Feeling Poorer?
You’ve Got Plenty of Company

When the Bureau of the Census reported recently on various measures of Americans’ economic well-being, attention centered on the alarming poverty statistics.  A higher number (though not a higher percentage) of people in the United States live in poverty now than at any point since the bureau began collecting data in 1959.
The study’s most surprising finding, however, might be in household income, which has been retreating across the board for the past decade.  The decline is sharpest at the bottom of the economic ladder.  Those in the lowest fifth of the population saw their income drop 14.2 percent from 2000 to 2010 if inflation is factored in.  But middle-class, and even upper-middle class, people have suffered, as well.  Those in the top fifth saw their income drop 5.8 percent.  Only a tiny sliver inside the top 5 percent saw their earnings increase.  Small wonder, then, that economic discontent has sparked political uprisings on both right and left--first the Tea Party and now the Occupy Wall Street protests.
Compounding the misery, mobility up the economic ladder also has slowed.  Though the Census report did not address the issue, other studies have shown that the United States lags most developed nations in the ability of people to better their lot in a life.  A 2007 study by the Organization for Economic Cooperation and Development, for instance, ranked the United States 10th of 12 countries examined in percentage of people with higher living standards than their parents.  The sad joke these days is:  “If you want to live the American Dream, move to Finland.”
Aside from being a recipe for social unrest, these depressing data show how disconnected the political debate in Washington is from most people’s economic reality.  The decline is earnings was well underway before the Obama administration.  It was even underway before the 2008 financial crisis, and it will not be reversed by passing another stimulus program or by getting Washington off the back of business, whatever merit those ideas might have.
The Great Recession exposed weaknesses in the economic models of the United States and other countries that rely too much on government and consumer debt.  And it accelerated the downward trajectory in industries already gripped by the tsunami-like effects of globalization and technological improvement, multidecade trends that have made it much easier to shift jobs overseas, where wages are lower, or eliminate them entirely.
Those problems can’t be fixed quickly, which is why politicians rarely talk about them, but bad public policy is clearly a part of the problem.  Government spends money in two currencies--American dollars and open-ended promises.  The latter is taking over budgets.  In 1980, spending on health care accounted for 11 percent of the federal budget.  Today, driven by rising cost that are also straining family budgets, it is 26 percent.  Health care and Social Security now make up 45 percent of federal spending.
A government whose primary mission increasingly is to tax (and borrow from) the young to fund entitlement programs, largely for seniors, is inviting economic stagnation and endangering its future.  In the recent census study, senior poverty came in at 9 percent, unaffected by the recession and virtually unchanged for decades.  That is an extraordinary success story.  But for working age people, the rate was 14 percent, and for children and astounding 22 percent.
Perhaps nothing would be as helpful in getting those problems addressed as a balanced federal budget, or any equivalent that would force and honest discussion of difficult tradeoffs.
An economy and culture that worships consumerism rather than saving an investment is a problem as well.  So, too, is a political system that caters to influential insiders and a tax code that has become a vehicle for rewarding them.
Until the nation begins to address these issues instead of playing trivial blame games, people up and down the economic ladder can expect more downward mobility.  In that context, the emergence of both the Tea Party and Occupy Wall Street could be a promising development.  If the extremes of left and right are feeling the same strains, some aspiring leader might find a way to tap into both.