Real Income Fails to Rise for most of the 2000s
I've been talking about this for years, but I am glad to see quantifiable proof has now been adduced. According to IRS data:
"Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004. . ."
Incidentally, the lack of real income growth was calculated using BLS data measures of CPI. It’s even worse than this in reality, as we have long demonstrated that CPI does not accurately measure inflation. So the true, after inflation, "Real Income," is actually far, far worse.
Perhaps this explains why 2/3rds of the people interviewed in a WSJ/NBC survey believe that we are either in a recession or will be within a year . . .
Also no secret: Income growth has been concentrated in the highest few percentile:
"The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000. These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.
The group’s calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law."
So long as we are popping economic myths, let's also dispatch with the 4.5% unemployment rate. That number has been largely caused by several million exhaustees and others simply leaving the work force:
The actual unemployment rate is closer to 6.5%. And if we measured it the way the Europeans do, its closer to 8%. This explains why wages and labor costs have remained subdued despite the alleged 4.5% UE measure.
Anyone with more than 4 functioning brain cells should be able to figure out that a 4.5% unemployment rate would be causing huge labor shortages and wage increases.
Instead, the average income gain is merely a measure of inflation: reported gains reflect increased costs for medical care -- the exact same coverage (but with a higher copay) which costs 15% more year-over-year shows up as increased total wages.
>
You may now return to your previously scheduled economic propaganda
>
Sources:
Average Incomes Fell for Most in 2000-05
DAVID CAY JOHNSTON
NYT, August 21, 2007
http://www.nytimes.com/2007/08/21/business/21tax.html
America's Economic Mood: Gloomy
JOHN HARWOOD
WSJ, August 2, 2007; Page A4
http://online.wsj.com/article/SB118600572789185278.html
Study #6074 (PDF)
NBC News/Wall Street Journal
July 2007
http://online.wsj.com/public/resources/documents/WSJ0707_poll.pdf
Tuesday, August 21, 2007 | 07:03 AM | Permalink
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Tracked on Sep 1, 2007 12:38:15 AM
Comments
Funny, we hear a lot about immigration in the media today, but not in this article. . . in fact not even one mention.
Furthermore - the article is very concerned with the population of people making over $100K - but, doesn't mention whether 2000 to 2005 was above or below average in immigration (legal or otherwise).
I'm a bit of bush apologist, so take my word with a grain of salt - but, it is rather odd that the article makes absolutely no mention of immigration.
Posted by: critical thought | Aug 21, 2007 7:55:08 AM
CT--I'm old and I just got up and trying to parse your point from only the word 'immigration' is more than I can handle right now.
Could you explain what immigrants have to do with the several issues Barry raised in his post? Numbers and facts would also be appreciated, if you have any.
Thanks.
Posted by: dark1p | Aug 21, 2007 8:15:45 AM
You could find a chart of household income here...
http://www.whitehouse.gov/fsbr/income.html
It's been clearly down since 2000 but they've stopped producing the number since 2005. I wonder why?
I'm still convinced that the real estate souffle had a huge impacts on people's desire to work. When equity extraction becomes a distant memory, many more people will be looking for a job.
Posted by: D. | Aug 21, 2007 8:15:50 AM
Immigration goes up (due to Bush non-enforcement), wages go down. Supply and demand. This is especially true at the bottom of the wage scale, where there is less complementarity.
Posted by: bjk | Aug 21, 2007 8:35:16 AM
This is what 6 years of conservative rule has produced - a poorer country with its infrastructure failing, business profits siphoned off from investment in the United States to fund more profitable investments abroad, a shrinking middle class, and a declining economy disguised by faking statistics. Not to mention a tragic, unsuccessful war and the enmity of the whole world.
And, guess what! Bush moved today to limit *states* from trying to insure more children's health.
If I ever had any respect for conservatives, if I ever were inclined to vote for one, never again.
Posted by: Sue | Aug 21, 2007 8:36:29 AM
foxconn the largest ems company pays its chinese factory workers 60 cents an hour
Posted by: jake | Aug 21, 2007 8:43:46 AM
Barry,
I long suspected that whenever certain ideologues in country A claim that they are better off than country B, because B's unemployment is much higher that there are different data collection methods at work.
I have not been successful in locating a reliable data source.
Can you provide any links regarding the actual US unemployment figure at 6.5% and 8% respectively?
Thank you.
Posted by: Werner Merthens | Aug 21, 2007 8:47:21 AM
A few weeks ago (on the McLaughlin group, IIRC) Maria Bartiromo said, "A rising tide raises many boats."
So what's the worry?
Posted by: Quiddity | Aug 21, 2007 9:03:24 AM
Anyone with more than 4 functioning brain cells should also be able to figure out that free trade equals manufacturing jobs shipped out to low wage countries which means lower
incomes in the U.S.
Posted by: Tom | Aug 21, 2007 9:04:52 AM
What do the numbers look like when you factor in benefits?
Dan
Posted by: Dan | Aug 21, 2007 9:12:38 AM
paulson shouldnt have gone on cnbc.......hes making the markets more nervous
Posted by: jake | Aug 21, 2007 9:16:35 AM
Sue,
"This is what 6 years of conservative Republican rule has produced."
There, Fixed that for you.
Please don't confuse anyone in the current administration with a true conservative.
Democrats = Tax and spend"
Republicans = "Borrow and spend"
Posted by: Pool Shark | Aug 21, 2007 9:16:47 AM
The old bait and switch tactic. Your wages will be stagnant, but we can make you feel wealthy with the alchemy of rising asset prices while you take on more "liquidity". Now that they have blown the world's largest bubble ever, the only thing left is the debt.
And people wonder while I call the masses sheeple.
Posted by: SPECTRE of Deflation | Aug 21, 2007 9:18:10 AM
Your initial post, after quoting my article, states: "Incidentally, the lack of real income growth was calculated using BLS data measures of CPI."
Not so in my article. The data has nothing to do with the Bureau of Labor Statistics. It is tax return data, while the BLS uses survey data.
Also, there is nothing in the data, referring here to a later poster, about immigration. When you file a tax return you are not asked where you were born or, if you immigrated or if you emigrated (Congress taxes Americans on their worldwide income regardless of residency.
~~~
BR: Thanks for commenting and clarifying your article. I just assumed that the inflation data was BLS derived (my bad).
“still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation”
If not the BLS CPI data, then what was used as the measure of inflation?
Posted by: David Cay Johnston | Aug 21, 2007 9:21:04 AM
This is what 6 years of conservative rule has produced - a poorer country with its infrastructure failing, business profits siphoned off from investment in the United States to fund more profitable investments abroad, a shrinking middle class, and a declining economy disguised by faking statistics. Not to mention a tragic, unsuccessful war and the enmity of the whole world.
And, guess what! Bush moved today to limit *states* from trying to insure more children's health.
If I ever had any respect for conservatives, if I ever were inclined to vote for one, never again.
Posted by: Sue | Aug 21, 2007 8:36:29 AM
This is a problem concerning elitism and not Conservatives and Liberals. Neither can give a rat's ass concerning you or I. You still don't get it even at this late hour.
You keep waiting for the Liberals to help you out, but be very careful what you ask for because you just may get it.
Posted by: SPECTRE of Deflation | Aug 21, 2007 9:21:59 AM
A falling tide lowers many boats. Except the ones already sunk on the bottom. -- Sum Dope.
Posted by: Douglas Watts | Aug 21, 2007 9:24:54 AM
Sue,
Would you rather have had 8 more yrs. of Jimmy Carter or the 8 we had of Ronald Reagan? I suggest that your current standard of living is significantly better today due to "conservative" Reagan than "liberal" Carter.
Posted by: Steve C | Aug 21, 2007 9:29:35 AM
Given the steady loss of quality manufacturing jobs (esp. pulp and paper mills) in Maine, the average real income data is not surprising. Domtar just permanently closed its large pulp and paper mill near Calais, Maine at the loss of about 200 high paying manufacturing jobs. Given how bad the economy is in Downeast Maine it is going to be hard for these people to find any work, even at a convenience store.
Posted by: Douglas Watts | Aug 21, 2007 9:30:58 AM
Please don't confuse anyone in the current administration with a true conservative.
Please. We've had enough of the mythical conservative. Lets leave fairy tale characters aside.
Conservatism is simply defined by what conservatives *actually* supported and cheered these years. And also defined by what they *actually* opposed and crushed these years. This is your baby.
Owing up - accountability - isn't that like a cardinal conservative principle?
Posted by: bullbust | Aug 21, 2007 9:37:45 AM
"This is a problem concerning elitism and not Conservatives and Liberals. Neither can give a rat's ass concerning you or I. You still don't get it even at this late hour.
You keep waiting for the Liberals to help you out, but be very careful what you ask for because you just may get it."
I think both parties are idiots whose desire for power lets them be easily manipulated by vested interests and the sooner each of them die the better our country will be.
One reason I support Ron Paul even if I know he'll lose.
Posted by: rj | Aug 21, 2007 9:38:45 AM
Can we finally drive a stake into the heart of the Bush administration claim that this is a good economy?
The economy, plain and simple, looked good only because of the unsustainable run-up in the house prices over the the last few years.
Without the construction employment and construction worker spending, home building and home builder employee spending, building materials and their employee spending, mortgaging industry and their employee spending, re-financing and their employee spending, secutitization and their employee spending, home owners and their weath effect spending, local government (and their property tax windfall) and their employee spending the economy would have been ZERO or less.
The only other growth factor in the economy was the defense industry.
This economy was built on debt that everyone irrationally hoped would never have to be repaid. This hope was unusually encouraged by the Bush administration with their push for "home ownership" and "go out and spend".
I think the analysis made by history will show that the much vaunted "tax cuts" meant very little to economic growth when compared to the effects of the home buying and building frenzy.
This is going to turn out very badly.
Picture the end of the dot-com bust. Then add a huge overhang of debt over all sectors of the economy. Add a severe drop in tax revenues. Add the effect of essentially ignored energy crisis. Add the
the short-term and long term effect of a failed foreign policy. And on and on.
Like the song, "Life goes on, long after the thrill of living is gone."
Posted by: Neal | Aug 21, 2007 9:38:50 AM
Easy credit has made it easy for Americans to sweep the inflation all around them under the rug and when that easy credit goes away they will HAVE to face facts. I hope that doesn't happen anytime soon. Oh wait...
Posted by: KP | Aug 21, 2007 9:40:42 AM
paulson is the wrong guy to calm the markets.....he reminds me of lloyd bridges in the movie "airplane" i keep waiting for paulson to say "i sure picked the wrong week to stop drinking"
Posted by: jake | Aug 21, 2007 9:45:21 AM
Just like Jimmy Carter, the next president is going to inherit many untractable problems. And just like Jimmy Carter, many people will blame him and not Nixon/Bush for their ills and celebrate the following president. The blame is very misplaced.
Posted by: wunsacon | Aug 21, 2007 9:48:39 AM
Inflation on things we need, deflation on things we want...
How about in-home entertainment and communication costs? Is that want or need?
I have four kids, 3 of cellphone age, and standard cable (well, got the DVR and HD, can't say no for the hockey and baseball).
My monthly costs for phone (wireless included, text messaging, insurance, excise and sales taxes etc, etc), cable and Internet is $300+.
Thirty years ago, in 2007 dollars, it would be about $80 for the phone and long distance.
If the economy goes south, are the cable and cellphone companies good or poor bets...will the middle class/majority drop cable and cellphones? Aren't we addicted?
Posted by: wnsrfr | Aug 21, 2007 10:00:46 AM
