The New York Times May 10 editorial, "Barely Staying Afloat," tries to make the case that the economic good news is really just good news for the rich.
President Bush's advisers say that the administration should receive more credit for the state of the economy, which, over all, is growing at a strong clip. But voters don't base their opinions on aggregate statistics. They react to their own paychecks and benefits, weighed against their fixed costs, like housing, health care and gasoline. For all but the wealthiest Americans, the latter are rapidly outpacing the former.
In a time of plenty, more American workers are in danger of slipping into outright poverty.
...Perhaps one of the reasons President Bush is generally regarded as such a poor economic steward is that his administration has done little to make the most vulnerable members of the working class believe that any of the good news is directed at them.
Perhaps one of the reasons the Bush Administration doesn't get credit for the bright economy is because liberal media outlets like the Times present such a bleak, and distorted picture.
SETTING THE RECORD STRAIGHT
Average Hourly Earnings Have Risen 3.8 Percent Over The Past 12 Months, Their Largest Increase In Nearly Five Years. Hourly compensation rose at a 5.7 percent rate in the first quarter. Personal income rose 0.5 percent in March.
Real After-Tax Income Has Risen By 13.8 Percent Since January 2001. Real after-tax income has risen by $2,398 (8.2 percent) per person since January 2001.
Securities Prices Show The Market Believes That Inflation Is Expected To Remain In Check.
More Than 5.2 Million Jobs Have Been Created Since August 2003, And 138,000 Jobs Were Created In April. The unemployment rate is 4.7 percent.
Yesterday, The Dow Jones Industrial Closed Within 83 Points Of An All-Time Record High. The Dow is up 8.6 percent this year and closed yesterday at a six-year high.
GDP Grew At A Strong 4.8 Percent Annual Rate In The First Quarter. This follows our economic growth of 3.5 percent in 2005 - the fastest rate of any major industrialized nation.
At $52 Trillion, Household Total Net Worth (Assets Minus Liabilities) Is At An All-Time High And Has Increased 8 Percent Over The Past Year And 33 Percent Over The Past Three Years. The growth is due to both real estate and other financial investments (i.e. it's not just a result of rising housing prices). Household financial net worth (which excludes housing and other tangible assets) is also at an all-time high.
The Conference Board Index Of Consumer Confidence Increased In April To Its Highest Level In Almost Four Years.
Productivity Increased At A Strong Annual Rate Of 3.2 Percent In The First Quarter.
Real Consumer Spending (Which Adjusts For The Price Of Gasoline) Grew At A 5.5 Percent Annual Rate In The First Quarter And 3.4 Percent Over The Past Four Quarters.
The President's Tax Relief Has Helped Spur America's Economic Momentum.
The President Worked With Congress To Reduce Income Taxes For Every American Who Pays Income Taxes. The Administration and Congress doubled the child tax credit, reduced the marriage penalty, cut taxes on capital gains and dividends, created incentives for small businesses to purchase new equipment and hire new workers, and put the death tax on the path to extinction. Altogether, this tax relief left $880 billion in the hands of American workers and businesses.
The President Worked With Congress To Reduce Income Taxes For Every American Who Pays Income Taxes. The Administration and Congress doubled the child tax credit, reduced the marriage penalty, cut taxes on capital gains and dividends, created incentives for small businesses to purchase new equipment and hire new workers, and put the death tax on the path to extinction. Altogether, this tax relief left $880 billion in the hands of American workers and businesses.
The Wall Street Journal: President Bush's Tax Relief Is Responsible For Economic Growth. "Critics continue to complain that President Bush's tax policies have only benefited the super-wealthy, but that would come as news to the five million Americans who were jobless before the 2003 tax cuts, and thus had no income, but now have a weekly paycheck." (Editorial, "Help [Very Much] Wanted," The Wall Street Journal, 4/10/06)
Yesterday, Congressional Leaders Agreed To A Tax Relief Extension Package That Will Help Millions Of Middle Class Families. "Republican congressional leaders agreed Tuesday on a $70 billion measure to extend tax breaks for investors and prevent 15 million middle-income families from being hit by the alternative minimum tax, which was intended to affect only the wealthy." (Jim Drinkard, "$70B Measure Would Extend Tax Breaks," USA Today, 5/10/06)
2 comments:
"Setting the record wrong" is how this should be titled. Though nominal wages have increased 3.8% over the last 12 months, the Consumer Price Index has increased 3.36% from March 2005 through March 2006. Since April's CPI increase release is deliberately delayed to prevent comparison with wages, a better indicator is taking wage increases through March of 2006. Nominal wages increased increased only 3.38% from March 2005 through March 2006, which means a real wage increase of only 0.02%. And this follows 2 straight years of real wage DECREASES. In fact March's real hourly wages are 1.2% less than they were in December of 2002. March's real weekly earnings are 1.4% less than they were in December 2002. This can be seen at the U.S. Bureau of Labor Statistics at Real Hourly Wages and Real Weekly Wages
According to the U.S. Bureau of Labor Statistics, average hourly wages of privately employed workers increased 3 cents in March, from $16.47/hour to $16.52/hour. That's a 0.3% increase, not a 0.5% increase. Meanwhile, the Consumer Price Index increased from 198.7 to 199.8, which is a 0.55% increase. This can be seen at the BLS site at Consumer Price Index. That means real wages DECLINED 0.25%.
In fact, real after-tax income has declined for the majority of Americans since Bush first took office. According to the U.S. Census Bureau, real median household income declined from 2000 through 2004. A graphic representation of this decline can be seen at: Median Household Income The only people who have seen actual increases are those in the top 5-10% income category.
Though the annualized GDP growth rate was 4.8% during the 1st quarter, this follows a dismal annualized growth rate of only 1.7% during the 4th quarter of 2005. Furthermore, during the 1st quarter, the consumer spending component of the GDP increase was less than the consumer income increase. With a 1st quarter current dollar GDP increase of $254 billion, consumer spending comprised $166.9 billion of this increase. However, consumer income increased only $132.2 billion. This means that $34.7 billion of the GDP increase was financed by borrowed money, or sale of already existing assets. Without this $34.7 billion addition, the current dollar GDP growth would have been only $220 billion. If the GDP only increased $220 billion, this would have reduced the current dollar GDP growth to 6.87%. Subtracting the GDP price deflator of 3.3% from this would give an annualized GDP growth of only 3.57%. Again, this is what it would be if the "borrowed money" component of consumer spending was subtracted from the total consumer spending. It is again worth mentioning that this follows the 4th quarter's dismal 1.7% growth rate.
"Consumer confidence has reached it's highest level in 4 years." Whoopee. That's because 4 years ago it sunk to it's lowest level in 4 years, following high's near 150 during the late 90's. In fact, to look at a graphic representation, April's levels are much, much lower than anytime during the 3 years before Bush took office. Furthermore, the Conference Board acknowledges that it's index is heavily weighted in favor of business, not consumers. The Michigan Index, which is weighted more towards consumers, has declined in 4 of the last 5 months. In fact, the Michigan index of consumer sentiment has DECLINED 24% since it's January 2004 peak. In fact, consumer expectations are at their lowest level of the entire Bush presidency. This information can be found at: Michigan Consumer Sentiment
Household "net worth" has increased exclusively due to home price overvaluation, and low interest rates and lax mortgage practices that have allowed buyers to bid home prices up far more than their actual worth. An overwhelming majority of the new "household wealth" created has been the result of the housing bubble, not increased production of any type of true wealth. And a huge amount of consumer spending, which is mandatory for economic growth, has been financed by borrowing off these overvalued homes.
Regarding jobs, Bush has created a net total of 1.48 million private jobs during his entire 5+ years in office, compared to a net increase in private jobs of 13 million in the 5 years before Bush took office. This can be seen at the BLS site at Private Jobs. April's payroll employment of 139,000 is less than the 150,000 necessary to keep pace with labor force growth.
The truth is, the economy is not good for the majority of Americans. Real wages are declining. Job growth is nowhere near where it should be following a recession. This economy is only strong for the high income earners. And eventually their lot will decline as well, because it takes consumer income, and the spending it finances, to create business revenues and profits.
Where to begin…
"There are three kinds of lies: lies, damned lies, and statistics."
Let’s start with the historical context.
The recession started in the third quarter of 2000 under Clinton’s watch. As the economy weakened, we were hit by the 9/11 attacks. That was followed by Enron and the other accounting scandals, all of which can be traced back to the incompetence of the Clinton administration. There was a shameful lack of corporate governance.
Your arguments and comparisons completely dismiss the economic conditions that Bush inherited as well as the dramatic events that had an enormous impact on the economy.
Rich Lowry, 5/12/06:
The downturn Bush inherited early in his term was driven by an investment bust. Consumer spending wasn’t the problem. Unlike in prior recessions, consumer spending didn’t decline at all, according to a report of the Joint Economic Committee of Congress. In contrast, investment collapsed. The way to revive it was suggested by a simple principle—the more you tax something, the less you get of it, and vice versa. Reducing taxes on capital and investment therefore should increase both, and so it has.
Consider the big picture: The tax cuts were passed in May 2003, and that’s roughly when investment—and everything else—began to take off. According to the Joint Economic Committee, all inflation-adjusted fixed business investment dropped at a nearly 6 percent annual rate from the third quarter of 2000 to the first quarter of 2003, then jumped by 9.2 percent from the second quarter of 2003 to the first quarter of 2006. Investment in equipment and software followed the same trend during the same time period. Meanwhile, the stock market began growing at a faster pace, because taxes were less of a drag on its value.
Larry Kudlow, 4/28/06:
Today’s economy may be the greatest story never told. It’s an American boom, spurred by lower tax rates, huge profits, big productivity, plentiful jobs, and an ongoing free-market capitalist resiliency. It’s also a global boom, marked by a spread of free-market capitalism like we’ve never seen before.
Recent data on production, retail sales, and employment are stronger
than expected. The latest durable-goods report shows huge gains in
orders for big-ticket items like airplanes, transportation, metals,
machinery, and computers — even cars and parts. These orders suggest that the economic boom will continue as far as the eye can see. And there’s more: The backlog of unfilled orders, the best leading-indicator of business activity, gained 12 percent at an annual rate in the first quarter. With this kind of real-world corporate activity in the pipeline, highly profitable businesses will be doing a lot of hiring in the months ahead in order to expand plant and equipment capacity. Just what the doctor ordered.
Deloitte research, 5/10/06:
The latest Deloitte Research Leading Index of Consumer Spending projects that the economy will continue to be strong as positive employment trends continue to outweigh a soft housing market and rising gas prices.
"Consumer confidence remains strong," says Carl Steidtmann, chief economist of Deloitte Research and author of the monthly index. "This is primarily due to the robust employment market, which is more than offsetting the housing market slowdown and the related decrease in home-related purchases. Indeed, the impact of increases in real wages in recent months has outstripped the impact of rising gas prices. Given these trends, our short term outlook continues to be solid."
The truth is the economy is good for the majority of Americans, not only high income earners. Your class warfare stuff doesn’t work. It’s a tired Dem talking point. Give it up. When examining the economy realistically and not politically as you and The New York Times do, one gets a more accurate picture – economic growth across the board benefits all Americans.
(By the way, your final sentence, "it takes consumer income, and the spending it finances, to create business revenues and profits," makes a nice case for tax cuts.)
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