Family Incomes Slipped In 1st Part Of Decade ("Rich getting richer" alert)

The Associated Press ^ | Feb 24, 2006 | MARTIN CRUTSINGER

[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.

[Sam Cree]

The problem is, if you can get past the philosophical ramifications of such a coercive system, that central authority can redistribute wealth as much as it pleases, but the recipients will redistribute it again unequally among themselves rather quickly, destroying the recent efforts of the state. The whole thing must be repeated constantly, by giant bureaucracies and state officials.

The best way for people to get ahead and accumulate their own wealth is for the state to stay out of the way, allowing them to pursue their own self interests, which in turn produces more wealth for all, thus serving the self interests and welfare of all.

The little anecdote you posted on slavery and its effects on humanity does serve to illustrate the harm done to the bottom rung of societies based on coercion and absolute authority.

[Sam Cree]

BTW, Cuba is the Latin American country that comes to mind which follows the practices you've advocated.

[Sam Cree]

"I take it you don't believe the IRS auditor who says he's there to 'help you'."

I think the income tax needs to be abolished :-)

[Mase]

USA generous land grants and other redistribution programs which helped to create prosperous and large middle class

Government largesse did not create the middle class in this country. That's not our history.

Expat-panama made the statement that Poor people tend to believe that the only way to get rich is by taking money from others, and rich people believe is the only way to get rich is by making something that people want and selling it to them."

This is a true statement. Yet you decided to go off on a Latin American tangent. Instead of using Latin American oligarchies as an example, why not refer to people and businesses within our own country?

[nopardons]

Toddsterpatriot is correct; A.Pole. You constantly, with out fail, on every single thread you post to, trash America.

Poland may no longer be a satellite of the USSR, but it was, when you were born and lived there. That has colored your views and living in America, hasn't managed to clear much of that bias up. You still harbor many SOCIALISTIS VIEWS.

BTW, you'd LOVE living in much of Latin America; they have dictators, SOCIALIST governments, and just the kind of programs that you yearn so much to have here in the USA. :-)

[nopardons]

I'll take a stab at it, though I'm certain he wont get it. LOL

[nopardons]

How many hundreds of years ago, are you going back? I'm asking, because many hundreds of years ago, there was NO "middle class", as we recognize it today, at all.

It really wasn't until the Industrial Revolution, that today's version of the middle class, actually came into being and in societies, with a gentry/aristocracy class, what we would called "middle class", was still stuck in a kind of limbo.

WHY are you stuck in the middle ages?

Gee.........Chopin didn't burn and pillage, but he sure did rise in class and wealth!

[expat_panama]

land grants and other redistribution programs which helped to create prosperous and large middle class. Government largesse did not create the middle class in this country.

It didn't create wealth either.   It was abolished in 1976, and since then more wealth was created than in the entire first 200 years of US history.

[A. Pole]

How many hundreds of years ago, are you going back?

We have written history of three thousand of years. We cannot just dump and dismiss all this experience.

You assume that idealized (the ideal that never was actualized) last few generations in a part of the world represent the universal norm which will last for ever.

[antaresequity]

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.

Couple that up with rising interests rates and the debt fueled spending spree that is definitely coming to an end...AND soaring commodity prices' and the capitalization of emerging markets and a broadening of the global market place and you have a very nice cocktail...

DOW is toast...hold on to your hats its going to be a bumpy ride...

[nopardons]

You are the one who has NO understanding of the past 3,000 years of world history. You also need to actually READ and understand my posts. This would save you, greatly, from posting muck back to me.

I "assume" NOTHING whatsoever! OTOH, you keep posting delusional tripe.

Going back to ancient Rome and Greece, what could possibly be labeled "the middle class", would have be the lower echelons of the aristocracy, which most assuredly, all of whom did NOT gain their wealth by burning and plunder. The artisans and those in trade, were just the highest end of the LOW class.

For most of recorded history, there was but two classes; though, from the Middle Ages until "modern times", the clergy was considered to be a separate class; one with its own hierarchy and class system.

It's long past time for you to at least try to divest yourself of your COMMUNIST/SOCIAKIST leaning. Or, you can just stop calling yourself a "conservative", because you aren't one.

[nopardons]

You don't know nor understand the market at all, so it would behoove you, to refrain from making any kind of comment about any of the markets.

[antaresequity]

whatever buddy...

[antaresequity]

let me order you up a peaches and cream pie...

[nopardons]

Just how much actual knowledge do you posses, of the history of the NYSE, CBOT, CBOE, the MRC, etc. and the past 200 years of the markets?

Do you have a degree and/or passed all of the various tests that those who work on THE STREET ( the generic use of that term ) have passed? Have you, since you were an adult, lived purely/solely, from your investments?

Or, as I suspect, are you posting pure speculation, based on emotion? :-)

[nopardons]

No thanks....buddy.

[antaresequity]

Why dont you point by point refute what I posted?

...interests rates are rising, the spending spree over the last few years HAS been driven by rising real estate values an drastically increased debt, commodity prices have soared over the last few years and according to some will continue to do so driven by increasing demand and decreasing supply and production capacity, emerging markets (by definition) put increased demand on capital and resources, and the global markets in terms of GDP is soaring...

Go ahead...refute it...your the one on the attack...back it up...

[Nowhere Man]

I have a question for you. If you had the choice to live the life of an average person in Communist Poland of 1960s/1970s or in El Salvador of the same time, what would be your choice?

I'd take Poland, at least it is a lot cooler there and for the time being in the Eastern Bloc, a relatively higher standard of living.

Come to think of it, there have been innovations that have been brought up in countries that have been judged to be socialist. If you take Finland, look at what they did with Nokia in the cellphone market. Sweden, under SAAB, might have had a Mach 2 capable fighter before the United States or the USSR with their SAAB S-35 Draken when it first flew in 1955 and was on the front lines soon thereafter. It looks like something out of Buck Rogers.

I'm a junky of alternate history junky myself and I remember one discussion where it is possible the first personal computer actually was developed in Poland in 1971. I did have a link with some pics but I did lose it but if I find it, I'll post it.

If there is a will to innovate, it will happen, no matter what.

[expat_panama]

Average incomes after adjusting for inflation actually fell from 2001 to 2004...   DOW is toast...hold on to your hats its going to be a bumpy ride...

You might want to avoid basing a negative attitude on the AP, given their tendency to lie.  

It's especially easy to see their lie in this case-- because the current year isn't 2004, we're finishing up the first quarter of 2006.   What's happening is that even with adjusting for inflation, household wealth has not only recovered from the Clinton's economic collapse, but it's now at an all time high.  

These days only a troll or a Democrat party hack could seriously believe we've got a "bumpy ride" ahead.