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.
I love that you escaped Communism, one of the most evil, failures of a political/economic system ever invented by mankind. You came to America, home of the best political/economic system ever invented by mankind and your ideas to improve America are to make it more like the system you escaped.
No. However, as an employee I -- and you, too, I suspect -- would rather not be treated as a disposable labor unit who can be gotten rid of at will. And I also think that it is in the employer's best interest to avoid that as well.
In my view, you have the right to freedom and to the fruits of your own accomplishments. But you haven't the right to the property of others, nor the right to control the free will of others, true. The state also doesn't have the right to such things, which is my personal point.
As most of our founding fathers noted, a country based on extensive individual freedoms (which means the freedom to pursue one's own interest rather than pursuing some state decided common objective) cannot survive unless the citizens themselves are virtuous, unless they thus exercise the freedom to pursue their self interest with responsibility, ethics and goodwill.
To the extent that they are not virtuous, their freedom will be lost, while the power of the state grows.
Of course, one of the justifications for extensive individual freedom is one of the same justifications used for extensive governmental authority, that human beings cannot be trusted to be virtuous and good. The choice, I guess, is whether the state must reign in its unvirtuous citizens, or the citizens must be free of unvirtuous rulers. Of course, the original hope of the USA was the latter. Lost now, to a large degree, for various reasons.
Apparently the Swiss Constitution of 1848 was modeled on the US Constitution. From what I have read, they have been far more faithful to it over the years than we have been to ours.
Exactly (freemarketeers represent the corruption on the right while pro-abort/pro-atheism/pro-perversity moon-bats represent corruption on the left).
Machiavelli wrote in several places that it is very hard to maintain freedom in a corrupt society.
"Still Republican can win thanks to the Democrats obsession with "gay marriage", abortion and secularism"
Exactly. I have been making this arguement for months. All the GOP needs to do is to drive a wedge between the mainstream and the money raising wacky fring.
But oh, no. Do you ever hear a Republican naming the party of the local officials that implement secularism? Who is in charge up there in GOP HQ?
But, as one that has studied economics as a discipline - like I have at the undergraduate level and through separate book reading - that is exactly how I view myself...a labor unit with a price tag that can, and will, change abruptly with the conditions of the market for the knowledge, skills, and abilities that I can bring to the table. I know you don't believe this about me but I am being quite serious and genuine here.
What is a market unless it is mostly free?
Name the last time a poor person gave a rich one a job?
can you elaborate on this? This isn't making sense to me...perhaps I'm not interpreting what your trying to get across correctly.
The DOW is NOT the US equity markets. It is 30 big caps and it changes. Shorting the DOW has a remix risks. If you are shorting the US equities the DOW is a lousey proxy.
One question: What is the average family size today vs. the 2000?
Maybe I missed that factor in the article. Would otherwise need to be calculated.
Ditto. I had just asked the question the moment I read the article and then as I finally read all the posts...wala...you nailed the same point.
Cool!
I also know what equity markets are.
What YOU don't appear to know, is that I was replying to a post, wherein the DOW, alone, was mentioned. But since the poster started out talking about the DOW, then talked about shorting the dollar, and wound up claiming that no, he was long on the dollar but short in the equity market, leads one to believe that he's more than just confused and confusing, but playing word games.
The problem with companies treating employees like disposables -- which is what you're essentially saying that people should accept -- is that people tend to put a lot of themselves into their work, not to mention basing a lot of their financial decisions on the assumption that their job is "theirs." In a "faceless capitalism" scenario, the company's stake is far different than that of its employees.
As such, the natural response to something like outsourcing is resentment, and resentment breeds a variety of unwanted results, especially political ones. It's all very well to say that people shouldn't think that way, but the fact is that people do think that way.
Sorry I didn't articulate well.
What I meant was that most people recognize the tendency of men to commit injustices to other men.
One philosophy calls for increased power to the state (referred to variously as the people, the King, etc.) so that it can use this power to prevent men from following their tendencies to commit injustices.
The other philosophy, the "American," or English model, believes that that the state cannot be trusted with such power, because the men who wield the authority of the state are after all just men, and have not only exactly the same tendencies to commit injustice as ordinary men, they have the power of the state behind them. Furthermore, the chance to wield such power attract creeps.
In any case, the tendency of men to commit injustice serves as justification for both philosophies. But the solutions are opposites.
Hopefully I am managing this time to get accross what I'm thinking.
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