A tale of two economies: US

Just recently I went to a small festival-crafts fair here locally. There's a pond there where a guy runs a business renting out those little pedal boats for people who want to go out on the water for a time. I asked him how things were going.

"Not good," he told me. "This is the worst year I've had in nine years. This weekend [i.e., the festival] helped, but even this isn't as good as usual."

I wondered aloud where all this economic recovery we keep hearing about is. "I don't know, he replied, "but it sure as hell isn't here."

Compared to the catastrophe of Iraq, our economy is a paradise. But compared to paradise, our economy is - well, perhaps not a catastrophe, but certainly not what we're being lead to believe by those who benefit by our struggles.

And "struggle" is the right word. We have indeed heard a lot about the supposed big burst of growth, jobs, everything is on the upswing! Tax cuts work! Hooray for Bush! - but it's more gristle than meat, more foam than beer, whatever more-than cliche you prefer. The simple fact is, for most of us the economy is going nowhere. Maybe not getting worse, but certainly not getting better in any real fashion. You know that sneaking feeling you've had that all you hear about the booming economy just doesn't match what you see around you but you kept thinking that maybe it was just you? It's not.

For example, retail sales were off in June,

the Commerce Department said on Wednesday in a report showing the American consumer struggling to deal with rising fuel costs. ...

The June retail sales decline was the largest since a matching drop in February 2003,

which was in the midst of the recession. The numbers were contrary to expectations that sales would rise modestly when an expected slump in car sales was excluded.

What's more,

[t]he U.S. economy grew much more slowly than previously thought in the first quarter while inflation was higher, a government report showed on Friday.

In fact, not only was it slower than previously thought, it was slower than in the last quarter of 2003.

Then consider jobs growth. Last week, Reuters noted that June

represented a 10th straight month of job growth that has added about 1.5 million workers to payrolls,

or an average of 150,000 a month over that time. But that gain of 1.5 million has come after a loss of 2.9 million over the preceding almost three years. Add the fact that economists estimate that as many as 140,000 jobs should be added each month just to allow for population growth increasing the workforce, producing a net gain of as few as 100,000 jobs over those last 10 months ((150,000-140,000) x 10 = 100,000), and the real picture comes more into focus.

And even that low growth won't necessarily be sustained. The same Reuters report says that

[t]he pace of U.S. hiring slumped sharply in June after several months of robust gains, the government reported on Friday, as employers added fewer than half the number of payroll jobs forecast and hours of work shrank.

The Labor Department said only 112,000 jobs were created last month, far fewer than the 250,000 that Wall Street analysts had anticipated. April and May new-job totals were revised down, to 324,000 and 235,000 respectively, from 346,000 and 248,000.

In its report, released July 2, the Bureau of Labor Statistics said that

The number of unemployed persons, 8.2 million, was essentially unchanged in June, and the unemployment rate held steady at 5.6 percent. The unemployment rate has been 5.6 percent in all but one month this year. ...

The number of persons who were marginally attached to the labor force was 1.5 million in June, about the same as a year earlier. ... There were 478,000 discouraged workers in June, the same as a year earlier.

So the number of jobs went up, employment went up but the unemployment rate has remained steady all year and the number of "marginal" (which includes "discouraged") workers is the same as a year ago. What does that add up to? That the growth in jobs has been enough to absorb the growth in the work force - but no more than that. We may no longer be sinking - but we are still merely treading water.

And in fact the only way we're doing even that is by working more. The Economic Policy Institute notes that the average workweek, measured by hours worked, is up by 3.1% since 1975. Some, however, argue that this is not a significant increase. Perhaps not - but it's also not the best measure. A more realistic figure is the total number of hours worked per week by all the members of a household, since we're far removed from a time when it could be assumed there was only one wage-earner per family. That figure, the Institute says, is up by 11% in that same time.

And what has that 11% increase in hours worked gotten us? Pretty much nowhere. Writing in the Houston Chronicle for July 11, commentator Walter Williams notes that

[f]rom 1970 to 2000 (adjusted for inflation), the bottom 90 percent's average income stagnated at $27,000 a year

- that despite the increase in hours. So who's benefitted? Who's benefitting? Who do you think? Williams knows, describing the

[w]orsening income disparities — greater than at any time since the 1920s....

Upper-middle- and upper-class families that constitute the top 10 percent of the income distribution are prospering while many among the remaining 90 percent struggle to maintain their standard of living. Further, a widening chasm separates the 13,400 most wealthy families, who on average earn just less than $24 million a year, from everyone else. ...

The top 10 percent experienced an average yearly income increase of nearly 90 percent, from $119,000 in 1970 to $225,000 in 2000. The top one-hundredth percent had their average yearly incomes skyrocket by $20,327,482 between 1970 and 2000.

Don't expect that to improve anytime soon. As EPI notes in another report, between November, 2001 - the end of the last recession - and November, 2003, real (i.e., inflation-adjusted) hourly wages of blue-collar and non-managerial workers went up by 1%. But since then, they have lost that 1% and are now where they were before our last two years of "robust" growth.

A good reason for the growing gap between the rich and the rest is a simple and straightforward one: As The Century Foundation (formerly known as The Twentieth Century Fund) puts it, "taxes favor wealth over work" - or, not quite so politely, our tax system favors the idle rich over the working middle class and poor. Favoritism for the haves over the have-nots is built into the system.

Under the new tax law enacted in 2002, capital gains and dividends are now taxed at a top rate of 15 percent. That is less than half the previous level. For middle-income taxpayers, earnings from employment are taxed more than twice as much - at income tax rates ranging from 15 percent to 28 percent, plus the payroll tax of 15.30 percent (split evenly between workers and their employers.)

(Actually, the Foundation isn't as polite as I suggested: The title of the report, which is in .pdf format, is "Why It's Good to Be Rich - And Getting Better All the Time.")

And contrary to what some claim, we do not make up in benefits what we lose in income. Last month, the International Herald Tribune, quoting the Boston Globe, reported that the US

lags the rest of the world in providing paid time off for illness, maternity leave, vacations and other benefits that are critical for working families, a study has found.

The Project on Global Working Families at Harvard University this week released the first comprehensive report comparing government policies that guarantee employee benefits in the United States with those in more than 100 other countries.

It found that the lack of federal support for workers who care for children and elderly family members means that the United States falls short of government protections available in other industrialized countries like Germany as well as in less developed countries.

The U.S. government, for example, does not require employers to provide paid time off for illness. As a result, only half of American workers receive sick time. In contrast, 139 other countries require paid time off for short- or long-term illnesses, according to the Harvard study. ...

U.S. policy failures affect not only those in the lowest-wage jobs but also middle-class families, [project director Jody Heymann] said.

"The majority of the middle class can't count on paid parental leave when they need it, paid sick leave when they need it, having the ability to address the sick needs of children, elderly parents or other family members," Heymann said.

Overall, things are getting better for the fat cats and worse - or at best stagnating - for the church mice. Of course, this didn't just happen all at once; it's been building for roughly the last 30 years, dramatically worsening through the 1980s. And don't feed me stories about the Clinton years: While the growth in income inequality did slow during the 1990s, it did not stop, as I discussed more in detail on December 31.

But the Clinton years do seem to describe the Democratic Party project of late: Things don't get better, they just get worse more slowly. Is this really the best we can do? Where are the voices that will come to the democratic process crying out that this just isn't good enough? Where are those who will say that we can only tread water so long before we sink and drown? Why are there none such?

Oh wait, I remember, we do have them. We have such as David Cobb of the Green Party, Ralph Nader, and Walt Brown of the Socialist Party, USA.

But then again, we don't dare support any of them, do we? Because as we all know from having been told oh so many times, advocating making things better will actually only make them worse.