and childcare etc. supports to ordinary people or through taxing wealth is of less importance than the fact of doing it at all. Why? Because democracy cannot be maintained with vast disparities of income among citizens.
50
@Andy - "why haven't we already seen a policy change?"
Cause the endlessly greedy Big Buck peeps legally own the "policy changers", (see, Citizens Divided). As you aptly note, money is now speech.
20
@Andy See the arguments you make in the candidates from the Democratic Party. Joe Biden is the "moderate" who wants go along to get along. But Bernie Sanders and Elizabeth Warren are painted as too far "left" and radical to be elected let alone get their proposals passed.
So who is doing the characterizing that way? The answer I think is the same groups that intentionally produce inequality.
17
Yes, yes, yes....
And what about indicators that show the relationship between business investment and growth as a function of skewed income distribution.
We may have a welfare function in mind that generally favors more equitable income distribution but the elephant in the room is that the more skewed the income distribution the lower is growth and improved welfare for all but the wealthiest.
Moreover, the cost of basic needs like health care, housing and education continue to rise faster than incomes, especially of the bottom (90%) contributing to worse health and welfare outcomes. And manufacturing and agriculture are in a quasi recession owing largely to trade policy but also to skewed incomes. The lesson here is that there needs to be a way to present disaggregated sector outcomes and their welfare impact. Perhaps publish a summary breakout of the CPI disaggregated for income deciles and regions?
It is important to link skewed income growth among deciles to economic impact,. We know how to do this. Public officials, academics and media could be reporting a lot of this information in consumer friendly formats --relevant key stats rather than just GDP growth. There are a plethora of aggregated welfare indicators. The challenge is to get Americans to expect and think about this data.
Commentators should get into the habit of providing core, essential statistics, especially when politicians inadvertently (?) cherry pick economic results.
What a pipe dream - there is no way Congress is going to grant anybody, including people within the government, the kind of access to personal income tax returns necessary to calculate the true effect of "economic growth" distributed across the taxpaying population. Let us also understand that no matter what, the true effect will still be under-estimated (or over-estimated) because there is a percentage of persons who are so poor they are not required to file income tax returns! Common sense and having a set of working eyes shows average Americans the truth about the "growth" in the economy - little to none of it is flowing to them, the very people who have produced the wealth and the growth.
72
@Jan N Not exactly the case. There are well-known procedures for ensuring proper confidentiality.
9
@Jan N
The IRS could generate the aggregated statistics needed by the Bureau of Economic Analysis -- there would be no need to release any individual returns. And the number of non-filers could be computed in a manner similar to the unemployment rate -- based on population statistics -- so the scheme laid out in the article is doable.
Let's do it.
60
@Jan N - The IRS does in fact publish all kinds of statistics, as does the Bureau of Labor Statistics. They are all available online to anyone who want to read them.
18
1% of $1 = 1 cent, of $100 = $1, of $1000 = $10, of $10,000 = $100, of $100,000 =$1000, of $1,000,000 = $10,000. About percentage raises in income, it makes a difference 1%, or double or triple that, of what amount you start with--slim pickings on the lower end of the scale.
2
Thank you! This is what always bothered me about economic reports.
If you give one person 10 apples and 9 people no apples, even though everyone on average has one apple, the reality is that what you have is 9 very angry people being told to be happy with what they've got.
231
@Kristina Excellent example! Maybe even Donald could understand that one-especially if HE was not the guy who received the 9 apples!
9
@Kristina
No, of the 9 people, 6 will be very angry, and the other 3 will take spiteful pleasure knowing that the other 6 won't have them either.
16
Or maybe 10 apples, one gets 8, two get 1, and 7 get 0.
The two who get 1 look down at the 7 who get 0 rather than get upset that they only got 1.
18
GDP measure output. We have seen
many times the increase in inventory
(stuff on the shelf) inflates GDP growth.
Income distribution is a serious issue.
Gloating over GDP growth means US
government care about 1% while
describing it as US prosperity. When there is so much debate about climate
change the pollution, which adversely
affect the well being, is not subtracted.
Good public schools, quality child care
centers as in France don't factor into
well being. Even bad infrastructure in US
and Germany doesn't seem to affect
GDP while it affects the well being.
Another confusion about US GDp data
is its tentative nature. It gets revised
so many times even after three
years. It is the first guesstimate that hits
headline. The revisions get buried
away from the highlight. The current GDP metric is surely obsolete.
22
The criticism is not new, and remains relevant.
“Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.”
— Robert Kennedy, University of Kansas
March 18, 1968
52
@James K. Lowden
Nobel winner Joe Stieglitz has written a book or two on this subject.
3
@James K. Lowden
I have this recorded on my computer--
I was looking forward to voting for RFK.
Listen: YouTube: "RFK 1968 GDP"
Makes my heart ache.
I suspect I'm not alone in thinking I'd rather have a job that pays $50k per year that I love than a job that pays $100k that I absolutely hate. Of course, if the job I hate pays $1 million per year, I'd be willing to do it for 2-3 years, and then retire to do what I want. Unfortunately, a lot of those jobs people hate, but do anyway because of the high salaries, pay what they do because the job is basically figuring out new and creative ways to get fewer people to do more work for lower pay.
38
Enough with the finer-grained and nuanced – and still completely contrivable – national metrics...
Go study why Boston is thriving and Baltimore is languishing...
For a same-state comparison – ask the same question of Nashville and Memphis...
For a same-state same-locale comparison – ask the same question of Jersey City and Newark...
If we can’t handle the truth, no choice but to (continue to) elevate folks like Colonel Jessup to watch out for our interests...
Even if they’d been an absolute Joker, earlier in life...
Yes, Jack Welsh was a Master at setting goals for measuring what he wanted to see. He was so successful he deliberately or unwittingly....I think the former...had GE’s quarterly profits go up every quarter. In a well-known scam discovered after Neutron Jack retired, His accountants used GE Capital as a big fly-wheel to manipulate profits to achieve the required answer.
Only after he retired and his other behaviors were revealed—his ugly divorce, his use of a GE airplane and New York apartment in his retirement package, were the Emperor’s clothes removed.
2
So the NYT is now an expert on the economy...I’ll stick with my WSJ, thank you very much.
1
Paul Krugman has a Nobel!
"...we are missing the reality of inequality...."
Not addressing economic inequality is not an innocent error. Both political parties and those who dominate the economy know the game and like the way it is played.
Hear the anti-socialist sirens? Ever heard the opposite sirens as wealth has been transferred from the nots to the haves?
The establishment is in an anti-Sanders-Warren frenzy because the unspoken has been spoken by both. Even Sanders-Warren fail to note inequality extends to the old observation: rich man's war poor man's fight.
No one publishes the distribution of wealth data. Here's one: what is the distribution of military pensions? Senior officers collect how much versus combat veterans.
Welfare for the rich and the rich for the rich is a staggeringly beneficial game for the those who start with the government protections accorded to them.
The implications of and administration of economic inequlity is the American story. Coverage is limited by its greatest beneficiaries. Conservative media bias operates at its bi-partisan strongest here. There is not a bit of oophs or error involved in cheering for the status quo.
It is an old and true maxim for many: never give a sucker and even break. Get me one of those MAGA hats!
1
Crazy there is no mention of Andrew Yang in this article. He has been bringing attention to the fallacy of assuming individual economic well being is somehow perfectly correlated to GDP since he started running.
From Andrew Yang’s campaign website:
It’s time to start measuring economic prosperity using a wider index that measures human as well as monetary indicators, such as (but not limited to):
Quality of life and health-adjusted life expectancy
Happiness/Well-Being and Mental Health
Environmental quality
Affordability
Childhood success rates
Underemployment
Income Inequality
Consumer and Student Debt
Work and civic engagement levels
Volunteerism
Infant mortality
Quality of infrastructure
Access to education
Marriage and divorce rates
Substance abuse and related deaths
National optimism
Personal dynamism/economic mobility
In short, why use GDP as a proxy for how Americans are doing when we can easily measure that well-being directly? Let’s start an American Scorecard, directly measuring the things we should be focusing on.
1
It's like the box office figures for movies. Whatever blockbuster, good or bad, makes the most money, people take to mean is the best movie out there. So that's the movie they go to. There is no need to hang on to those box office numbers every week!
This is a terrible article about a terribly serious problem.
It wastes most of its ink on describing the history of the problem, and only gets around to Why it's a problem in the latter stages.
I'm sure Mr. Kuznets was a ground breaker in the 1930s - his progeny may be justly proud. But real live people today are suffering in the obscured inequality - indeed, fully 90-95-99% of us.
That's the story, here, and it needs to be better illuminated for not only it's economic - but also its political implications. Insecure people are frustrated and scared - it's not difficult to link their distress to the rise of the avowed strong/con-man-in-chief.
1
For anybody not sleeping must have always been clear that the headline economic data measured the health of Capital. It was never supposed to reflect the state of Labor.
Merica is the most unequal of advanced countries. It is easier to realize the Merican Dream in Finland. Republicanism has done this to us. Both major parties are involved. Republicanism believes government should be reduced to practically nothing in order to let the economy boom. Well decades of tax cuts for the wealthy (together with a little tax-cut candy for ignorant Mericans who are poor at math.
Government is the only friend the 99% has against wealthy/powerful Mericans. Plus there is so many worthwhile things that intelligent good government can do for it's people that is simple not in the interest of industry or the marketplace does not do it well. Healthcare is a perfect example. Also, infrastructure comes to mind.
1
Welsh, CEO of GE, was actually quoting Joseph Steglitz (economist, Nobel Prize laureate, and prof at Columbia University)
"What we measure affects what we do, and if we measure the wrong thing, we will do the wrong thing."
Many have been arguing (albeit lamely) for more than 30 years that the Kuznet Models need upgrading to measure what matters - outcomes & the changing dynamics of our national & global economic system, changing dynamics that change outcomes (enterprise software scalability & block chains are one example and measuring Internal Rates of Returns (IRR) plus External Rates of Return (ERR) is another example). Nice to see behavioral economics is being highlighted in the mix, as evidenced by this weekends NYTimes article by two 2019 Nobel Economists on interest rates, taxation labor force mobility and social programs. As for me, I am confident the economists selected for attention also know, once we set future goals, there are are many paths available to societies for achieving them. Bluntly restated, the economists highlighted by the NYTimes do not work for Big Oil or for large donors to our political parties.
There's a presidential candidate who's been talking about this for months now.
" . . . the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
Robert Kennedy, http://www.jfklibrary.org/learn/about-jfk/the-kennedy-family/robert-f-kennedy/robert-f-kennedy-speeches/remarks-at-the-university-of-kansas-march-18-1968
Remember if you don’t like the outcome change the measures. C’mon does anybody believe that this is not a ham fisted way to give liberals some hope that the improving economy is secretly not good? Remember people vote with their pocketbooks and so far Trump has the edge, so the answer? Let’s change the measures. Silly at best.
1
You are going to have a really hard time convincing me of this as long as I need to have multiple jobs to survive.
Hyped market EXUBERANCE through Ponzi thematic schemes with bottomed interest rates for 99% average Americans,sky rocketing account maintenance fees hurting their pockets,lowered corporate tax rates(21%)without any changes into corporate manipulated tax loopholes coupled with staggering federal budget deficits close to 1 Trillion since 2017 and GOPers partisan bickering will lead US where?
Remember Greenspan’s words & BULL street’s crazy dances in past three decades!
The country that was the first to recognize the pursuit of happiness as an unalienable right is only 19th on the World_Happiness_Report.
It still claims to be the richest.
Clearly it is not doing a good job in using its richness for the common good.
1
There are a great many cognitive biases involved in trying to make such a change, including the status quo and confirmation biases.
Cognitive biases cause people to distort and constrain the information they hear and consider. The more distorted and contrained the information heard and considered, the more impaired the critical thinking.
In my opinion, in order to address this issue, we must build the emotional intelligence competencies of those responsible for making such decisions because emotional intelligence is that which enables people to reduce and otherwise keep their cognitive biases in check. Meanwhile, Researchers have found a decrease in empathic concern among university students by over forty percent from the 1970’s through the 2000’s. Such empathic concern is an aspect of emotional intelligence. Therefore, it's safe to say that emotional intelligence in our society has decreased significantly over recent decades. This is also responsible for the increased incivility, polarity, anxiety, and many other such things.
3
Pieces with almost this exact same headline seem to run almost every year. When are we going to do anything differently? (The definition of insanity is supposed to be doing the same thing and expecting different results.)
I don’t think anyone in Reagan’s administration actually believed in trickle-down economics. It was just rhetoric to convince Americans that allowing the rich to do whatever they pleased was in the best interest of the American people, when in reality they didn’t care. I assume that is why we continue to use GDP as an indicator of the health of the economy - the people at the top can continue to run unchecked in the name of economic growth.
8
@Lisa Richter - "I don’t think anyone in Reagan’s administration actually believed in trickle-down economics."
David Stockman, "The Father of (R)eagonomics", said; "I mean, [Reagan's 1981 tax cut] was always a Trojan horse to bring down the top rate.... It's kind of hard to sell 'trickle down'. So the supply-side formula was the only way to get a tax policy that was really 'trickle down'." - in other words, a way to fool the hoi polloi and feed the Fat Cats. Stockman also said; "None of us really understands what's going on with all these numbers," - (Yikes!). History shows it should have been named, "trickle-up".
In his naivety, Stockman hoped trickle-up wouldn't have damaging side effects, but, as he watched (R)eagan explode our national debt, he realized his mistake and publicly changed his position, which got him drummed out of (R)eaganland.
(R)eagan, it should be noted, based a lot of his campaign against Carter's (relatively puny) debt increase, then (R)on promptly slashed taxes (mostly for the pluto-corporatocracy), increased spending and tripled our debt. He oversaw the biggest %age increase in national debt since WWII, altho' The Fat Man has a good chance to top him - the "best" debt, of course.
1
This piece relates to a concept many in the sustainability community (and others including R.F. Kennedy) have promoted for decades: Measuring success of a culture by General Progress Indicators (GPI) instead of Gross Domestic Product(GDP).
A new method that includes some valuation of ecosystem services as "natural capital." There have been attempts to place a dollar value on ecosystem services such as Robert Costanza's work which resulted in an estimate of $44 trillion(!).
This may seem difficult to do but it is essential.
Either "natural capital" is an economic concept that is at least as viable as financial capital, (which itself is determined on subjective valuation)
or valuation of ecosystem services is more cogent than financial valuation, because (some form of) the ecosystem would continue after the collapse of the economy, while the inverse is not valid.
Is economics as traditionally been practiced ultimately a flawed system of reasoning because it fails to value human survival?
2
@JR
RFK: YouTube "RFK 1968 GDP"
He spoke to it even then!
Ten percent swaths could not nearly capture what is happening in this country, and the world; in fact, it will serve to obscure the truth just as much as the current system. So much wealth has flowed to so few in the top .01%, that they would like nothing more than to be lost in the statistics. meanwhile, they continue to fashion the world to their comfort, while everyone else runs around in a state of constant panic.
5
The Bureau of Economic Analysis needs data from IRS (individual tax return data) in order to measure gains/losses by income level. Treasury Secretary Mneuchin would have to approve this. If the data shows that life under Trump has not improved per this data, the release of said data will be stonewalled. We don't want Trump looking bad, right? Release of "personal information" that can be compromised should NOT be an issue. Any good programmer from IRS can mine data and provide to the Bureau without names, addresses, SS#, etc., to facilitate their analysis.
This both timely and addresses the elephant in the room: the top 1% almost three times the advantage to the lower income growth. So yes let's get Piketty et al's measurement and tailor our own reporting on the economy to show the reality of this "growth" that's so amazing.
More balanced and egalitarian statistics on national income and distribution across all income levels — sound aims as America moves ever more into a condition of burgeoning income disparity obscenely favoring the top 10%.
But as long as Washington heels so willingly to the wealthy special interests and an army of high priced lobbyists that routinely write the legislation, policy and reality will continue to turn a blind eye to the economic plight of the the bottom 90%.
3
@G. Sears: I would make that last statement be 99% or even 99.9%. It's the super-wealthy who gain the absolute most.
1
Like pollution, disease care ("health care") produces nothing and yet is applauded and heavily subsidized by the federal government and business. The disease care industry is thriving and currently accounts for 21-25% of GDP, is the largest non-military sector of the economy, and is responsible for a big chunk of direct and indirect employment. Medical spending and health insurance costs continue to spiral out of control even with price controls in place. UAW just negotiated to ensure their members receive "Cadillac" health care. Endless tests and doctors visits are assured. Pharmaceutical and surgical treatments for preventable diseases like diabetes, hypertension and colon cancer are in non-stop demand. Guns or butter? Both are killing us slowly from within.
4
@JCX
Compared to what?
The rest of the advanced world handles medical care for a fraction of the US folly. Medical expense managment is an American failure not a major insoluble problem.
7
Maybe stagnant inflation and precarious to nonexistent access to healthcare for millions makes treating preventable diseases more difficult.
Maybe a sense of hopelessness has a medical cost.
That Cadillac healthcare you tsk tsk about would cost less if the obscene profits being sucked out of that 3.5 trillion was throttled back or eliminated.
Try punching up instead of down.
1
Can people in the two quartiles around the median income by class afford housing, healthcare, education, transportation, and food? This information needs to be included in any reasonable economic report. What does our economy's health look like if we consider these metrics?
8
"From 1963 to 1979, as the economy grew, people at all levels — rich, poor, middle class — saw their income grow at about the same rate. Over that period, the economy grew at an average of 1.7 percent annually and most Americans’ income growth stayed closed to the average. In fact, the poorest saw their incomes rise much faster than the average while the richest saw their incomes rise much slower. Incomes among the bottom half rose by 2.6 percent per year while the top 1 percent saw theirs rise by 1 percent."
Incidentally, Reagan was elected in 1980.
22
@RFC
From 1975 to 1979 I don't recall growth as much as stagflation. Incidentally, Carter was president then.
2
@kwb
One term Carter was president from 1963 to 1979?
You cherry picked out 4 years from a 16 year period. The stagnation of the Carter years were wildly overstated as is Conservatives attempt to hang the events around Carter’s neck.
2
First, I'm glad to finally see more reporting on the decades-long problem of economic unfairness that has plagued the 99%, and richly rewarded the 1%. And we do need to completely change how we measure economic growth in terms that reflect the well being of ALL Americans, not just Corporate America and the 1%. One glaring flaw is the headlining of the "unemployment numbers", which is so misleading as to be almost useless, but yet is touted as the standard measure of economic health.
But we shouldn't need numbers to know that the economy is broken for most Americans. And we don't need statistics to tell us why: Reaganomics, or "trickle down" economics. It's no coincidence that the steady regression of wealth and income for most Americans began in 1980, Reagan's first year in office. So while we're arguing over which things to measure, we could instead be working at rolling back all the changes that underpin "trickle down". Undoing the change that reduced taxes on short term profits, which drives CEOs who gain most of their compensation from stocks to focus only on quarterly returns, and ignore long term investment, which includes employee wages, benefits, training, and retention. In fact, it gives huge incentive to drive these things down. You don't need statistics to tell you the effect of that over decades!
There are other aspects of "trickle down" that need to be undone, but in short, we need to return to "capitalism with a conscience" that reined from FDR to Reagan.
9
America is a series of regional economies. Let's have more regional economic analysis.
7
The way the economy is managed, measured and reported is a is right up there with (1) the right to work, (2) the war on drugs and (3) no collusion.
13
Currently, low unemployment is touted as exhibit one that the economy is thriving. However, perm-temp jobs and consulting jobs play a major part of the low employment picture. Meaning, wages are low and without benefits of any kind. That these workers are complementing their existence with government support is seldom told. At the same time, real estate listings have reached stratospheric values: a NYC apartment going for $98 million or a California home going for $200 million are not that unusual. While buyers have an opportunity to launder money and real estate investors to make an obscene profit, real estate taxes in a city like NY makes it impossible for working families to remain put. So, essentially we’ve seen in the last decades a social cleaning of working families through home displacement coupled with stagnant wages and an inability to keep afloat with inflation.
Glad to know that a small effort is being made to restructure measurement of the economy; much more is required.
18
@Ted , High housing prices
are creating homelessness. Great
urban areas of prosperity like
San Francisco, New York,
Washington, LA,etc. also have
serious problem of homelessness.
1
If we were intellectually honest, in particular, if the practice of Econometrics was honest with itself (and everyone else), insofar as what it measures and why, then there would be no need to have added this:
There are other problems as well. When a factory spews toxic fumes into the surrounding air, this doesn’t get subtracted from national income, and we don’t count the negative effect on the lungs of all the people nearby. Worse yet, the money that is spent to clean up the air — and the money that is spent to care for the rise in asthma for the local population — gets counted as an increase in output.
The general phenomenon of the Tragedy of the Commons
is neglected by Econometrics for purely ideological reasons. This distorts what the phrase "economic growth" means. As a result, we can really believe "growth is good" only because the costs of growth are not allowed to enter into the calculation. Isn't this called "brainwashing"?
We see this with how the EPA now chooses to measure the costs/benefits of emissions of various
toxins. The health cost projections have been downplayed to
justify higher emission rates, which, of course, then gets
encoded into the growth of different industrial polluters--all
for the "good".
We see this in the absence of a carbon charge, giving a free pass to emit warming gases which contributes to "growth of the economy", since no one is forced to acknowledge, and pay for, the damages, which won't be easy to fix.
8
@bl your wise comment needs to be expanded upon. Amazon is tearing up roads and polluting the air with no cost accrued to them, it’s all on residents.
I’d personally like to see more economic data presented as a Lorenz curve. It does a good job of illustrating inequality. Best part is you can use it with a multitude of metric such as income, wealth, etc.
2
NKM, thanks for mentioning the Lorenz curve. The Wikipedia article on "income distribution" describes that, as well as the Gini coefficient, both developed in the early 1900s. It's clear that economists have long been of aware that stating GDP on a per-capita basis is "grossly" misleading. I'm surprised that the NYT article didn't mention these existing metrics.
In mathematics, there are different ways of measuring the distribution of data: mean, median, mode and range. We focus on the mean, or average, as several examples in the comments point out. We all know that the distribution is skewed but we don't use the proper tools to give us a fuller picture of where the income is going.
Beyond this, we have so many other anecdotal inferences that the economy is lopsided. 29 hours a week (or less) is considered employed, but we all know that's not livable. Lack of benefits, lack of stable working hours and the overall view of humans as a labor commodity and little more are critical when determining how the American worker is doing, but never seem to be part of the narrative.
5
Of course if everyone's inccome grows by 2%, as prior to 1980, then GDP does too. But now only the very rich gets richer, and GDP grows at 1%. Which is better?
It's not just how we measure growth and its impact on income inequality. On many fronts, something profound happened to the American psychology in the years surrounding 1980. As a people, we lost the cohesiveness of a society that had prevailed since the Great Depression. Michael Milken became a household word because his 'greed is good' mantra resonated with many more people in the country. As Saez and Zucman have shown, while tax avoidance and evasion always existed, the social shame of avoiding tax helped to keep it in check during the decades before 1980. But it really ramped up beginning in 1980, with a succession of schemes devised, then countered by the IRS; at the same time, IRS resources were being starved so that these schemes were harder to police; and the marginal rates of income taxes were falling, finally to the point that the richest 400 people in the country now pay a lower tax rate than the bottom 50%. There is now no shame in avoiding tax; indeed, our president claimed that the fact he paid no tax "made him smart". We can change the way we measure growth, but until the psychology of the nation changes, from an emphasis on 'me' to one of 'we', nothing will improve. Sadly, it is hard to legislate empathy or social responsibility.
25
Last year, 2018, saw 82% of the increase in GDP go to the top 1%. There was no increase at all in the average American household income. Since 1980 the average income of 90% of Americans rose just 22% while the top 1% saw theirs rise153% and the top.1% over 320%. A massive pyramid (Ponzi) scheme.
9
@John David James
Let's see some source for those numbers. GDP and income are not the same thing.
1
@John David James 82% increase slipped into top 1% while 18% in the pockets of 99%! That’s < 0.02%(0.018%)=less than TWO PENNIES !?! Two pennies not worth to buy even few drops of PURIFIED water.
It’s an red alarm waiting to rattle what? Guess!!!
1
@kwb - Look it up, kwb. The data is all over the internet, available to anybody who really wants to know.
Readers of this article should also be aware of a very revealing World Bank study, published on January 30, 2018, titled, "Moving Beyond GDP To Look At The World Through The Lens of Growth."
It is particularly useful because it breaks down the evolution of a number of countries GDPs through both the growth and usage of natural resources and of income levels. The striking, but expected result, is that the richer countries get, the more of income goes to the top.
13
absolutely, we should be measuring things like Quality of Life to see whether our economic growth has enough vitamins and minerals or whether it's junkfood economic growth.
11
An excellent, thoughtful, and informative article. Thank you, Ms. Boushey.
You quoted Jack Welch about measuring the right things. I'd add Henry Ford, who raised the wages of his workers so they could afford to buy the cars they made. He realized that widespread prosperity is a positive feedback loop. Today's races to the bottom on costs and wages are negative. (@Wiltontraveler made a similar point in a comment.)
Odd how the American era we think of as the most-great is the one in which the rich were taxed at rates far higher than today, and government investment built a nation the world envied and emulated. Today it is crumbling, the exemplars are other nations, and we think that here yelling about our greatness will make it come back.
23
Excellent read! I wish Congress and The Senate knew how to read.
And interpret.
And govern.
20
@Ed Weidner ,Congress contribute
to inequality by enacting tax codes
to favor their major donors. Take away this power and the donations
will dry up. congress won't act
against their interest.
2
It is admirable to wish for political changes that result in more widespread social benefits, and it is wise to recognize the way data can be used to create effect propaganda which conceals the harm that the data reveals (to those willing to look at it). Boushey does not take into account the systemic factors that REQUIRE that inequality persist while economic growth persists. These factors, described in detail by Piketty, are built into our capitalist system, which REQUIRES growth to occur by exploitation, which REQUIRES that when exploitation is exposed that politicians be paid off by the rich and powerful to bury that exploitation, that REQUIRES that my success by someone else's loss, since we live in a zero-sum system where competition demands that there be losses, that REQUIRES that we look after our own individual needs at the expense of the greater good. Yes, I'm a progressive and I believe in trying to correct the injustices that are built in to the system, but I also recognize that as long as we keep the system, the fight will never cease. As long as we keep the system, our victories will be outweighed by our defeats. As long as we keep the capitalist system, which demands that the greater good be sacrificed on the pyre of individualism (thank you, Ayn Rand), we will continue to have inequality, or at least relative impotence to change the overall tide of inequality that the capitalist system of necessity gives rise to.
10
@Samantha
Brilliantly stated. Unfortunately the Fox propaganda would bury this as well as it buries all TRUTH.
I agree that we need better and more nuanced measurements to capture not just the economic trends but also the interaction between the economy and politics. This said, there is an easy slide from “what is” to “what should be” in this article. Who says that equality is a worthwhile goal to pursue? This is not an economic statement but a political one. A totally equal society is neither possible nor desirable. Another issue is the creation of a false dichotomy: “we” versus “wealthy”. I am not in 1 percent but I have no cultural, ideological or social solidarity with the lowest 10 percentile. If you raise my taxes to invest in scientific research or fight climate change, I won’t object. If you raise my taxes to make life easier for an opioid-addicted single mother of six in rural America, I will object vociferously. Economics is incomplete without talking into account ideological and cultural divides.
3
@Mor - almost by definition in a functioning democracy marked inequality is not possible. And yes if your taxes help the poor become richer, healthier and more educated everyone benefits, since by definition of the bottom rises the whole elevator does too.
4
@Mor Mor I really want to thank you from the bottom of my heart. I can certainly vouch for your insightful logic, having spent 10 years following the the 2008 crash living at or below the poverty line, working part time and temporary jobs. It’s ruined my life, and now that I’m older, I will never really recover financially. I am a highly educated white male who only has two kids, and does not do drugs. I grew up middle class. I have known many very responsible low income people. But, with what I have gone through recently, I can easily image the social and psychological impacts that poverty can generate. I also notice the dishonesty, cheating and corruption of a fair number of rich people. What’s their excuse?
Your insights are merely the gross assumptions of prejudice.
2
@Mor, you jump quite easily to a "totally equal" society when nobody on a national stage is calling for that. There is clear social benefit to helping an addicted mother of six: preventing six people from becoming a drain when they could be assets. Add in one more for the woman turning her life around. She has the potential to become your social peer too.
1
Thoughtful analysis. I have benefited quite a good deal in the short term from income inequality through investments (on which I live in retirement). But I know that these benefits are not sustainable: if wealth does not spread out to people at all income levels, my investments eventually (in fact, pretty soon) won't do as well. And other factors such as the governments lack of sufficient investment in infrastructure and the welfare (such as health care) of all US residents will compound both income inequality and the accompanying fall in investment returns.
19
The cost of polluting is not borne by the industries that cause it. It would be beneficial to all if smoke stacks and foul liquid emissions were prevented or cleaned at the source. The true cost of output could be passed along to the consumer both private and commercial. This would mitigate the skewed cost curve we live and suffer from now. Every river system in this country is contaminated by chemical outflow from thousands of refineries and factories. Well heads burn-off excess gas. And coal fired power plants drive up hospital visits for respiratory failures. Trade agreements are not enforced and foreign countries that export commit even worse environmental calamities. There is no place left to run and hide that is clean.
19
So this is an article on equitable growth from the President/CEO of the “Washington Center of Equitable Growth.”
What the author doesn’t address and what no one in liberal economic circles question is the assumption that equitable growth is the key metric for measuring the economy. Does government, as Warren and Sanders argue, have an obligation to equitably distribute wealth in this country - the per se definition of socialism? More importantly, will a government that dictates an equitable economy inhibit overall growth?
I agree that it is the obligation of government to help the neediest by doing everything in it’s power to eliminate poverty, provide necessary healthcare to everyone who can’t afford it, and ensure that everyone has access to basic necessities, including shelter, food, water, medicine, etc.
But beyond that, why is it government’s responsibility to ensure that everyone have the same economic advantages?
4
@Steven Roth The government sets economic policy, which contrary to free market evangelists, has a huge impact on how wealth is created and distributed. So the answer to your question is yes, if that is what people in a democratic society want. Economic policy during the New Deal and after World War II did have economic equality as one objective. Economic policy after the stagflation of he 1970s had a different goal, the outcomes of which we are experiencing today. The economic policies of Reagan and followed by Bush 41, Clinton, and Bush 43 encouraged the greatest concentration of wealth and capital that we have experienced since the 1920s. The repeal of Glass Steagall encouraged profit taking and shenanigans that brought about the Great Recession. The Trump tax cuts have encouraged further capital accumulation among the richest. So yes, it would seem that prudent economic policy set by the government to level the playing field is in the best interests of the country as a whole. And please, get your definition of socialism correct. Socialism is when the means of production are owned by the community and administered by the government. Please remember the Postwar prosperity that brought benefit to almost all Americans (African Americans were still largely excluded because of rampant racism) was the result of government policy which explicitly sought to distribute it in order to build a middle class.
6
@Steven Roth , Government
policies help the rich to get richer.
why should they if they won't help
the poor? Greatest good of the
greatest number should be the policy.
l
@Steven Roth Because of the horrible impacts gross inequality has on disadvantaged individuals and communities. People are not robots, we are sentient, pycological and socially oriented.
We are absolutely not "in the best of times" even using the standard macroeconomic parameters. The recovery is now the longest, but it has also been the most sluggish in terms of GDP growth. The U-3 (standard) unemployment rate is very low, but the employment/population ratio (for prime ages) has not recovered to year 2000 levels. Wage growth has also been extremely slow for most of the recovery. The discussion in the media of international trade assumes implicitly that it is providing great benefit to the overall economy, but the average rate of GDP growth has certainly not been improved as trade increased and the trade deficit went up.
The problem is not in looking at the wrong factors, the problem is in the bias of the media, politicians and many economists in judging things on the basis of the welfare of the wealthy and corporations rather than the majority of the population. Corporate profits shot up in the recession of 2001 and again immediately after 2009, but this receives little mention.
30
Afflux is the rate at which a nation (or other economic unit) produces and consumes goods and services. It is a superior measurement of economic vitality. It should be the objective of economic policy to maximize a nation’s afflux. Income equality would be one of the outcomes of such a goal.
2
I don't think this would actually be all that difficult to do - measure the economy across the population, that is. Just skimming through the comments already shows lots of insight into how to pull it off. There's no shortage of smart people who could construct helpful metrics.
Why we don't is the bigger question, and the answer is obvious: it exposes some nasty truths about how our society distributes access to materials and the benefits of labor, and the people dragging their heels on the reckoning are those who will be exposed.
5
An increase in income inequality is not necessarily a sign that things are worse for the poor. If the poor get richer, but the rich get richer at a faster pace, inequality grows. But the poor are better off.
Boushey makes some valid points about the limitations of looking only at the size of the economy to measure it's quality. But I think more acknowledgement is needed that the size of the economy is a really big part of social improvement, and inequality is not a perfect measure of the quality of the economy either (if we were all poor, we'd have very little inequality).
3
Please look around. The burgeoning destitute are not better off within this out-of-control system. The UN has identified half our citizens are living in a ‘third world’ country. That’s not better in any sense of the word. Please look around. Half the country is dying of despair.
26
@Oliver So, rather than address any of the points I've made, "please look around."
Tell me, by "looking around", am I going to see something that proves to me that the infant and child mortality rates are as bad as they were in the 1700s? Am I going to see something that proves that calorie consumption is just as low as it was in the 1700s?
Economic growth has had massive benefits for our society, whether you'd like to admit this or not.
4
@MA Correct - if you start at the 1700s. However, some of that progress is starting to crumble since the Reagan years. This is what the article is addressing...
Almost every country on earth manages to treat the majority reasonably well. It is how they treat their minorities that says whether they meet the ideals of liberté, égalité, fraternité.
Similarly, the economy is usually going to do well for the majority. It is the minority that should trouble us.
How about we only publish economic data for how the poorest 25% of the population is faring?
3
@whaddoino We are not even treaty the majority well here, only a minority of people is profiting from the current conditions. The numbers belie that fact.
2
What would be the benefit for middle class to know how much money the richest people made in their country. They already know that they cannot change the situation.
1
Fight for Bernie to win, and keep fighting to change the situation! Don’t despair! A million of us died recently, of despair. We cannot survive this way, but we can band together and fight and win.
6
In short, spreading the wealth and income redistribution are unAmerican attacks on freedom and liberty. The only fair tax is a flat tax. Higher earners use proportionately less government than the poor, not more. Impose a flat tax and let people’s income be up to them.
3
@DRS Our bloated military is used to protect and enrich the already wealthy. Their property right of I Me Mine,contribute directly to our homeless population. Land of the free, if you can pay. even now the system that bezos built puts hugep pressure on infrastructure, mosly built by citizens.
5
shadowstats.com gives real statistics, not the lies and propaganda of the Fed and the government. eg real GDP has been negative since 2000, except maybe a couple of years.
7
To reverse trends which ignore running out of losers to whom capitalism's requisite "liar's poker" needs to lie, economists -- like quantum physicists -- need to take into account the missing entanglement for which the far bigger picture literally expands our universe. Heed not mere points save for what's squared by the timelessness of light's momentous speed.
Yes, Einstein would agree that stock-optioned quarterly reports may accurately reflect who's got the best lemonade stand. But to prioritize this over the R & D of what can withstand the test of time inhibits uncertainty's far greater check.
After all, particle stays preclude waves never waived. Hence longing our equality's quantum state to which marginalized capitalism can't point. Per Elizabeth Warren, for example, only the synchronized 'murmurations' of democracy's far greater flock can paint-by-number what follow-the-dot groundswells can only rig.
1
@Chris Morris this is a terrible metaphor, worse physics and altogether dangerous politics. Quantum mechanics does not apply to macro-system, such as human society, it biology does - we are animals, after all. So here is a little biology for you: natural selection, not capitalism, requires inequality and produces winners and losers.
So, you're saying murmurations aren't birds invoking altruism to trump selfishness, @Mor?
Moreover, if quarterly reports were Schrodinger-boxed for better returns on split-fate fixity, R & D could hasten our destined singularity.
What is being unpacked in this article is a cornerstone of Andrew Yang's policy proposals with the "American Score Card".
If we measure to get a more accurate picture of what is happening in our country, the better we can react to problems, creating incentives to solve them.
8
One thing no one mentions is that GDP changed in the early 2000's to mask the effects of outsourcing. Paper-Traded was added to GDP although it produces nothing....and masks international investment in the US stocks as a US "Product." 2008 occurred partially because "no one" saw the coming reversal of fortune....for the US. Right. Just like no one bet the stock market on 9/11.
America first, needs to start with that inquiry.
3
The index has always been unbelievably flawed. You think it worked well in the 1970s? By 1979 Interest rates were in the double digits due to hyper inflation, Nixon froze the pay of hundreds of thousands of civil servants, mortgages rates were skyrocketing allowing for creation of adjustable rate mortgages which pulled many down a debt spiral. Nothing in the reports makes clear how much capital many average workers lost in that decade.
9
Am I the only one who suspects the one million allotted to the Bureau of Economic Analysis to quantify income gains by economic tier will go down the same Trump rabbit hole that for months sequestered the 400 million designated for Ukraine's defense?
Like real data about environmental degradation, Wisconsin's JR's story (see below) is not one this group of plutocrat boot-lickers wishes to be told.
As for Ms. Boushey's other sensible suggestions--Good Luck!
7
This article is bang on, but this is not a new idea. Sen and Nussbaum have been suggesting alternative, more inclusive ways to measure success (Since the late 80's both have advocated from a human capabilities approach that measures economic success by exploring the extent to which economic activity by what people, at all levels of life, are capable of doing. (Sen won the Nobel prize for this work). Also, Bhutan has introduced the Happiness Index. Both attempts have their limitations, but they are closer to reality than the current GDP measures yet economies rise and fall on these skewed measures. We are seeing the reality in an increasingly unequal distribution of wealth that are not reflected in current economic measures. But the stock markets around the globe are built on GDP and it will take much to change it...
9
Economist Kenneth Boulding's brilliant essay of 1966 poignantly pointed out that we measure and manage the earth's economy as a Cowboy economy with endless frontiers, whereas the reality is that earth is a spaceship and should be managed accordingly: rewarding efficient use of resources.
The great works of others like E.F. Schumacher, Herman Daly, Robert Costanza, Hazel Henderson and many more have long been avoided by mainstream economics - and our climate chaos is among the many unnecessary tragedies of this willful blindness.
As Neomi Klein aptly put it (This Changes Everything) the climate crises, described by Stern as the biggest market failure in history, is simply a matter of unregulated capitalism. We don't have to throw the baby out with the bath water - we just need to regulate capitalism better for social and environmental performance.
Desperate people will do desperate things, and inequality is a cornerstone of sensible environmental economics. The serious tudies projecting economic effects of serious climate action indicate (as all thoughtful studies of sustainable economics since Progress As If Survival Mattered by David Brower et.a., 1977) that the macro economy will likely be better if we do the right thing for equality and environment. So what are we waiting for?
26
When a large portion of the population don't vote and are working 2-3 jobs trying to pay rent and put food on the table, they don't have the time to know what is really happening. They basically give up their rights to those who use every trick in the book to get more. This absentee voting block is not paying attention as they continue to lose out. These are the same people who are not included in any of these statistics.
27
The way the economy is measured in the U.S. (and many other countries) looks like this: Jeff Bezos in an act of good citizenship decides to move to Flint, MI. Flint, MI is now one of the wealthiest towns (city) in the U.S. The citizens of Flint must be really well off, right?
48
@Sisyphus Happy
Great comment...and fabulous ironic user name!
2
There is also a lot of paid work that is done that is of little value, mostly because of regulations.
At the bank where I worked before I retired, every employee had to take the anti-money-laundering course. My job was configuring LDAP servers on Unix machines, and I had never encountered a customer in the 28 years I worked at the bank. But I had to spend 3 hours taking the anti-money-laundering course anyway, and my average fully-loaded rate was $110 an hour (this included occupancy costs). So $330 of completely worthless time-wasting was added to the GDP every year, along with any of the other 250,000 employees who never interacted with banking customers and had no acquaintance with actual banking.
10
@Jonathan A study I recently heard about on the radio indicated that the unpaid labor of women in the nation amounted to some 25% of the GDP number. Now imagine if we actually had to pay women for that work. The way we count fingers and toes for the economic numbers we us is both criminal and insane since it cannot help us to make reasonable decisions. And it shows in the increasing stress and suffering of ordinary people.
9
Let’s do away with all regulations! And we know what will happen. (You won’t like it. )
@Jonathan
And what about unpaid child labor, unpaid off the books human-trafficked labor, underpaid undocumented immigrant underpayment, labor by wait staff underpaid due to tips being a significant part of their earnings (and unreported tax for that matter), prison labor by prisoners in private jails and prisons, and "capital gains" that produce nothing but tax decrements, and money laundered out offshore with no taxation either for that matter?
1
GDP, GNP, whatever! All this information is useless to me. I haven’t gotten a decent pay raise in years. I’d wager most of your readers are in the same boat. Big companies often use these figures to deny workers decent pay while enriching themselves. Statistics mean nothing without action.
33
I commend Ms. Boushey for writing this article. It's timely and important to know that our government is starting to respond to the obvious shortcomings of using blanket GDP to measure the economic strength of the US economy. It would be very beneficial to know how that economic growth is distributed among the various tax brackets. I strongly support the decision of the Senate Appropriations Committee in allotting funds to the Bureau of economic Analysis to develop indicators on how the personal incomes grew, measured by 10% swaths, across the tax paying spectrum. It would be very interesting to see, also broken down by 10% swaths, is the percentage pf income remitted as taxes by each group. I believe we'll find the richest taxpayers, due to write offs and loop holes, remit the lowest percentage of their earnings in taxes. Hopefully, our next government will address our ever increasing deficit as one day we'll have to pay the piper. Should interest rates stay low, the deficit hasn't presented too much of a problem to finance. Eventually, interest rates will start to rise. When that happens the country may find itself in a very serious financial bind as the cost of financing its ever increasing deficit may rise to intolerable levels.
5
Because "national accounts tabulate only goods with a price tag," they also miss much of the impact of digitalization across the economy. As prices are driven down--or even free, such as internet search--benefits to consumers rise (Consumer Surplus) while measured net output per unit falls. The $600 for a mobile phone today buys a lot more computing power and information access than that same $600 bought a decade ago. BEA has made attempts to measure this but grossly underestimates the impact, as my co-author Ilya Talman and me argue in a paper on SSRN.
2
Yes, we need to delve far deeper into the weeds to understand income, inequality and quality of life. Along with the impacts of global warming and population migration. And then "optimize" conflicting goals toward improving welfare for the rest of us, not just a privileged few.
8
There are better ways to measure our economic situation especially that of the poor and those just making it besides income tax. The number of people not receiving benefits such as health care coverage or the growth of personal incomes and the difference between growth between the rich and poor are a few. Perhaps the number working two or three jobs is another. Economists and government policy makers need to pay more attention to these statistics.
For a long time now those in power will ignore our real poverty and income inequality in order to sweep it under the rug. There has always been a bias that says only the rich really count in our society. If things are rosy for them who cares about the rest.
10
Everybody should read USNA73 quote of RFK address on exactly this topic.
Ms Boushey is absolutely right in her call for new metrics with which the American people can get a better idea as to how our economy benefits which segments the most and the least.
The economy is one of the bedrock elements of a functioning civil society and directly impacts quality of life issues. As RFK noted, GDP is not a finite measure of the value created by the American people or the resulting quality of life enabled in major part by the economy.
The problem of course is the political pushback.
The political mouthpieces committed solely to political power will oppose such measures. Vehemently.
They will leverage their propagandistic media and conspiracy websites to warn the tails of the population bell curve that such disclosure of data will lead to an Orwellian state.
Worse, that Orwellian state will be ruled by a deep state of global conspiracists determined to subjugate true Americans. or some such Trumpian level attack, augmented by some foreign power.
The competing political professionals advancing their own agendas will use the data solely to argue for redistribution of the nation's wealth because of disparate outcomes. No need to look any deeper than that for them.
Perhaps the most disappointing aspect of today's current political leadership is their abandonment of rational analysis of meaningful data characterizing complex problems that need to be solved.
32
Doesn't the total income automatically go up in the mere increase of the population? Unless, of course, there is recession or depression.
1
@Frank Casa No total income does not go up automatically just because the population increases. Only when more output is produced.
3
@J.Mike Miller But doesn't the increase in population create greater consumption which in turn brings about greater production?
2
@Frank Casa Not necessarily. This is especially true in poorer countries in the world. Also the consumption by the increased population without a corresponding increase in output means, on average, less consumption per person.
4
2019 and we still have to explain this to folks. (BTW, the measurement '2019' is another example of Mr. Welch's principle. With differing motives, we could be calling our time any other number.)
1
Let us be careful not to eliminate Gross Domestic Product from our measurement of achieved national goals. As the author seemingly points out, we need more than one measure of such achievement. There is no one form of measurement that can serve as the guide to national gain. Life and human welfare are more complex than that.
2
@Penseur -- Funny how GDP seem to rise no matter how low average wages remain. Yeah, funny.
15
@Penseur Entrepreneur Jermy Haft, writing in the 2019 edition of the Foreign Policy Association's "Great Decisions" study guide about US-China trade issues, made the point that the GDP is an incomplete and misleading metric of the economies of both countries. For the present discussion, distorting Chinese metrics may be irrelevant, but Haft's discussion of metrics for the U.S. coincides nicely with Jack Welch's, it seems to me.
1
@ChesBay GDP incorporates government spending as a contribution to our 'national product', but how does that make any sense?
How does spending taxpayer money actually increase the earnings of taxpayers? That's like counting the money you spend on your credit card as part of your income. It's utterly ludicrous.
The entire calculation of GDP is an artifice, meant to obfuscate, not illuminate, the financial problems in our economy. It's 'cooking the books'...it's financial fraud. Our entire economy is based on a fraudulent metric of wealth.
Period.
University of Kansas, March 18, 1968 Robert F. Kennedy
Even if we act to erase material poverty, there is another greater task, it is to confront the poverty of satisfaction - purpose and dignity - that afflicts us all.
Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.
It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
And it can tell us everything about America except why we are proud that we are Americans.
187
@USNA73
Thank you USNA73 for the reminder that it is critical to first decide what will be the measures of success - the indicators of success - before launching efforts to achieve it. And similarly critical that the society overall commit to those measures not just those leading it.
6
@USNA73
It is no wonder they murdered Bobby. What could have been...
10
@USNA73
Thank you for posting RFK's intelligent & eloquent speech. I was about to post that but you got here first.
So how about analyzing the information along the lines of a "double entry" bookkeeping system: assets & liabilities.
For example: the Medical GDP is a plus/ or positive gain for the medical sector while in the liability column it becomes a minus/or negative/ loss for the public.
The housing/construction GDP which is also attached to the Finance GDP (through construction loans & mortgages) is a plus, but the debt load for the public is a minus (the interest on mortgages affects disposable, discretionary, consumption dollars).
In other words, what is a gain in one sector can be a loss to another sector. Eisenhower also made a similar observation inn his farewell speech:
"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone."
Indeed, very gun sale is a plus for the NRA/gun manufacturer and a minus for every victim---particularly if you include the heavy medical costs involved.
9