A trnansient society in the making.
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.
A trnansient society in the making.
I figured it out, though. In 2006 and 2008 and 2010, it probably will swing better for the Democrats, if economic news is not associated with any President or party. If mushy middle people associate the economy with the party in power, and the economy is good, they won't want to vote the Dems in. So...break the association as much as possible.
You have that right. Socialism gains credibility when the chief beneficiaries of Capitalism misuse their wealth & power at the expense of those less fortunate.
The reason Karl Marx developed such a following in his day was not because of anything he personally did, but because corporate interests lived up to the very worst stereotypes of themselves.
The second - "some level of redistribution of wealth". No society can exist for long without some redistribution.
I'd like for you to continue your logic a little farther,
You would like it, but I would not. Have you ever heard about Aristotle doctrine of the mean or moderation?
From the fact that it is good to heat the house in winter you cannot draw a conclusion that it is good to burn it. And reverse - from the fact that that it is bad to to burn the house it does not follow that heating it is bad.
A lot of Hush Bimbo "reasoning" is based on such false sophisms. He really bamboozles his audience. I guess he has a good laugh with his friends: "So what BS should I sell these suckers tomorrow?"
Usually instincts have a proper role and cannot be eradicated without causing much greater damage.
There are plenty of such places. And we do not want America to become such place.
The above makes it a little clearer why you took the stance you did. Not my view of conservative thinking, but perhaps it wasn't meant that way anyhow.
There is the third way - supression in El Salvador style.
I grew up in Communist Poland. After Stalin it was not so horrible place and much better than some Latin American countries or other Third World capitalist oligarchies.
I met people who moved to Poland from such places.
It is nice that YOU are nimble. What is has to do with the topic?
Or with the supression El Salvador style.
I do not buy that you desire to help anyone.
Fortunately, your purchase is not required.
This is what made USA different from Latin America. There were land grants (as opposed to the few families getting the whole land), GI Bill, labor laws and many other things. And this TRICKLE UP economy worked better.
Still Republican can win thanks to the Democrats obsession with "gay marriage", abortion and secularism.
That's because Poland at the time was a country with still [barely at the time] functioning civil society. But socialism is incompatible with the civil society and wears it out. Thus what you experienced in Poland was precisely a transient phenomenon.
Oh, I'm sorry. I guess I should have put on my "victim identity" and bought into "the topic" of the article.
I especially love his theory that socialism with a face (Communist Poland) is superior to American capitalism. Very funny coming from someone who left that workers paradise to come to heartless America.
Thank you both for your comments. I was about to say this has been one of the more interesting economic threads I have read on FR in a while, when I saw WilliamofCarmichael had already expressed the same thought in post 80.
One of the ironies is that I think Bush understood going into the presidency that most people are emotional rather than logical when it comes to voting for their economic self-interests, i.e. his "compassionate conservatism." I believe though for the most part his attempt to care for the needy and give a hand up to the poor in America has been fatally flawed because in most cases he has sought to do so through government programs. Such a job is simply too big for the government, and government's attempt to do it corrupts the characters of the "givers" (aka taxpayers) and the recipients in the process. At one time I believe the Republican party was being more innovative in its approach to problems of the poor (Kemp's enterprise zones; Schundler's many initiatives). But that spirit within the GOP seems to have died or gone dormant.
IMHO the GOP needs to once again find and promote innovative, market-based solutions that unleash the power of communities, families and churches to address these issues. That was part of the genius of Reagan: He understood the power of emotion (for instance, his famous definition of the difference between a recession and a depression) and sought to make structural reforms that unleashed the drive and initiative of the average American while encouraging every person to realize his or her full potential.
On the other hand, after watching the aftermath of Katrina, I wonder if it may be more effective for grassroots people just to jump in and push government out of the way (i.e. the churches that have gone into the areas affected by Katrina and provided aid from food to housing repair while the government was still dawdling). Perhaps it is more effective to build strong communities so that people don't perceive a need for the government to "take care" of them. But either way it's a tall order.
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