Define “A Great Economy”

Our demented President continues to brag about the economy, claiming sole credit for producing good numbers, and (as usual) fabricating many of them.

That said, according to the metrics used by most economists and pundits, the economy is doing quite well.

Republicans running for the House and Senate are trying hard to emphasize that economic “good news,” and one of the more puzzling aspects of the midterm campaigns has been the lack of traction those efforts have generated. Usually, when the economy is humming along, that’s good news for the incumbents; this time, economic arguments don’t seem to be convincing many voters.

The “chattering classes” attribute this to a variety of factors– Trump’s extreme unpopularity, concerns about the negative effects of Trump’s tariffs and the escalating trade war with China. Those things clearly matter, but I have a different explanation: we are using the wrong metrics to measure economic performance . I’ve misplaced the link, but I copied the following paragraph from an MSN website that makes the same point.

A humming national aggregate economy does not necessarily translate into improved livelihoods for most workers. Since the recession, nominal wage growth has been anemic compared to past business cycle peaks. Health-care and education costs keep rising while job benefits disappear. Most households are still in rather precarious financial straits. And there’s still a large population of “shadow” unemployed the official unemployment rate isn’t catching.

According to official statistics, the net worth of the typical American household is still about 20 percent below where it was when Lehman Brothers’ failure triggered the financial crisis. It is true that the gross domestic product is now substantially higher than it was — but a majority of Americans have not seen their incomes improve. And as the above quote notes, the admittedly very good unemployment rate ignores people who have given up looking for work.

If a “good economy” is measured by stock market performance and corporate profitability, then yes, we currently have a good economy. If, however, it is measured both by aggregate indicators and the degree to which citizens share in the prosperity, our economic performance doesn’t look quite so good.

A recent analysis from the Brookings Institution addresses that disconnect. After conceding the positive indicators, the report notes that the labor market continues to struggle.

 Wage growth is still sluggish, with modest gains offset by inflation. Despite recent increases, the share of prime-age Americans in the labor force is still slightly below the pre-Recession level. Levels of unemployment vary widely across places and the population by key demographic characteristics.

The report was generated as part of Brookings annual update of the employment rate gap (which, as the authors explained, differs from the jobs gap), calculating each indicator  by race/ethnicity and level of education. The employment rate gap is the  difference between the demographically adjusted 2007 employment-to-population ratio and the same ratio at other points in time.

As the report concluded,

The Great Recession inflicted economic pain on many American families, but its burden was not equally distributed. Ultimately, the brunt of the Great Recession was borne by those without the protection of postsecondary education. College raises average lifetime earnings, and it also helps insulate workers from economic downturns, providing economic security in the times they need it most. Finally, racial disparities have been less severe in recovery than in the worst years of the Great Recession, though differences in employment rates persist. For the American labor market to be truly healthy, it needs to work for all people—not just some.

A truly “great” economy distributes its largesse widely. It is that often-referenced rising tide that lifts all boats.

When most of the benefits generated by economic productivity enrich only the top 1%–or even the top 10%–that economy is only “great” for the pigs who have monopolized access to the trough.

 

41 thoughts on “Define “A Great Economy”

  1. Sheila,

    “When most of the benefits generated by economic productivity enrich only the top 1%–or even the top 10%–that economy is only “great” for the pigs who have monopolized access to the trough.”

    Thanks for the short description of present day America. As Becky would like to have said, in yesterday’s post, “If you don’t like it, why don’t you get up and leave?”

  2. Give it time … GDP numbers are now above four percent. Remember when Obama said Trump needed a “magic wand” to make that happen? Well, abracadabra!

  3. Ask all those hardworking Americans, who vote, how they feel every quarter when they get their 401K statement? If the Democrats take back the house, this economy will tank.. and any common sense person KNOWS it! The Democrats have even admitted it as the price Americans will have to pay to get rid of Trump! Wow, that’s a “winning” strategy.

  4. The key thing to remember about measuring medians of anything, including household incomes, is that a million dollar increase at the top brings the median up. It doesn’t indicate overall prosperity. I wonder what the picture would be if we took out the top 1% before looking at median household income. I suspect the picture would be much bleaker.

    VOTE BLUE!

  5. No. We don’t have a great economy now. The rich has a splendid economy, but not a great economy. A great economy – for the lower classes or the rich or anyone in-between – achieves its financial vigor without spoiling the environment, without abusing its workforce, without harming the country’s health and without welfare for corporations. You could raise a country’s GDP growth rate to 10 percent or 50 percent or 80 percent, but if you did so by crushing the little guy and poisoning his environment, you do not have a great economy. America used to set its standards higher than every other country.

  6. My basic assessment of the economy always starts with the question “is it fair?” And my answer remains the same as it was two years ago “NO!”

  7. Just wait till when the stock market speculators are forced to consider FUTURE CIVIL UNREST, then you will see the real value of Trump’s “economic miracle.”

    But as Becky would, nevertheless, say, “Love it, or leave it.”

    Don’t be an idiot, VOTE BLUE!

  8. Becky: “If the Democrats take back the house, this economy will tank.. and any common sense person KNOWS it! ”

    The truth is that anyone with common sense who has also paid attention for the past 20+ years knows the Repiglican control ALWAYS ends up bringing about higher deficits and a crash. But Trump backers, being delusional to begin with, for get that Obama tripled the market from about 750 or so to 22-2300 and Trump has produced at best a 200 point rise–Nothing compared to Obama. As soon as the full effect of the tariffs and the deficit from tax cuts for the rich kick in then we’ll see another crash–and Trumpers will have to magically wave that away with “alternate” facts.

  9. Becky; your statement appears you believe all hard working Americans have 401K statements to receive. T’aint so!

    “It is true that the gross domestic product is now substantially higher than it was — but a majority of Americans have not seen their incomes improve.”

    No only has my income NOT improved the past 3-5 years, the soaring prices of everything has depleted what income I do have and there is no improvement in sight. My 22 year old car is on life support, my 31 year old furnace died during the mid-January ice storm so at age 80 I went into debt for a new furnace with 9.9% interest – no guarantees I would live long enough to pay it off. In June my 17 year old refrigerator died; drug out my VISA yelling “charge it”. Three weeks ago my used computer hard drive of unknown age died; again “charge it”. Now 81 years old I am deep in debt for the first time in over 20 years…but well aware I am one of the fortunate ones of my generation, I do have “stuff” to break and so far am able to replace it…so far!

    I pay $1,248 yearly for my Medicare plus co-pays for lab tests. The past four years that has covered one annual basic physical exam of vitals and twice yearly blood and urine lab tests. I understand that insurance is “a hedge against the darkness”, a “just in case I need it” payment and currently it is helping others get health care. Others have helped me in the past. But it all adds up to outgo as fast as it comes in and not getting ahead but questioning maintaining my financial status quo.

    “When most of the benefits generated by economic productivity enrich only the top 1%–or even the top 10%–that economy is only “great” for the pigs who have monopolized access to the trough.”

    My work history covers 25 years; low but still part of the millions of working Americans who keep that trough filled yet today. Don’t insult my intelligence by trying to convince me the economy is greater for America and all Americans today as I watch my working family and friends work harder and longer to keep up with the ruling class whose greed demands we fill that trough.

    VOTE BLUE!

  10. Thanks, Becky, for including some alternate reasoning into an otherwise boring discussion. Connecting Democrats to declining economies flies in the face of the history of our economics. Since you don’t seem to understand what Republicanism is, read Marv’s stuff for a couple weeks, Naomi Klein’s “Shock Doctrine”, and other bloggers here who actually know the ins and outs of runaway capitalism.

    Democrats tend to restrain capitalism so it doesn’t consume itself. Republicans let it run wild so the rich can buy another yacht and grin at the quarterly reports. On a slightly different topic, when the lower classes have been oppressed and had their opportunities for a better life reduced or eliminated, they will rebel. Sometimes it’s a revolution. Sometimes it’s just bloody riots in the streets. Hunger, and having one’s nose rubbed into their hopelessness is a hell of a motivator.

    So, no, our economy is dreadfully unfair to working people. Our oligarchs/Republicans are rubbing our noses in their mess and telling us it smells like roses.

  11. Citing GDP numbers, as the federal government likes to do, does not provide an accurate picture of our economy. GDP should be thrown out and replaced with Real GDP. Real GDP includes inflation in the equation and provides a more accurate picture of the economy. Our economic performance would actually be a much lower number (and possibly negative) if realistic numbers adjusted for inflation were used.

    Regarding unemployment statistics – those numbers have been extremely bogus. There are still millions of citizens who are unemployed and looking for work every day, yet they are not counted after their unemployment insurance runs out. They simply disappear from the stats. The government has no way of counting these people and why would they want to? Including the unemployed people who are still searching for employment daily would make our unemployment rate much higher and a much more accurate picture of reality. No president wants to post that kind of number for all to see.

    I believe our actual unemployment rate is closer to 12-14 percent.

  12. Vernon,

    You mentioned rebellion or a revolution. I have mentioned on this blog several times that there will be a revolution in our future. You can only beat people down to a certain point and when they have nothing left to lose they will rise up and refuse to be held hostage as slaves to those who took advantage of them.

  13. Vern,

    “Our oligarchs/Republicans are rubbing our noses in their mess and telling us it smells like roses.”

    Great comment. My twitter friend, Ulla in Sweden, made a similar one, last week, when she said, something like, “laying a bunch of roses on the grounds of Auschwitz, doesn’t make the holocaust disappear.”

  14. Vern and Marv; Stephen King says, “You can frost a turd but it is still a turd.” Referring this situation or the Holocaust to roses is being too kind.

    VOTE BLUE!

  15. Another Fox watching Boomer talks about economics and politics…yay!

    There are plenty of alternative measures besides GDP. The Social Progress Index and the Happiness Index. We don’t do so well with either of these indices.

    Why not?

    Because workers don’t share in the profits of our production despite productivity gains growing in double digits. We have never been more productive as a nation but our wages are stuck in the early 90’s. Who’s reaping all the benefits?

    CEOs and shareholders.

    CEO wages have grown beyond productivity gains. Shareholders have prospered the most.

    And what about when Lehman and other greedy bankers tanked the economy under GWB?

    ALL the gains have gone to the .01% in the economy. Remember who got wiped out: Bankers and Homeowners (specifically black homeowners).

    When our federal government was faced with this self-imposed crisis, what did they do?

    The Democratic POTUS (who happened to be black) bailed out the bankers with trillions in easy money. Guess what those greedy bankers did with all that easy money?

    They pumped money into the stock market. Their cost of money was zero so why not?

    Homeowners or average Americans have not been so lucky. Many are one paycheck away from financial disaster because low paying service jobs have replaced high paying manufacturing jobs which the Boomers enjoyed for decades. The sooner conservative, or republican Boomers, die off the better our country will be. It’s why they are the most despised generation in history.

    One last note, why won’t our federal government and our Mainstream Media use the Social Progress and Happiness Indices?

    Because the USA isn’t #1.

    We’re not even in the Top 10. It’s hard to promote American Exceptionalism when you’re not so exceptional. LOL

  16. Nancy, I think you make a good point. Economists have found that understanding an economy by measures is far from a simple thing. It takes many, many sets of numbers to really gain insight into what is going on.

    Thus understanding our economy is much like science and civics. Real understanding take a huge and exclusive investment in significant time and effort to achieve so what most of us are fed are oversimplifications that makes us feel way more informed than we really are capable of being.

    This all is a product of the huge explosion in collective human knowledge. Each of us knows a tinier slice of what is known (compared to our predecessors) and that gets more so every year. We are collectively on the average getting relatively more ignorant every year and the experts are, in their fields only leaving us further and further behind.

    Experts have to dumb down what they tell us and therefore they cannot offer complete explanations.

    This to me needs to be added to natural resource consumption and the now inarguable connection between our civilization’s energy sources and consumption rate’s effect on earth’s climate and our population growth as the indicators that our civilization is not sustainable and therefore temporary. It has to end at our hand or nature’s.

    Are we smart enough to manage what’s unavoidable to decrease the trauma of nature’s solutions?

    No evidence so far that we are.

  17. Becky,

    LOL. This blog is filled with college-educated people of many ages as well as non-college people. Almost all of us have the good sense to examine all sides of an issue before publishing thoughts. Thomas Sowell does not publish common sense. Anyway, good luck with your adherences.

  18. A college degree does not always go hand in hand with common sense. The most brilliant man I’ve ever known was German Grandmaster Robert Hubner. Robert speaks several languages, was ranked as high as third in the world in chess and did all that while being a top flight papyrologist. His education was 1st rate and his I.Q. off the charts.

    He also showed up for a two week chess tournament in Chicago (which he won, by the way) and forgot to bring luggage.

    Becky’s embrace of Sowell’s supply side economics (or voodoo economics–as George H.W. Bush accurately called it before he rolled over and played dead for Ronnie) is akin to Robert’s neglecting to bring luggage. She lacks some essentials.

  19. Some reality Numbers:

    The Standard and Poor’s 500 was on Dec 31,1980, 135.76.
    The Standard and Poor’s 500 was on Dec 30, 2016, 2,238.83.
    This represents an increase of 16.49 times in the S&P 500, 2,238.83/135.76 = 16.49.

    What has happened to Median Household Income during this time???
    According to the U.S. Census Bureau, “household median income” is defined as:
    “The amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount.”

    As heads-up there is a difference between Mean Income and Median Income.
    The “mean” is the “average” you’re used to, where you add up all the numbers and then divide by the number of numbers. The “median” is the “middle” value in the list of numbers.

    From the Census Bureau:
    Median Household Income in current dollars was $17,710 in 1980.
    Median Household Income in current dollars was $59,039 in 2016.
    This represents an increase of 3.33 times. $59,039/$17,710 = 3.33 (Near the rate of inflation)

    If Household Median Income had increased the same as with the Standard and Poor’s 500, the following would be the result:

    1980 Household Median Income $17,710 x Standard & Poor’s 500 increase (per above) 16.49 = $ 292,038. What this calculation shows is Household Median Income lags far behind the Standard & Poor’s 500.

    What this demonstrates is “The Market” bench Standard & Poor’s 500 has no relationship to Household Median Income.

    So where did the difference go??

    The big winner was the Top Fifth or top 20%. In 1980 the Top Fifth had 44.1% of aggregate income, by 2016 the Top Fifth had 51.5%. This means the Top Fifth had 51.5% of the share of aggregate income. The Top Five Percent struck gold. In 1980 the Top Five Percent had 16.5% share of Aggregate Income, by 2016 the Top Five Percent had 22.6% share of Aggregate Income.

    What this would all seems to mean is, the increases in “The Market” went disproportionately to the top 20% and top 5% of Americans.

    There is one other item to share with you:
    http://time.com/money/5054009/stock-ownership-10-percent-richest/

    The Richest 10% of Americans Now Own 84% of All Stocks.

    The top 10% of American households, as defined by total wealth, now own 84% of all stocks in 2016, according to a recent paper by NYU economist Edward N. Wolff.

    “Despite the fact that almost half of all households owned stock shares either directly or indirectly through mutual funds, trusts, or various pension accounts, the richest 10% of households controlled 84% of the total value of these stocks in 2016,” Wolff writes.

    Furthermore, while virtually all (94%) of the very rich reported having significant stock holdings—as defined as $10,000 or more in shares—only 27% of the middle class did. (The study framed that middle class as the group between the poorest 20% and the richest 20% of Americans.)
    *******************************************
    Just so you know, when Bill Clinton took office in 1992 the Share of aggregate income for the top 5% was 18.6%, by the time he left in 2000 the Share of aggregate income for the top 5% was 22.1%. The bottom 80% were the losers.

  20. Becky’s comment causes me to wonder what her college major was and where she graduated from. Not all majors are brag-worthy and the same goes for colleges/universities.

  21. Wray,

    It appears that Becky believes the only path to knowledge is to watch Fox Noise or listen to the famous (yet completely ignorant) far right radio commentators.

    Therefore, in her limited view of the world she has all the knowledge that she needs.

  22. Monotonous Languor,

    Thank you for taking the time to post realistic and true economic statistics.

    As I mentioned in a prior post, no president (or member of Congress) would ever want the true picture of our current economy to be published. They know that their jobs would would abruptly end in the next election and they definietly would not want to deal with the public fallout and anger of their voters before their jobs end. It would be political suicide.

  23. Nancy; about those 401Ks Becky was impressed with, there is another side to their story. My daughter became disabled after 24 1/2 years slaving in the main (commercial) Kroger Bakery; disabled with no health care she had to wait a specified number of years before she could cash it out to use and her wait for disability was 5 years. My daughter-in-law was 1 of more than 2,000 “let go” from Rolls Royce here, the job search at that time was slim to none; after more than a year Rolls Royce said former employees could apply for their old jobs at minimum wage. They must have had problems filling the more than 2,000 jobs they vacated. She waited to cash out her 401K for the specified amount of time while picking up an occasional low-wage job. My friend was one of many “let go” by Chrysler about 6 years ago; while she and her partner waited to be able to cash out her 401K they lived on her partners SS Disability checks.

    Thousands who worked and paid for 401Ks lost their jobs and had to wait a few years to benefit by their investments.

    VOTE BLUE!

  24. It’s the economy… A really tough economy, still. Terrible wages. United Way agencies are studying this now: ALICE. ALICE is an acronym that stands for Asset Limited, Income Constrained, Employed
    https://www.unitedwayalice.org/overview
    1/3 of the nation population is living under economic hardship( ALICE), low class to very low middle class, one foot on a banana peel to living in your car. Yet employed! for $8-$16/hr, working two jobs, usually. This is how Trump won. These people were left behind during the last several administrations and they said, screw it! Blow it up with Trump. Sure, they voted against their self-interest but they didn’t get anything better the last time with the blue team.
    Someone, anyone, fix minimum wage and insert medicare for all to swell the middle class again and we’ll be upright on rails. Then curb corporate welfare while you’re at it.

  25. ML,

    Very excellent summary of the realities of earnings inequality!! But, as with most other truthful and factual summaries, the advocates of Thomas Powell, et. al., will never admit it. They are forced – by their own fears – to adhere to something and opinions that require no work. Therefore, they don’t have to try to overcome their prejudices.

    You’ve brought me up short a couple times from voicing inaccurate or misleading data, and I do appreciate it.

  26. The reality is that Trump and the Republicans are leaving us with just two options in the near future: Either Race War or Revolution. Unfortunately, there is, seemingly, no way out, as human beings, contrasted with the animal world, have, for the most part, lost their ability to take PREEMPTIVE ACTION.

  27. Really the “realities of earnings inequality” as Vern worded it should be known to All Americans. It should be taught in our schools. The Proles would seem to be aware of it, but do not have the facts at hand to challenge the cheerleaders of Wall Street.

    As a Boomer, my wife and I were fortunate to have made some good decisions, worked at high paying jobs, that allowed us to contribute a portion of our disposable income into a 401K, matched by our employers, add in some good luck and inheritance.

    My concern is for my daughters and their families (and in a universal sense to Gen X, and Millennial’s). How do we fix this??? There is a solution set, but we have to be resolute in finding it.

    Voting Blue is a start but after that, we must IMHO, purge the Corporate Democrats out. The Corporate Democrats have treated us like mushrooms – fed us crap and kept us in the dark. I am seeing the “flag” of Democratic Socialism proudly held up by the younger generation – good for them!!!!

  28. We would do well not to conflate the stock market with the economy. Nor to not assume GDP growth is good without considering the distribution of the new wealth it creates.

  29. Well John; I am doing my part to aid in use of the GDP growth, car parts, new furnace, new fridge, new hard drive and now I need a new printer. All in a 9 month period. I added my Social Security check plus my retirement check; figured the total on a 40-hour work-week and I live on $6.67 per hourly wage.

    VOTE BLUE!

  30. a living wage,health care,goverment guarentee of retirement bennys,supporting the local buisness,because we make a living wage, and wall street,supports America,by paying taxes,and being a citizen,such as,in thier never ending need for citizens united.,lets redifine citzens united,by, relization,if your an American corp. you act American. otherwise,theres plenty of third world nations where you dont have to pay taxes, and you can shit in a bucket,and walk a dirt path to whatever you can do to fine work..,

  31. I have written at least 100 blogs dealing with wage inequality, and there will be no “great” economy until its fruits are fairly and equitably distributed as they were following WW II when wages rose in tandem with the Dow, a process that came to a dead stop with Reagan and one that has not yet recovered as measured by median wages. What we are reading about the “great” economy now is WSJ fluff.

  32. Here’s where your quotation came from:

    http://theweek.com/articles/795275/why-voters-arent-enraptured-by-trump-economy

    “There’s a lesson in their relatively low ratings, beyond the usual points about partisanship — namely that a humming national aggregate economy does not necessarily translate into improved livelihoods for most workers. Since the recession, nominal wage growth has been anemic compared to past business cycle peaks. Health-care and education costs keep rising while job benefits disappear. Most households are still in rather precarious financial straits. And there’s still a large population of “shadow” unemployed the official unemployment rate isn’t catching.”

  33. ML – Thank you for the very clear and detailed description of the relevant economic facts.

    I remember when I took a Macro-economics course a million years ago (OK – ’68), the teacher described the economy as diamond shaped with most of the income going to the middle class. The policy goals he wanted to study were how to decrease the number of people at the very bottom and how to bring that American middle class economic life style to minorities that were being left out.

    There is a different shape now – probably more like an inverted triangle.

    As for Thoma Sowell, I am not an economist, so I will not argue the details. I will only point out that he works at the Hoover Institute. According to their mission statement, they are not there to answer questions. They are there to promote private enterprise and argue that the government shouldn’t be involved in social or economic policies unless absolutely necessary. When you start with the premise that private enterprise is the answer —

  34. JoAnn,

    Just today I found out that the Diagnostic Charge to come out and see what is wrong with my eight year old A/C which totally stopped two days ago will be $92.00. This does not cover parts and labor to fix. A new conservative water heater will set me back $1400.00. My car need repairs that could amount to over $800. And on it goes.

    With each year, month, day as I proceed in my 76th year of living, with income from social security (worked for 40 plus years since age 16), from a defined pension plan, a small IRA, I find my ability to cover my living costs is definitely declining. Like you, I have worked my way out of most debt (still owe on car and condo), and am now looking at borrowing oncemore.

    I have such compassion for all those many seniors, and not so senior, persons who are not as fortunate as me. While I do so, I am really beginning to understand the how’s and whys seniors just give up, and don’t care….limited energy and resources which continue to not cover necessary living costs do not lead to a happy, joyful, carefree aging.

    My heart goes out to you, JoAnn, wish I could help you with your bills. But fearful to even give to favored non-profits at this time.

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