Left and right should at least be able to agree about this. For the average American, there has been no recovery. Median household income rises in a recovery, even if there is a lag.
It gets worse. Today’s median household income, adjusted for inflation, is no higher than in 1988, at the end of the Reagan presidency. The middle class has in effect stood still for more than a quarter century.
It gets worse still. The government keeps moving the goalposts on inflation. Especially under Clinton, the method of calculating it changed, and of course changed in such a way that less inflation was reported. Today the Fed complains that it wants more inflation. But if inflation were calculated the old way, it would already be running at 5% a year.
This is important. Median household income adjusted for the cost of living is not just the same as in 1988. In actuality, it is much lower. We have fallen backward for a generation.
Former Fed chair Ben Bernanke said that the Fed would start increasing interest rates when unemployment hit 6.5%. Now that reported unemployment is 6.3%, former Fed vice chair Alan Blinder congratulates current Fed chair Janet Yellen for so nimbly sidestepping this pledge.
The government’s highest rate of unemployment, the one that includes part time workers who would rather be full time and other “discouraged” workers, now registers 12.3%. This is still an understatement. If unemployment were calculated as it was during the Great Depression, it would be more like 23%. (An excellent source on past versus current methods of calculating inflation and unemployment is John Williams’s shadowstats.com. Mark Thornton also cited figures from Williams in his May 7 post about the recovery-less recovery.)
And who, by the way, has lost the most inflation-adjusted household income since the current depression began? Left and right can agree about this too: blacks, those with a high school education or less, southerners, those under 25, and those between 55 and 65. Everyone knows how hard it is in this economy for anyone, but especially anyone under 25 or over 55, to get a job.
In response to this, President Obama proposed legislation that would grant disappointed job seekers the right to sue a firm that did not employ them. Imagine how many firms would be interviewing if that passed. Paul Krugman also offered a complementary proposal: require that companies seek government approval before laying off or firing. Something like that has already been tried in France and of course it just means that no one hires in the first place.
Sites like the Daily Kos stamp their feet about the rampant inequality of today’s economy. Why should the rich keep getting richer while the middle class, the young, and the poor slip further behind? We agree. Something is wrong, terribly wrong.
To see what is wrong, you need only ask: who is getting so rich in the midst of this non-recovery? A moment’s inspection reveals that it is people with close connections to the government money fount at the Fed ( eg. Wall Street) or people with close connections to government officials ( think big companies such as Pharma and Farma, not just little green energy firms started by major Obama campaign finance donors).
This isn’t a failure of capitalism. It is instead crony capitalism run riot, and it is destroying America’s capital and economic base.
We could yet recover. To do so, we would need a consumer led economy, one with honest prices not nudged, manipulated, or controlled by Washington. We would need honest savings and thoughtful investment, the kind of investment that will create jobs for decades, not pay off cronies.
Real populists seek to help the middle class, the young, and the poor by beating back the corruption of crony capitalism. One would think that left and right could unite on that point too.