Middle-class woes? A letter to Lou Dobbs

Christian Science Monitor ^ | 4 January 2006 | Donald J. Boudreaux

[shrinkermd]

Had to limit excerpt to above. There is a great section on Free Trade destined to drive some to the wall with logic instead of emotion.

[Clemenza]

Lou Dobbs is just bitter that he lost several sheckles in the .bomb craze.

[Clemenza]

My family's story:

The 1950s: Row houses in Newark and Jersey City, surrounded by pollution and grime, but, hey, at least they had "good jobs in the factories!"

Today: Parents are retired and wealthy at a beautiful home in South Florida, while I live a prosperous life unimaginable to my grandparents.

You can multiply my story by the millions. Unfortunately, fools like Dobbs and Buchanans would like us to remain part of a bloated and inefficient proletariat.

[Lunatic Fringe]

Facts don't matter...

It's a WAR on the MIDDLE CLASS!

[Graybeard58]

My father was born in poverty in 1916 and entered adulthood in the great depression, with a strong work ethic that he passed on to 7 children he over came that poverty and all 7 of his children are doing well.

Poverty is a by product of the "great society" and socialism in general. Generation after generation remain in poverty because of the "entitlement" society we live in. Liberals want to make it even worse by throwing more of mine and your money at it.

[speedy]

I live a prosperous life unimaginable to my grandparents.

Exactly. How many people can actually claim downward mobility from their parents or grandparents generations? And if they can, well then they sure screwed up somewhere along the line.

[CWW]

My father was the oldest of 6 children and the first child to attend college and, ultimately, law school. He and his 4 brothers and 1 sister lived in a 4 room house. His father was a dining car conductor, and his mother worked in the cafeteria for a coal mining company. He eventually filed for bankruptcy from debts incurred to feed his family. After he got back on his feet, he went back and paid every single person he owed money. Not only my dad graduate from college, but so did his brothers and sister. One brother went on to become CEO of Nestles USA. None of them had a private school education, a television or any of the opportunities common to us. What they did have were two loving parents and a commitment to God.

[Prokopton]

Anecdotal evidence is nice and sometimes inspiring. However, the facts of the situation, found many places including the cite below, are not near as rosy as the selective statistics used by the author would lead us to believe.


http://mwhodges.home.att.net/family_a.htm

[ClaireSolt]

Disability is a big downer, because it is not really insurance, just another welfare program.

[Mase]

I've always liked Boudreaux. IIRC, he's also a regular contributor to Cafe Hayek. He certainly has Lou Dobb's number. I'm so sick of hearing this canard on FR about two incomes being required to make ends meet these days.

Perhaps you think that this prosperity exists only because so many of today's households require two income earners. But women started leaving homes for paid employment at least a century ago, with no jump since the end of World War II in the rate at which women enter the workforce, according to a recent report by the Bureau of Labor Statistics.

Had worker pay truly deteriorated in the past 30 years, and had families reacted by sending moms to the workforce, the rate at which women join the workforce would have increased. It did not.

Today, the percentage of household expenditures used to buy nonessential items is at an all-time high - about 50 percent compared with about 45 percent in the mid-1970s. That undercuts your notion that two incomes are needed just to scrape by. Not only is America's middle class not disappearing - it's thriving.

[Nowhere Man]

Lou Dobbs is "da man!" Pinging the usual crew.

[Obie Wan]

While there may be some merit to Mr.Boudreaux's report, I think there's an over-simplification of issues like the huge trade deficit that grows larger every year and the possible long term effects to our country.I've heard a number of economists over the years addressing the trade deficit and in all honesty I've never heard one cheer about it the way Mr. Boudreaux does. Granted people "have" more stuff today then ever before,I'm just wondering whether they "own" more stuff,for instance when I bought my first house in the 70's,nothing down loans that are being offered today were unheard of. The traditional loan was fixed not adjustable and required 10% down of purchased price or you weren't buying.I do think the lower unemployment rate is a result of one of the few things I agree with George Bush on being the tax cuts he offered in his first term.I think the whole article is open to debate but as someone said,let the economic bubble keep floating because if you touch it,it just might pop !!!

[wgflyer]

"The percentage of Americans who own their own homes is higher than ever, even though the size of today's typical home is larger than ever."

This is a lie. A more truthful statement would read like, "The percentage of Americans whose names appear on a contract assigning a home to them, for which they pay out the nose monthly in principle and (especially) interest payments, and taxes, is larger than ever.

You don't own your home until no one can take money from you simply for staying there, unless you redefine ownership.

[jveritas]

Excellent article, and I am glad that someone is putting down this bitter hate filled liar Lou Dobbs.

[speedy]

Great story, great spirit, and the classic American way!

[rabscuttle385]

Fortunately, Washington's spending binges are not serious enough to cripple America's entrepreneurial economy.

You ain't seen nothin' yet.

[Cedar]

Great point.

[Attention Surplus Disorder]

Thanks, I think you've more accurately characterized what's taken as "ownership" wrt homes these days. While the number of Americans "owning" their homes is the largest number in history, the percentage of owner equity in said homes is very likley about the smallest in history.

[WilliamofCarmichael]

4.5 percent. . .is lower than the average annual unemployment rate of past decades.

So? There used to be things called strikes and layoffs. In both cases the workers returned to work as the business cycle moved on, up and down, up and down. . . .

What's the point? Look at them three-percent rates in the 1950s and 1960s - if you insist on comparing to the old days.

BLS numbers Annual average unemployment rate, civilian labor force 16 years and over (percent)

1948 3.8

1949 5.9

1950 5.3

1951 3.3

1952 3.0

1953 2.9

1954 5.5

1955 4.4

1956 4.1

1957 4.3

1958 6.8

1959 5.5

1960 5.5

1961 6.7

1962 5.5

1963 5.7

1964 5.2

1965 4.5

1966 3.8

1967 3.8

1968 3.6

1969 3.5

1970 4.9

1971 5.9

1972 5.6

1973 4.9

1974 5.6

1975 8.5

1976 7.7

1977 7.1

1978 6.1

1979 5.8

1980 7.1

1981 7.6

1982 9.7

1983 9.6

1984 7.5

1985 7.2

1986 7.0

1987 6.2

1988 5.5

1989 5.3

1990 5.6

1991 6.8

1992 7.5

1993 6.9

1994 6.1

1995 5.6

1996 5.4

1997 4.9

1998 4.5

1999 4.2

2000 4.0

2001 4.7

2002 5.8

2003 6.0

2004 5.5

2005 5.1

2006 4.6 ?

Inflation, meanwhile, is running below the average for the 70s, 80s, and 90s.

In the old days the "basket of goods" was fixed. Today a survey of households expenditures determined the basket of goods (variable-basket of goods). Thus, in the old days if prices went up the inflation rate went up. Today the households often adjust; to wit, they stop buying the steaks and buy something cheaper, or no steaks at all. The survey shows little or no change compared to the old days.

So, is inflation really what the CPI-U says it is?

FED source: Consumer Price Index, CPI-U Base year is chained; 1982-1984 = 100 (Annual Average cost for the basket of goods, I believe. Not shown here. starts a 9.9 in 1913, is 100 for 1982-1984, and rockets to 201.7 in 2006 )

1950____1.3

1951____7.9

1952____1.9

1953____0.8

1954____0.7

1955____-0.4

1956____1.5

1957____3.3

1958____2.8

1959____0.7

1960____1.7

1961____1.0

1962____1.0

1963____1.3

1964____1.3

1965____1.6

1966____2.9

1967____3.1

1968____4.2

1969____5.5

1970____5.7

1971____4.4

1972____3.2

1973____6.2

1974____11.0

1975____9.1

1976____5.8

1977____6.5

1978____7.6

1979____11.3

1980____13.5

1981____10.3

1982____6.2

1983____3.2

1984____4.3

1985____3.6

1986____1.9

1987____3.6

1988____4.1

1989____4.8

1990____5.4

1991____4.2

1992____3.0

1993____3.0

1994____2.6

1995____2.8

1996____2.9

1997____2.3

1998____1.6

1999____2.2

2000____3.4

2001____2.8

2002____1.6

2003____2.3

2004____2.7

2005____3.4

2006*___3.3

The percentage of Americans who own their own homes is higher than ever

We didn't have "creative" financing in the old days.

no jump since the end of World War II in the rate at which women enter the workforce

What's the point? Lots of Rosie the Riveters in those days.

the percentage of household expenditures used to buy nonessential items is at an all-time high

We didn't have stacks of credit cards in the old days.

foreigners invest some of their dollars in America. They buy American corporate stock, they build their own factories and retail outlets in the US, they lend dollars to Uncle Sam, and they hold some dollars in reserve as cash.

Yes, the Cox Report talked a lot about the "princelings" and the PLA. Also OF COURSE investments from our real friends is good, inscourcing is good also -- it creates jobs for Americans.

Smith correctly understood that with free trade, the economy becomes larger than any one nation - a fact that brings more human creativity, more savings, more capital, more specialization, more opportunity, more competition, and a higher standard of living to all those who can freely trade.

Great. But did Smith know global labor arbitrage, cross-border technology, countries of hundreds of millions of people willing to work for peanuts? All that in exchange for the latest technology and enough FDI to create / upgrade the foreign countries' own state owned enterprises.

Both sides: Stop comparing this era of such things as hedonic GDPs, variable-basket of goods, and labor arbitrage to the old days. Please.

[pfony1]

With all due respect, it is YOU who is seeking to redefine "ownership". Consider that:

(1) OWNERS of assets can borrow funds secured by the value of those assets. RENTERS of assets can not.

(2) OWNERS of assets earn capital gains when they sell those assets. RENTERS of assets collect nothing when the assets they use are sold at a profit.

(3) OWNERS of assets take tax deductions for the interest and tax payments associated with those assets. RENTERS pay "rent", which is not tax-deductible.

Nevertheless, your quaint idea that only "debt-free" assets are actually "owned" IS amusing.

Goofy, but amusing.