What's up is down

So CNN says that

WASHINGTON (AP) - Forecasters believe things are falling into place to produce the strongest economic growth in two decades. ...

"The economy is off and running, and 2004 should be a very good year," said Mark Zandi, chief economist at Economy.com. ...

Many analysts believe the overall economy, as measured by gross domestic product, will expand next year by 4.6 percent or more, the biggest gain since 1984.

Okay - but good for who? The sky-high GDP growth of the 3rd quarter of 2003 annualized to 8.2% (i.e., the GDP would grow 8.2% a year if the same rate of growth continued). That's a big increase. Where did the benefits go?

Certainly not to workers, as Paul Krugman notes in his December 30 New York Times column:

[W]age and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation. ...

[T]hanks to a weak labor market, employers have felt no pressure to share productivity gains. Calculations by the Economic Policy Institute show real wages for most workers flat or falling even as the economy expands.

Nor has it gone into job growth that would benefit the unemployed.

[T]he current jobless rate of 5.9 percent - down from a high this summer of 6.4 percent - is expected to still be around 5.7 percent when America votes next November[, CNN says]. ...

The sustained recovery should translate into job increases of 100,000 or more per month, which would translate into at least an additional 1.2 million more jobs next year, the first positive year for job growth since 2000. Since the recession began in March 2001, the country has lost 2.35 million payroll jobs.

But even under this upbeat scenario, Bush will end his term with a net job loss of over 1 million - a net loss being something that hasn't happened to a president since Herbert Hoover. Indeed, the figure of 100,000 additional jobs a month is not only, Krugman says,

well short of the 225,000 jobs added per month during the Clinton years; it's even below the roughly 150,000 jobs needed to keep up with a growing working-age population.

That is, the predictions most favorable to Bush only mean that ordinary people will be losing ground more slowly. Just how bad is the job market? The Los Angeles Times for December 29 lets us in on a very poorly-kept secret: It's much worse than the "artificially rosy" official figures let on.

To begin with, there are the 8.7 million unemployed, defined as those without a job who are actively looking for work. But lurking behind that group are 4.9 million part-time workers ... who say they would rather be working full time - the highest number in a decade.

There are also the 1.5 million people who want a job but didn't look for one in the last month. Nearly a third of this group say they stopped the search because they were too depressed about the prospect of finding anything. Officially termed "discouraged," their number has surged 20% in a year.

Add these three groups together and the jobless total for the U.S. hits 9.7%, up from 9.4% a year ago. [Emphasis added.] ...

The segment of the labor force that has been jobless for more than 15 weeks has risen nearly 150% since 2000. The current level is the highest since the recession of the early 1990s. Nearly one-quarter of the jobless have been unemployed for longer than six months.

That, CNN reports, is a 20-year high. And that's not likely to improve over the long term, the LA Times indicates, quoting Erica Groshen, an economist with the Federal Reserve Bank of New York.

"If you plot job losses versus gains on a chart, it's shocking," she says.

Losses are running at about the same rate they were in 1997 and 1998, two good years for the economy. But job creation in the first quarter of 2003 - the most recent period available - was only 7.4 million, the lowest since 1993.

So, where did the benefits go? Krugman knows.

The direct gains are going largely to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. ...

A good indicator of the share of increased profits that goes to different income groups is the Congressional Budget Office's estimate of the share of the corporate profits tax that falls, indirectly, on those groups. According to the most recent estimate, only 8 percent of corporate taxes were paid by the poorest 60 percent of families, while 67 percent were paid by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class warfare!" the right shouts.) So a recovery that boosts profits but not wages delivers the bulk of its benefits to a small, affluent minority.

The bottom line, then, is that for most Americans, current economic growth is a form of reality TV, something interesting that is, however, happening to other people.

As Krugman indirectly points out, any time you criticize the privileged positions of the rich or suggest reducing the cost their greed imposes on the rest of us, they will summon up every bit of tut-tutting condescension they can muster, belch politely (one too many truffles, so sorry), and lecture you on the importance of rewarding great effort (theirs) and the evils of rewarding sloth (yours), while their right-wing acolytes scream "Class warfare!" in the political equivalent of a pre-emptive strike.

Class warfare is nothing new here. There's been a class war going on for a long time - a war of the rich against the poor. For a relatively brief period, about the 30 years from the latter 1940s to the latter 1970s, the rest of us had the upper hand, and during that time real disposable income rose as income equality shrank, as did, during the last 10 or so years of that time, poverty. But the tide turned again as the Empire struck back with a new divide and conquer strategy: Knowing a direct assault would fail, they took advantage of lingering discomfort over the social changes born of the 60s to push the so-called "hot button" issues to divide black from white, women from men, workers from environmentalists - and when economic times were hard they urged everyone to be concerned with only themselves and theirs and the hell with everyone else. Over time they succeeded in moving the victims of their avarice to blame, to point fingers at, to denounce, everybody, anybody, anybody but them. So complete was their victory that a majority of us supported repeal of the estate tax, even though it was already so limited that the change benefitted only a tiny handful of the richest people in the country.

By stealth their wealth grew this time, not by glorying in it; this wasn't the Golden Era, it was a time for subtlety. Hidden away, unspoken, the dictates of wealth re-established themselves. After-tax family income tells the shocking story. Over the period 1977-1999, after-tax family income for the poorest fifth of our population fell by 9%. For the next fifth it was essentially stagnant, while the middle fifth gained about 8%. Over the same period, the after-tax income of the next richest fifth went up 14% and that of the richest fifth rose 43%! To top it off, the after-tax income of the richest 1% among us went up 115% over that period - that is, it more than doubled. (Calculations from the vital Center on Budget and Policy Priorities, using Congressional Budget Office data.)

The simple fact is, the rich have gotten richer and richer over the past 25 or so years, gobbling up more and more of our national wealth, leaving less and less for the rest of us. According to the most recent figures available from the Federal Reserve's Survey of Consumer Finances, the richest 10% of our population own 71% of the wealth. Income figures tell the same story: "Most measures of income inequality indicate that inequality rose substantially between 1967 and the early 1990s and was largely unchanged through the late 1990s." (Money Income in the United States: 2001, US Census Bureau, September 2002) Other sources agree that the growth in inequality slowed in the 1990s but it did not stop, that is, inequality continued to grow, just not as fast. (Recent Trends in Wealth Ownership, 1983-1998, by Edward N. Wolff, Jerome Levy Economics Institute, April 2000.)

We have been getting squeezed for decades with results that can be seen in everyday ways.

We don't know the final sales figures yet, but it's clear that high-end stores did very well [over the holiday season], while stores catering to middle- and low-income families achieved only modest gains

Krugman says. Our futures shrivel, our presents stagnate and slip away, our plans for our children to be better off than us fade, many of us give up even on the hope of a decent job and benefits? What are they?

Sooner or later, sooner or later, enough people will get angry enough, enough people will see clearly enough, enough people will have hope enough, to take back their futures - if only we can survive this dark time. Which I fully and perhaps foolishly believe we will.

In the meanwhile, the next time someone tells you that, for example, raising taxes on the rich is "class warfare," you just tell them "Damn right it is. And about time, too."

They Also Serve Who Only Stand and Wait Dept.: CNN says

[David] Wyss [chief economist at Standard & Poor's in New York] and other forecasters believe the Federal Reserve will keep interest rates low most of the year despite stronger growth because inflation will continue to be a no-show. Many don't expect the first Fed rate increase until after November's election.

Careful, now: Don't do anything that might even possibly slow the expansion.

And by the way, think about just why "inflation will continue to be a no-show."

Update: Edited to add a link to the Economic Policy Institute