Republicans have been trying to convince the American people that we don’t have any money. They have used the financial collapse of Wall Street to scare Americans into believing this tale. It is true that the average American is having problems paying his/her bills. That is because everything is going up except their salary. Wages have been flat or depressed for over 30 years. We (our government) have promoted policies which have allowed corporations to play a game of labor arbitrage, which has depressed our income and fattened the wallets of CEOs. We have showered big business with tax breaks and have done nothing to help the average worker. As a matter of fact, we have made it harder on the average Joe by deregulating almost everything and tearing up the economic safety net.
Incomes, on average, have grown substantially over the last three decades, both in absolute terms and per person. The good news is that projections show comparable income growth over the next three decades, too. The chart shows the annual levels of per capita income for 1980-2010 and 2010-40. Adjusting for inﬂation, per capita income was $28,684 in 1980, steadily increased to $47,737 by 2010, and is expected to rise to just over $75,000 by 2040. With this level of past and future income growth, we as a nation are not broke—governments can afford the investments and services we need, and employers can provide rising compensation to employees.
And we won’t be broke if we make appropriate choices. The future prosperity of the broad middle class hinges on the economic policies and structures that determine how this future income is generated and shared. For instance, federal and state governments certainly face deﬁcits today, and those deficits are primarily the result of tax policies (Bush-era cuts for the wealthy) and the impact of the Great Recession (which will lessen with time). But with the per capita income growth over the next three decades projected to match that of the past three, we have the means to pay for the government programs we need, and should do so.
Update: I have a commenter focus on this post like a laser. He has had several thoughtful questions. I would just like to add that blotting government spending on one axis versus income on the other axis only reveals a part of the picture. We need to see more in order to truly evaluate if government spending is truly out of control. We need to look at GDP also. Anyway, I would like to point everyone to this nice paper by EPI. It explained that we aren’t broke and we can afford to pay workers more.