The Economy: Up, Down, or Sideways?: Ruy Texeira and EPI's View

Ruy Texeira writes about the state of the economy:

The Emerging Democratic Majority WebLog - DonkeyRising: Last week, I pointed out that, while views of the economy had improved somewhat toward the end of last year, that didn't mean the public now thought the economy was in good shape. They merely thought it was less bad than before. And this week we have a new poll from Ipsos-AP that indicates views of the economy may be declining once again. From the Ipsos report on the poll:

Despite strong job numbers for December, Americans' confidence in the economic state of the country declined in January, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. This was primarily due to low expectations in economic performance over the next six months and increasing fears about job security.

This stubborn failure of the public to get happy about fairly solid GDP and job growth has occasioned much head-scratching among the commentariat and, of course, among GOP operatives who smell a press plot to discredit Bush's alleged economic achievements. But there is a much, much simpler explanation for the available data: people don't think the economy is so great because it isn't so great. The indispensable Economic Policy Institute has produced a crisp one-page summary supporting this viewpoint. Here are some choice excerpts:

Profits are up, but the wages and the incomes of average Americans are down.

--Inflation-adjusted hourly and weekly wages are still below where they were at the start of the recovery in November 2001. Yet, productivity--the growth of the economic pie--is up by 13.5%....

--Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.

More and more people are deeper and deeper in debt.

--The indebtedness of U.S. households, after adjusting for inflation, has risen 35.7% over the last four years.

--The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 115% of after-tax income, twice the level of 30 years ago....

--The personal savings rate is negative for the first time since WWII....

Rising health care costs are eroding families' already declining income.

--Households are spending more on health care. Family health costs rose 43-45% for married couples with children, single mothers, and young singles from 2000 to 2003.

--Employers are cutting back on health insurance. Last year, the percent of people with employer-provided health insurance fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. Taking population growth into account, 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level.

There you have it. The public's not so crazy after all. Commentators and GOP operatives take note.

I would add a big caveat: If you own a house in what Paul Krugman calls the "Zoned Zone," the value of your house has gone up a lot. Of course, changes in the value of the existing housing stock are not additions to national wealth--they are redistributions of wealth from future to present homeowners.(1)

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(1) Thinking about it, that's not quite right. If housing prices go up with real interest rates remaining the same, that's a redistribution from future to present homeowners. If housing prices go up because interest rates have fallen, that's... more complicated. It's a redistribution from future to present homeowners plus a whole bunch of other effects I have to think about...