Jason Furman on the American Standard of Living

Jason Furman on American earnings and inequality:

American Prospect Online - ViewWeb: Walk and Chew Gum at the Same Time. by Jason Furman: Damn Matthew Yglesias. Somehow he hacked into my computer and stole my argument on the Rose-Mishel debate -- before I had even written it. Damn he's good. As Matt points out, the debate over what has occurred in the last 30 years is largely irrelevant to the policy prescriptions and political strategies we adopt to ensure that America becomes an even better place over the next thirty years.

But the facts are not entirely irrelevant.... I would much rather we all... spend our time figuring out what to do about rising inequality. But... Rose is right, people are substantially better off than they were 30 years ago.... [T]oday's workers are earning more than their counterparts did 30 years ago.

Ignore the statistics for a second and use your common sense. Remember when even upper-middle class families worried about staying on a long distance call for too long? When flying was an expensive luxury? When only a minority of the population had central air conditioning, dishwashers, and color televisions? When no one had DVD players, iPods, or digital cameras? And when most Americans owned a car that broke down frequently, guzzled fuel, spewed foul smelling pollution, and didn't have any of the now virtually standard items like air conditioning or tape/CD players?...

A long life -- it's four years longer today than it was in 1975. A college education -- 38 percent of young adults are enrolled today, compared to 26 percent back in 1975. A home -- also more common today than in 1975....

Some of the wage statistics that Mishel tosses around suffer from a number of limitations, virtually all of which bias the picture in the same way. The biggest one is that wages... are reported after the cost of increasingly generous and technologically advanced health insurance is factored out.... Health isn't the only problem with the wage data; other benefits have grown as well -- in addition to the fact that the wage comparisons rest on a measure of inflation that is almost universally believed to be biased and ignore the influx of immigrants who weren't in the data back in the 1970s.

But if you are capable of walking and chewing gum at the same time, then read Mishel to learn about the large rise in inequality and the large disconnect between productivity growth and compensation for the typical worker.... [O]ur economic system does a decent job of delivering strong productivity growth... even when inequality widens, the majority of Americans are still doing better.... But I also want more Americans to share in those gains, and thus support investments in education, progressive savings incentives, and more generous tax credits to make work pay -- especially for childless workers who have been left behind by our increasingly child-centric tax system....

[I]f we're not happy with the way our society distributes the gains from our economy -- and I personally wouldn't be happy with the state of things even if someone [were to] convince me that inequality was actually decreasing -- then the final part of a solution is a more progressive fiscal system....

A good politician -- think Bill Clinton -- can talk optimistically about America's successes but also constructively about overcoming our probelems and challenges. Surely even us lesser mortals can aspire to do the same.