Election Issues III: America’s Two Economies

By the time November rolls around, Americans will have heard more economic numbers crunched in more creative ways than anyone ever would have imagined possible. That’s the mathematical formula for recreating any candidate in the image of a populist hero: numbers and more numbers. Bury ‘em in numbers, and if they start asking questions, well, pull out some more numbers!

While Mark Twain’s infamous line about “liars, damn liars, and statistics” is more than apt here, it’s also true that sometimes numbers tell a story more powerfully than any orator. Such is the case with a pile of numbers put together in an article in the New York Times by Princeton economist Alan Binder, who took the time to discover that, statistically speaking, during the period from 1948 through 2007, the U.S. economy grew faster under Democratic presidents than Republican presidents. (See chart below right.)

Binder reports that “data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.” He continues that that statistical difference between parties of 1.14 points, “…if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.”

In other words, what Binder is not-so-subtly suggesting is that if Americans had stayed with Democratic economic policies instead of experimenting with Republican supply-side theories, ordinary people would be a lot better off financially today: specifically, 9.33% better off. While hindsight is always 20/20, these numbers are interesting to say the least. And what’s more, they only tell half of the story.

The other half of the story, the half you may have heard much more about, is that income inequality has been steadily growing over the last 30 years, largely as a result of Republican economic policies. While the original idea was something to the effect of: more money at the top will result in more jobs and eventually more money for everyone; we know that in practice what has happened is that more money has simply floated to the top and stayed at the top. Real wages are falling, jobs are moving overseas, the middle class lifestyle that once flourished during the manufacturing era is showing signs of critical strain.

What’s worse, the trend is strengthening.

In 1947 the median family income in the U.S. was $23,400. By 2007 it had (roughly) doubled to $50,233, after hitting a pinnacle of $58,400 in 2005. During that same time period, the income of the top one tenth of one percent of all households has soared from $2 million to over $10 million. So, while the family smack in the middle of the census tables saw a doubling, more or less, of household income, the family at the very top 1/10th of 1% saw household income increase fivefold.

According to an AP article released on Labor Day, “all the data that Wall Street has seen lately seems to be pointing to a dual economy, one in which businesses are generally faring better than consumers.” The article continues, stating, “Evidence of this divergent economy keeps building — the average consumer is suffering, but business spending, particularly abroad, appears to be keeping the U.S. economy from sinking severely, even as the financial sector continues to struggle.”

In other words, yet another batch of numbers seem to show that U.S. businesses are holding up because exports and investment overseas are going well. Consumers, who have seen their jobs go overseas with all that corporate investment, are hurting. The fact that business has been able to thrive and prop up the economy while Americans wither on the vine is disturbing to say the least. That raw fact raises difficult questions about the capacity for the free market to self-regulate in ways that are not severely harmful to the U.S. populace at large. The mantra of the free market is sounding more and more hollow; and for sure it isn’t helpful at the grocery store or the pump these days.

If healthy businesses do not create healthy families, plentiful jobs, and consumers with money to spend, what interest should working Americans take in keeping business healthy? At the very least, the latest statistics indicate that issues of free trade, fair wage and labor laws, bankruptcy, and health are urgently in need of review and probably reform. The similarities to the the Depression era are striking.

The U.S. is not facing another Great Depression, or that, at least, is the consensus among experts. However, the U.S. working family is facing a painful protracted period of declining wages, increasing costs, and seeming governmental indifference.

When rhetoric, ad campaigns, and punditry grow tiresome (and do they ever), sometimes it helps to look at the numbers and ask yourself, am I voting my own interest? Am I better off than I was ten years ago? More and more Americans know the answer to that question without even having to think about it. They don’t need Alan Binder to prove it to them statistically, but it’s nice to know he can.

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