Krugman!

Our So-Called Boom

By PAUL KRUGMAN

It was a merry Christmas for Sharper Image and Neiman Marcus, which reported big sales increases over last year's holiday season. It was considerably less cheery at Wal-Mart and other low-priced chains. We don't know the final sales figures yet, but it's clear that high-end stores did very well, while stores catering to middle- and low-income families achieved only modest gains.

Based on these reports, you may be tempted to speculate that the economic recovery is an exclusive party, and most people weren't invited. You'd be right.

Commerce Department figures reveal a startling disconnect between overall economic growth, which has been impressive since last spring, and the incomes of a great majority of Americans. In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation.

Why aren't workers sharing in the so-called boom? Start with jobs.

Payroll employment began rising in August, but the pace of job growth remains modest, averaging less than 90,000 per month. That's well short of the 225,000 jobs added per month during the Clinton years; it's even below the roughly 150,000 jobs needed to keep up with a growing working-age population.

But if the number of jobs isn't rising much, aren't workers at least earning more? You may have thought so. After all, companies have been able to increase output without hiring more workers, thanks to the rapidly rising output per worker. (Yes, that's a tautology.) Historically, higher productivity has translated into rising wages. But not this time: thanks to a weak labor market, employers have felt no pressure to share productivity gains. Calculations by the Economic Policy Institute show real wages for most workers flat or falling even as the economy expands.

An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years.

So if jobs are scarce and wages are flat, who's benefiting from the economy's expansion? The direct gains are going largely to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. Indirectly, that means that gains are going to stockholders, who are the ultimate owners of corporate profits. (That is, if the gains don't go to self-dealing executives, but let's save that topic for another day.)

Well, so what? Aren't we well on our way toward becoming what the administration and its reliable defenders call an "ownership society," in which everyone shares in stock market gains? Um, no. It's true that slightly more than half of American families participate in the stock market, either directly or through investment accounts. But most families own at most a few thousand dollars' worth of stocks.

A good indicator of the share of increased profits that goes to different income groups is the Congressional Budget Office's estimate of the share of the corporate profits tax that falls, indirectly, on those groups. According to the most recent estimate, only 8 percent of corporate taxes were paid by the poorest 60 percent of families, while 67 percent were paid by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class warfare!" the right shouts.) So a recovery that boosts profits but not wages delivers the bulk of its benefits to a small, affluent minority.

The bottom line, then, is that for most Americans, current economic growth is a form of reality TV, something interesting that is, however, happening to other people. This may change if serious job creation ever kicks in, but it hasn't so far.

The big question is whether a recovery that does so little for most Americans can really be sustained. Can an economy thrive on sales of luxury goods alone? We may soon find out.

Yeah. I know I clip Krugman in his entirety. I suppose I could save a local copy, but it's difficult to parse a 750 word op-ed.

As anyone that reads this blog with the slightest amount of attention knows, I am no fan of GWB's domestic policy -- if it can be called that -- and his furrin policy AKA THE BUSH DOCTRINE hasn't exactly charmed a larger percentage of Americans and the wider world is horrified by what they see.

Now, I am a true benefactor of GWB's non-stop succession of tax cuts. This year alone, I'll save 30,000 dollars in income tax. According to the publicly proclaimed arguments of the Bushies, I'll be pumping that money right back into the economy. Frabkly, no. I will not be doing any of the sort. I'll be waiting for inflationary pressures to build and sitting on cash, buying distressed real estate to better balance my pre-retirement portfolio.

That's what people with large amounts of capital gains do. They buy goods at less than market value due to inherent inequities that follow a bubble. At least that is what I have done.

I do not want to see future generations having to pay for my personal financial well-being. I'd rather pay my fair share as I go, and leave the country in a better situation as it regards the debt issue.

Ya know, post 9/11, Bush called on all Americans to make sacrifices. He obviously wasn't talking about his multi-millionaire cabinet, or even guys like me. I understand that another round of tax cuts is in the offing, even as the states struggle to balance their budgets. This is fucking absurd. Whatever happened to fiscally responsible small government conservatives? Sure they were still locked into a 19th century attitude about social issues, but at least they tried to balance the nation's checkbook.

From Reagan on, the GOP has been about bigger government and spending our future away. It seems ludicrous that we now spend as much as the rest of world combined on our military, when the nature of the threat(s) are not 'fixable' in the traditional military sense. Terrorism, containment of technologies, and advanced arms(bio/chem/nuclear) do not require more ships, tanks, and heavy artillery. Human intelligence is where our defense dollars should go, dammit! Okay, end of rant.