Wednesday, September 17, 2014

Economic Conditions Driving Political Squabbling

GDP versus Median Income in the United States
The basic message of this graph is that the median household income in 2011 was the same as that in 1989 -- the folk in the middle had seen no improvement in their incomes in 22 years. This was in spite of the fact that the per capita production of goods and services had increased by almost 35 percent in that period. (Growth looked better from 1992 to 2007, but then came the Great Recession.)

So where did all the extra money go? Basically it went to the people with incomes above the median, and the people who took the biggest chunk of the increase in production were the top one percent of households, as shown in the following graph.
And this is what John Cassidy says about the situation in an article in The New Yorker:
The political implications of these figures are, surely, pretty obvious. When spending power is rising broadly, benefitting most social, geographic, and income groups, it is much easier to get rival political parties and factions to coƶperate. Consensus politics can thrive, as they did in the postwar era. But when most people’s incomes are stagnating, and have been for decades, politics become darker and more fractious. 
With fewer gains to go around, distributional squabbles intensify—not just among various income groups but also among different social classes and ethnic groups. (As the Census Bureau data show, income disparities are still highly correlated with race.) Meanwhile, those lucky folks at the top of the income distribution, where almost all of the incremental income has accumulated over the past couple of decades, have a big incentive to get more involved politically: to prevent the adoption of redistributive policies. 
To oversimplify a bit, income stagnation paired with rising inequality is a recipe for political polarization and, under the American system of divided powers, political gridlock, which is what we have. Based on the latest Census Bureau figures, there’s no sign of that changing anytime soon.

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