The Daily Sandwich

"We have to learn the lesson that intellectual honesty is fundamental for everything we cherish." -Sir Karl Popper

Location: Boston, Massachusetts, United States


Friday, July 14, 2006

Who the "booming economy" helps

I've written before on the new attempt by conservative pundits to characterize the current economy as nothing short of miraculous-- all thanks to brilliant economic policy from the top. They're outraged that the sinister, liberal media isn't constantly reminding people of how great things are.

But as Paul Krugman writes, while the economy might be moving along at a nice clip, it's only good news for a miniscule number of Americans.

Here’s what happened in 2004. The U.S. economy grew 4.2 percent, a very good number. Yet last August the Census Bureau reported that real median family income — the purchasing power of the typical family — actually fell. Meanwhile, poverty increased, as did the number of Americans without health insurance. So where did the growth go?

The answer comes from the economists Thomas Piketty and Emmanuel Saez, whose long-term estimates of income equality have become the gold standard for research on this topic, and who have recently updated their estimates to include 2004. They show that even if you exclude capital gains from a rising stock market, in 2004 the real income of the richest 1 percent of Americans surged by almost 12.5 percent. Meanwhile, the average real income of the bottom 99 percent of the population rose only 1.5 percent. In other words, a relative handful of people received most of the benefits of growth.

Since Krugman's column is behind the Times' subscription wall, that's all I've got from Klein's post. But I'm pretty sure that 1.5% isn't even enough to keep up with cost-of-living increases.

In short, Bush's economic policy is exactly what critics feared-- a massive handout to the richest people in the nation.