Understand that what unifies American voters of all parties and persuasions is economic anxiety—about themselves today and about their children tomorrow. Exit polls on Tuesday made this soberingly clear. Only one percent of voters described the U.S. economy today as “excellent.” Almost 70 percent described it as “not so good” or “poor.” Only 29 percent said their family’s financial situation had improved in the past two years. Nearly 80 percent said they were “somewhat worried” or “very worried” about the direction of the economy. These numbers accord with a slew of recent polls. Two months ago in their joint survey, The Wall Street Journal and NBC asked Americans, “Do you feel confident or not confident that life for our children’s generation will be better than it has been for us?” An all-time record 76 percent do not feel confident about their children’s prospects.
What drives this pervasive anxiety is not jobs per se. Last Friday’s Employment Situation report indicated that unemployment in October fell to 5.8 percent. Allowing for measurement error in this statistic, it means the U.S. labor market is quite close to full employment. No, what drives anxiety is the stagnant earnings of so many jobs. Since 2000, only workers with a doctorate or a professional post-graduate degree—just 4.0 percent of workers in 2013—have enjoyed increases in their average inflation-adjusted money incomes. Median household income in America in 2013 was $493 less than inflation-adjusted U.S. median household income in 1989.Perhaps some of the malaise of the American people has been caused by the tsunami of attack adds and negative opinion on so called cable news, but I accept that the economic gains in the recovery from the Great Recession have been largely appropriated by the wealthy. They have seen huge increases in income while the poor are still poor and the middle class is hardly progressing.
For the wealthy, the increase in wealth is more important than income. The Dow Jones Industrial Average hit a low of 6,443.27 in March 2009, and is 17573.93 now. Thus someone who had a billion dollars in these stocks in 2009 has nearly three billion dollars today; if he just held the stocks, there was no taxable income associated with the increase.
The housing boom was in part due to providing home loans to people who were too poor to qualify for loans in the past. The risk of these loans was passed on through new financial instruments, often going into the investment portfolios intended to support retirement. The result of the increased demand for modestly priced homes was a real estate bubble. When that market crashed, a lot of people had their loans foreclosed, and lost their savings; others still are under water, owing more on their mortgage than their homes are worth. The impact of the disappearance of savings was like a negative income.
Serious economists suggest that those who fear that their children will not be better off than they are will often be right. The one-percent are more likely to protect what they have than to grow the economy for others; they seem likely to use their economic power to obtain political power and use that to appropriate still more of the income and wealth of the country.
We have two years to get ready for the next election, and try to put in people who will do a better job than those elected last week.