Game Is Rigged Against Most Of Us
Having a hard time getting a grip on what’s happening with the economy? We all know something’s not quite right here, but it’s hard to put a finger on just what it might be. The Dow Jones goes up almost daily - big boom there, no question. Millionaires a dime a dozen, as it were.
Unemployment down, inflation down, all good news.
But then we see these odd blips. The number of U.S. bankruptcy filings reached a fifth straight record in the first quarter, rising 26 percent above the year-earlier quarter to 335,073, according to the American Bankruptcy Institute. (That must be a jolly place to work.) Median wages stagnant. Income gap getting worse. Wealth gap even worse than that. People working longer hours, needing two jobs or two incomes. Que pasa?
What we have here is the interesting fact that a rising tide does not lift all boats. This defies not only conventional wisdom but natural law, as well. How can it be that a rising tide does not lift all boats? Some of us may have yachts while the rest of us are in rowboats, but shouldn’t it work anyway?
Nope - the problem is we had the wrong metaphor to begin with. Or, if you want to stretch the metaphor, the majority of us never even made it to the pond and are still sitting, with our water wings, on dry land.
The problem is distribution. Andrew Hacker’s new book (since we’re on a monetary roll here, it’s a gold mine of information), “Money: Who Has How Much and Why,” contains the following 1975-1995 increases in average income:
Richest 5 percent: up 54.1 percent
Top 20 percent: up 35.4 percent
Second 20 percent: up 13 percent
Middle 20 percent: up 6.7 percent
Fourth 20 percent: up 4.4 percent
Bottom 20 percent: up 1.5 percent.
Although everyone gained, the top fifth did 24 times better than the bottom fifth. And measured by their share of the aggregate, not just the bottom fifth but the three above it, all ended up losing ground. Indeed, the overall share received by those segments, comprising four of every five households, dropped from 56.7 percent to 51.3 percent.
That’s why this “booming economy” story the media keeps harping on feels so odd to so many of us. The median wage for men actually dropped during the 20-year period from $24,007 to $22,562 because of declining wages for those in the bottom tiers.
Let’s look at a few more reasons why this doesn’t feel like a “booming economy” to most of us. In 1970, a newly built house cost about twice a young couple’s annual income. By 1994, the price on a typical new home was almost four times their income. You can figure out the social consequences of those numbers without my help: a need for two incomes, postponing marriage and having children, more young people living at home with their parents, etc.
Allan Sloan of The Washington Post reports: “The biggest trend in the U.S. economy for the past 20 years has been the decline of manufacturing and a corresponding shift to high-technology, retailing, finance and entertainment.”
The primary source of wealth has gone from making things to the business of thinking up things. But, as Sloan also points out, this is an evanescent form of wealth: “Your sneakers go out of fashion, your movies flop, your software becomes obsolete, and suddenly, you go from being top dog to being dog food.”
The second spur to economic growth has been the rise of international business: Coca-Cola, Wrigley and Gillette can now market worldwide. Billions of Chinese will soon be persuaded to munch on Doublemint. This is all very well for the stock of gum manufacturers, but as we are all uneasily aware, the globalization of markets is not joyous news for American workers.
What we have here is a case of Them Who Has Is Them Who Gets: those who own stocks and mutual funds (about 25 to 30 percent of all households), those who have stocks in their pension funds, and those who have been in the market since the mid-‘80s. The stock market has quadrupled since 1983 and doubled in just the last 30 months. And that leaves the other 70 to 75 percent of us out of luck.
According to economist Edward Wolff of New York University, most middle Americans save so little that their assets would sustain their lifestyles and consumption for only three months. Mary Leonard of The Boston Globe reports: “The average wealth of the richest 1 percent of Americans increased from $10 million to more than $14 million from 1989 to today. But wealth at the low end is actually shrinking, as the use of credit cards, debit cards and home-equity loans pushes many middle-class families and lower-income families, who are disproportionately minorities, further into debt, out of the home-buying market and even into bankruptcy.”
Lots of people have lots of dandy ideas about what to do about all this - to be reported upon - but for now, I just wanted you to know two things: Numero Uno, you’re right, the media are doing a terrible job reporting this economy, and Numero Two-o, it was an exceptionally dumb time for Congress to give big tax breaks to the rich.
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