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.
From EPI:
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.
1. The Republicans aren’t arguing that “we” are broke.
The Republican claim is that the government is “broke.”
2. ECT: Wages have been flat or depressed for over 30 years.
From EPI: 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,
Can you and EPI both be correct?
The quote didn’t quite pick up the gist of the EPI piece. Per capita is the average wealth increase, but the distribution of wealth and income is the issue. The article states “the top 10% of the income distribution has claimed almost two-thirds of the gains in income since 1979, with the top 1% alone claiming 38.7% of those overall gains. Moreover, the wealth of the median (or ‘typical’) household was lower in 2009 than in 1983, in spite of the 40.3% growth in the average household’s wealth.”
The government has a cash flow problem which has been caused by Republicans. They have continually cut taxes and have never made any “offsets.” If you continue to cut the inflow then there’s going to be a problem with cash flow. Secondly, Republicans never want to talk about the economic downturn as one of the big problems with the government cash flow shortage. Anytime there is a recession there’s a decrease in the government inflow. This will reverse once the economy gets going.
My argument is that wages are stagnant compared to other costs.
http://www.epi.org/publications/entry/webfeat_econindicators_wages_20080514/
http://www.epi.org/pages/newsflash_060915_wages/
http://www.guardian.co.uk/commentisfree/michaeltomasky/2011/mar/15/usdomesticpolicy-public-private-workers-have-in-common-inequality
Finally, here’s a post that I made several months ago that brings it all home. https://whereistheoutrage.net/2010/12/22/our-problem-in-america/
Thanks for your comments.
thanks for your solid explanation. I appreciate you stopping by.
Per capita is simply per head, each individual. It could be income, wealth, cars etc. I don’t think the article was misrepresented. Per capita could apply either to income or wealth. The EPI piece was a snapshot.
The main problem is that the writer examines income in isolation, apart from spending. From 1980 to 2010, per capita income rose from 28,684 to 47,737 or 66%. Compare that to federal spending which rose from 591 billion in 1980 to 3591 billion in 2010 or 600%. [BTW State government spending has also increased six fold].
Federal government spending has increase 10 times more than the increase in income since 1980. Yikes!
Total federal revenue has increased from 517 billion in 1980 to 2,163 billion in 2010 or 318%, again dwarfing the relative rise in income.
The author’s reasoning is like Spendthrift Joe who gets a 10% raise and then increases his spending 100% and maxes out the credit card. Joe may have had a raise but he is still broke.
http://www.usgovernmentspending.com/downchart_gs.php?year=1980_2010&view=1&expand=&units=b&log=linear&fy=fy10&chart=F0-state&bar=1&stack=1&size=m&title=&state=US&color=c&local=s
in your equation you haven’t added corporate income. Why not? Since federal revenue is a combination of federal income taxes plus corporate income taxes. Would that give you a clearer picture? Finally, I think that if you look our increase in GDP over the same time period there isn’t a Yikes at all. (http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=5&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1970&LastYear=2011&3Place=N&Update=Update&JavaBox=no#Mid) Our GDP has increased over 700% during that time frame. Then again, Republicans have controlled the White House almost completely since 1980. They have spent and spent but it is only when the Democrats get into the White House that there is a cry of deficit spending. I’m not buying it.
Thanks your comments.
Sorry, I’m fighting a cold. Since both responses have similar themes, I will answer in one post.
First, I did not mention the GDP because I used your stats. Your original post did not mention the GDP. I’m okay with changing the playground.
Second, you repeat a common but flawed argument concerning the budget. You state that the Republicans have controlled the White House for most of the last 30 years and have spent and spent … etc. Your argument is good on the rhetoric but poor on the civics. The President can veto but Congress makes the budget. Presidents Reagan and Bush I [88-92] never had a Republican house and maybe one or two sessions with Republican Senate. After 1994, Clinton had a Republican Senate and House. Remember the news meme about whether or not the President was relevant? “W” had the House for six years but the Senate may be four years. A lot of Republicans did complain but the President was the party leader and Bush never had much interest in spending restraint. Spending shot up Bush’s last 2 years when the Democrats controlled the House and Senate and even more over the last 2 years.
Finally you blame Obama’s deficit on the Republican tax cut. The facts don’t support your thesis. Obama/ Pelosi/ Reid have outspent Bush by several hundred billion each year (including a 800 billion dollar spending package 1 month into his presidency) both in total amount (10,260 billion Bush’s last 2 years versus 11695 billion in Obama’s first 2 years)and as a percentage of the GDP (18.11%-20.76% for Bush and 23.5%-25.3% for Obama). You are right; Obama has suffered from low revenues due to the recession. Unfortunately, even though the recession has been declared to be over, revenues are not close to the level that Bush had during his last few years. Obama’s “stimulus” hasn’t increased revenues much.