Economists talk about the lost decade in Japan, a period where the macroeconomy stumbled along for years. Well, with these 2010 data, we can confirm the lost decade for the American middle class. Though the economy grew most of these years in GDP terms, and productivity growth was notably robust, the middle class fell behind.... as the income, poverty and inequality results of the last decade reveal, we have a structural problem that needs to be addressed. Otherwise, we could lose the next decade as well.
http://jaredbernsteinblog.com/the-lost-decade-for-the-middle-class/
ReplyDeleteJared Bernstein, senior fellow at the Center on Budget and Policy Priorities
http://jaredbernsteinblog.com/
The headline numbers are:
ReplyDelete–the poverty rate increased to 15.1% in 2010 from 14.3% in the previous year;
–the income of the median household, the one right in the middle of the income scale, fell 2.3% in real terms, a loss of about $1,100; median income was about $49,500 last year.
–just about 50 million people lacked health insurance last year, about 16.3% of the population, which is about the same share as last year; but this steady share reflects loss of employer-based coverage and gains in coverage by a government plan.
n many ways, the years since the median household income peaked back in 1999 have a something quite rare in economic analysis—a natural experiment testing an economic hypothesis such as these:
ReplyDelete–if you cut taxes for the most wealthy, the benefits of their increased economic activity will trickle down, enriching the rest of the society.
–if you deregulate financial and labor markets, you will unleash innovation, investment, demand and again, the benefits will trickle down to the broad middle class and the poor.
–these markets will self-regulate—the inherent incentives in the deregulated system are all that’s need to ensure the best outcomes for everyone.
–gov’t interference in any of this, from unemployment insurance to labor standards to safety nets, will only serve to dampen innovation and broadly shared wealth creation.
Well, based on these results, not to mention the fallout from the Great Recession that was very much an outcome of that economic experiment, it is fair to say that from the perspective of the vast majority of Americans, the experiment has been a devastating failure.
These Census results should force us to be very clear eyed in recognizing that markets sometimes fail and when they do so, the federal gov’t must fill two very important roles.
ReplyDeleteFirst, we must have countercyclical measures to protect the most vulnerable among us, those least able to withstand the loss of income or health care coverage, from the economic storm. Today’s results deeply underscore the need for countercyclical policies like Unemployment Insurance, nutritional assistance, and publically-provided health-care coverage (see here for CBPPs analysis of this point).
The second critical role for gov’t here is to help offset the contraction in private sector demand, with temporary measures to help people get back to work. In case we needed another reminder, these results underscore urgency of passing the jobs measures the President recently introduced.
Those are, of course, temporary measures meant to further offset the impact of the Great Recession—to pick up where the Recovery Act left off. These are cyclical measures. As such, they are warranted and important.
But as the income, poverty and inequality results of the last decade reveal, we have a structural problem that needs to be addressed. Otherwise, we could lose the next decade as well.