One of the more routine [tag]Republican[/tag] talking points argues that Bush deserves more credit for the “growing” economy. It’s not fair, they say, that [tag]GDP[/tag] is up and the [tag]unemployment[/tag] is relatively low, but Americans continue to say they strongly disapprove of the president’s handling of the [tag]economy[/tag].
As a public service to Bush sycophants everywhere, the NYT’s [tag]Paul Krugman[/tag] devoted his column today to explaining that the nation’s economic [tag]growth[/tag] doesn’t mean much when the vast majority of the public sees literally zero benefit.
Here’s what happened in 2004. The U.S. economy grew 4.2 percent, a very good number. Yet last August the Census Bureau reported that real median family income — the purchasing power of the typical family — actually fell. Meanwhile, [tag]poverty[/tag] increased, as did the number of Americans without health insurance. So where did the growth go?
The answer comes from the economists Thomas Piketty and Emmanuel Saez, whose long-term estimates of income equality have become the gold standard for research on this topic, and who have recently updated their estimates to include 2004. They show that even if you exclude capital gains from a rising stock market, in 2004 the real income of the richest 1 percent of Americans surged by almost 12.5 percent. Meanwhile, the average real income of the bottom 99 percent of the population rose only 1.5 percent. In other words, a relative handful of people received most of the benefits of growth.
There are a couple of additional revelations in the 2004 data. One is that growth didn’t just bypass the poor and the lower middle class, it bypassed the upper middle class too. Even people at the 95th percentile of the income distribution — that is, people richer than 19 out of 20 Americans — gained only modestly. The big increases went only to people who were already in the economic stratosphere.
As Ezra explained, simply looking at “growth” offers very little useful information. “Unused to analyzing anything more complicated than single, undifferentiated macro numbers,” Ezra noted, “[the commentariat] look at big growth figures, smile, and wonder why the president isn’t getting more plaudits for his supercalifragilisticexpialidocious economy.”
But as Krugman reminds them, this couldn’t be more wrong.
The “rising tide” metaphor is of no value when every boat has run aground except the most luxurious yachts. Or, as [tag]Krugman[/tag] put it, “[I]t’s a great economy if you’re a high-level corporate executive or someone who owns a lot of stock. For most other Americans, economic growth is a spectator sport.”
It’s just another point to keep in mind the next time a) Republicans complain about Bush’s lousy poll numbers on the economy; and b) those same Republicans want to cut the estate tax for billionaires while rejecting a modest increase to the minimum wage.
Update: KC in comments reminds me that investors aren’t particularly happy right now, either. It’s a good point; the stock market is lower now than it was when Bush took office five-and-a-half years ago.