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And in other news, reliable studies have shown that it gets darker when the sun goes down. |
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.
review
"All well and good -- but you're making Cato's mistake: you've not accounted for human nature, and thus will end up surprised when socialism makes another leap forward."
Absolutely true. When the masses start believing that capitalism is giving them a raw deal, capitalism is in deep trouble. Eventually the socialists will accomplish change, either through the ballot box or the bayonet.
I'm not saying it's right or wrong, just saying the possibility is there and it's very real.
If it should happen one day, Good Lord willing, I will simply find something else. Or, like I am doing now, continue training/education so that I get more tools in my toolbox.
No one owes me a living, but I owe my young family my most earnest efforts to provide them with one.
How much of this was driven by the Y2K mobilization? For a while there, qualified IT folks could pretty much name their salary.
OTOH, the idea that you might lose your job because some Chinese or Bangladeshi is cheaper ... that's where one can plausibly apply the "faceless capitalism" label: to the company it's not personal, it's just business. Of course, to you it's utterly personal.
The economic arguments in such cases are all very well and good; however, the difference between "nothing personal" on one side, and "of course it's personal" on the other, cannot help but cause friction.
And where is socialism with a human face?
Given the amount of information available in this culture, my opinion is that one must stay informed enough to at least read about current trends. Being able to interpret current trends and make hopefully sound judgements about your own future should ward off a career choice of a role that could easily be done in Bangladesh.
Good question. Plenty of the Left would point to Cuba, Venezuela, etc. unforutnately.
I truly wasn't sure where you were headed, thanks for the explanation.
I now find that our differences are far fewer.
As a free marketer and a believer in individual freedom, I hardly think that prices of goods and services should be set individually according to predetermined asset levels. Instead, prices ought to be determined by what people are willing to pay. That's nearly unavoidable in any case.
I do agree that those of wealth have some *moral* obligation to help in some way those who are in need. Even though, IMO, the actual wealth that they've created is more (generally) helpful to the needy than their charity is. But the obligation should not be a legal one in a free country, charity should be at the discretion of the giver rather than the receiver...or the state.
As for outsourcing and free trade, I am philosophically a free trader, but do have mixed feelings and concerns, especially where national security comes in. Besides which, how can there be free trade if only one side is doing it?
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And in other news, reliable studies have shown that it gets darker when the sun goes down. |
Absolutely, if you have only 2 major strata, exceedingly wealthy, and exceedingly poor... you will wind up with a Boshevic outcome or some sort, whether it be all out Communist uprising, or socialism.
You must have a vibrant middle class, where the lower classes honestly can see a path to improving their lot peacefully.. otherwise, you will wind up with a nice revolution on your hands.
If you're one of those folks who sees a hungry kid and wants to help her, then you see its human face every time you look in the mirror.
Most humans naturally do want to help people in need. I'd go so far as to say that many folks who are in favor of various socialist ideas are genuinely motivated by a desire to help. And there's nothing wrong with wanting to help.
The failures of socialism as a governing principle are well-known. It's a perversion of a good and natural desire to help; the problem is that it raises "wanting to help" above all other moral imperatives (like freedom, for example), and thus not only ruins those things, but also ends up failing to help.
Still -- the "human face" of socialism is yours and mine.
Another lefty CRUTSINGER "analysis" supported by Schumer Wyss and Bernstein...all educated in the laps of Marx.
My human face and my desire to help is not socialism.
However you slice it, the rich do get richer. That's how capitalism works. Get over it. Perhaps you'd rather watch the nomenklatura get richer instead?
No -- but it is the driving force behind socialism nevertheless. As I said, socialism perverts the desire to help by making it The Only Thing That Matters.
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