Posted on 02/24/2006 6:24:09 AM PST by Sam's Army
WASHINGTON - After the booming 1990s when incomes and stock prices were soaring, this decade has been less of a thrill ride for most American families.
Average incomes after adjusting for inflation actually fell from 2001 to 2004, and the growth in net worth was the weakest in a decade, the Federal Reserve reported Thursday.
Many families were struggling in the aftermath of the 2001 recession and the bursting of the stock market bubble in 2000, the Fed's latest Survey of Consumer Finances showed. The comprehensive look at household balance sheets comes every three years.
Average family incomes, after adjusting for inflation, fell to $70,700 in 2004, a drop of 2.3 percent when compared with 2001.
That was the weakest showing since a decline of 11.3 percent from 1989 to 1992, a period that also covered a recession.
The average incomes had soared by 17.3 percent in the 1998-2001 period and 12.3 percent from 1995 to 1998 as the country enjoyed the longest economic expansion in history.
The median family income, the point where half the families made more and half made less, rose a tiny 1.6 percent to $43,200 in 2004 compared with 2001.
Economists said the weakness in the most recent period was understandable given the loss of 2.7 million jobs from early 2001 through August 2003, when the country was struggling with sizable layoffs caused by the recession, the terrorist attacks and corporate accounting scandals.
The weak income and the stock market decline in the early part of the decade, which wiped out $7 trillion of paper wealth, had an adverse impact on family balance sheets.
Net worth, the difference between assets and liabilities such as loans, rose by 6.3 percent in the 2001-04 period to an average of $448,200. That gain was far below the huge increases of 25.6 percent from 1995 to 1998 and 28.7 percent from 1998 to 2001, increases that were fueled by soaring stock prices.
The 2001-04 performance was the worst since net worth actually declined by 9.9 percent in the 1989-92 period.
The report showed that the slowdown in the accumulation of net worth would have been even more sizable except for the fact that homeowners have enjoyed big gains in the value of their homes in recent years.
The gap between the very wealthy and other income groups widened during the period.
The top 10 percent of households saw their net worth rise by 6.1 percent to an average of $3.11 million while the bottom 10 percent suffered a decline from a net worth in which their assets equaled their liabilities in 2001 to owing $1,400 more than their total assets in 2004.
"This is the continuing story of the rich getting richer," said David Wyss, chief economist at Standard & Poor's in New York. "Clearly, the gains in wealth are going to the top end."
Democrats used the new report to blast President Bush's economic policies, contending it would be wrong to make permanent his tax cuts, which primarily benefit the wealthy.
"These statistics show why, even though GDP is rising, most people do not feel better off," said Sen. Charles Schumer, D-N.Y.
The Fed survey found that the percentage of Americans who owned stocks, either directly or through a mutual fund, fell by 3.3 percentage points to 48.6 percent in 2004, down from 51.9 percent in 2001.
Analysts said this was an indication that investors burned by plunging stock prices in the decade's early years have been leery about getting back into the market.
The share of Americans' financial assets invested in stocks dipped to 17.6 percent in 2004, down from 21.7 percent in 2001.
Reflecting the housing boom, the share of assets made up by home ownership rose to 50.3 percent in 2004, compared with 46.9 percent in 2001.
The Fed survey found that debts as a percent of total assets rose to 15 percent in 2004, up from 12.1 percent in 2001. Mortgages to finance home purchases were by far the biggest share of total debt at 75.2 percent in 2004, unchanged from the 2001 level.
There was concern that families might start to feel even more squeezed as the cost of financing their debts increases along with rising interest rates.
Although surging home values have supported consumer spending in recent years, analysts worry about the economic impact if, as expected, the home price surge begins to slow this year.
"This report shows a race between factors boosting net worth, such as home ownership, and factors pushing the other way, such as weak wage growth," said Jared Bernstein, senior economist at the liberal Economic Policy Institute, a Washington think tank.
Hundreds of years ago the poor thought they could get what they wanted by burning and plundering. That didn't work. Then they tried plundering first and then burning. That was better but still not good enough.
Now, people all over the world are dumping this entire 'soak the rich' nonsense, and standards of living world wide are improving. People have been willing to open their eyes and see that the rich didn't get their millions by taking the money from poor people, because they know for a fact that the poor never had any millions to steal.
And what about it? Should we pass a law to ensure that no one makes too much money?
These "strides during the 50's" were related to the manufacturing jobs. After these jobs started to dry out, blacks whom moved into industrial cities from rural areas got stranded and were in need of government assistance.
You got it wrong. Hundreds of years ago it was the upper class (nobles/aristocrats) who got riches through war/"burning and plundering". The peasant serfs were not armed, they were making food eaten by the nobles while the craftsmen were making the other stuff used by the nobles.
You helped me to think about another tagline, thanx.
Also, Latin American countries have tended not to be open societies, but dictatorships. Where they became redistributive, the people became worse off, contrary to leftist rhetoric. Not relevant therefore.
Government assistance is a contradiction in terms.
And now what, is more government assistance the answer? Or should we tax the dickens out of everyone who was lucky enough to win "life's lottery"?
Or both?
Please tell us: What would A.Pole do to solve America's ills?
One of the key causes for difference between USA and Latin America is that the US land was distributed through the free land grants among the general population. In Latin America it was given to the few families on top.
If blacks in the South were given their "forty acres and a mule" their descendants would be much better off today.
One day a few negroes was sticking sticks in the ground when massa come up. "What you niggers doing?" he asked. "We is staking off the land, Massa. The Yankees say half of it is ourn. The massa never got mad. He just look calmlike. "Listen, niggers," he said, "What's mine is mine and what's yours is yours. You're just as free as I and the missus, but don't go fooling around my land. I have tried to be a good master to you. I have never been unfair. Now if you wants to stay, you are welcome to work for me. I'll pay you one-third the crops you raise. But if you wants to go, you sees the gate.
(Forty acres and a mule
The AP has decided the only way for their masters to winn back some power is to flog the economy some more. All else is apparently lost so the economy is all that is left.
I'll restate my position posted the last time they wrtote this article, the poor need to work harder and catch up.
"This is the continuing story of the rich getting richer," said David Wyss, chief economist at Standard & Poor's in New York. "Clearly, the gains in wealth are going to the top end."
Obviously, this economist doesn't know a single thing. If the median rises, but the average decreases, then in fact the rich are getting poorer and the average guy is getting richer.
However, being a liberal, anything with "income" in it is viewed by Mr. Wyss as "rich getting richer." This he says with great sanctimony from his position as chief economist, before heading home in his Escalade to his $800,000 home where he will have to face the hard decision about which country club to join so as to afford him the right contacts to move his career to the next level.
I've been trying to get A.Pole to answer that question for some time now. His silence leads me to believe that he is adamantly in favor of wealth redistribution and government intervention to ensure, not only equal opportunity, but also equal outcome.
How about it, A.Pole: Do you stand for everyone's right to become rich and stay that way? There are only two ways to to get rid of economic inequality: give money to the poor, or take it away from the rich. But they amount to the same thing, because if you want to give money to the poor, you have to get it from somewhere. You can't get it from the poor, or they just end up where they started. You have to get it from the rich.
You could, of course, make the poor richer without simply shifting money from the rich. You could help the poor become more productive. This is the method that works in capitalist countries. Which of these two methods do you subscribe to? Are you for wealth redistribution or, are you for making the poor wealthier by increasing their productivity?
Why not reference your own country?
Are they rich "by making something that people want and selling it to them"?
The vast majority of people become rich by providing a good or service that people want and need. You're just trying to avoid the issue.
And who make the things - the workers or the owners?
Who risks the capital - the workers or the owners? Did those jobs exist before the owners risked their capital or not? You sound like someone who believes that the profit motive is wrong and that people have a duty to the state to risk their wealth and provide jobs for others.
Kennedies and Bushes are very rich, what do they make?
Yes, when you don't have an argument you can always default to class warfare. It just makes you sound envious and ignores the fact that 80% of all American millionaires are first generation rich.
This fact alone makes a pretty convincing argument that opportunity in America is alive and well for anyone with ability and drive. For those without, there will always be forums where they can go to complain about things that don't exist and pine for the good old days of nanny statism.
I take it you don't believe the IRS auditor who says he's there to 'help you'.
Because it is less known in America, in that aspect at least. But since you asked I will "reference" it.
It is very likely that the chief reason for the decline of Poland as the great power and the following partitions in XVIII century was the selfishness and the greed of the Polish nobles, both the very rich "magnates" and the average aristocrats "szlachta".
They were keeping majority of population in poverty and prevented the strengthening of the national institutions.
The emancipation of peasants and generous redistribution of land would secure the general prosperity of Poland and her role as a major power.
Sorry, I did not mean Poland. I was hoping you would reference the U.S. when making your comparisons since, I assume, this is your home now.
Anybody think they can explain to A.Pole why burning and plundering won't make anybody rich. It's difficult for me to put it into words because some how it just seems so obvious that it's plunder first and burn second
I already made a comparison between USA generous land grants and other redistribution programs which helped to create prosperous and large middle class with the Latin American model.
Thank you for the correction. Plunder first and burn second!
LOL. After a few tries they would, most likely, figure it out. It'd make a funny Monty Python skit though.
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