Every three years, the Federal Reserve puts out a Survey of Consumer Finances, and they just released their newest one that covers the period up through 2013. Neil Irwin provided a good overview of it at The Upshot, How Are American Families Doing? A Guided Tour of Our Financial Well-Being. The short answer to the question is: American Families are doing really poorly.
It would be nice to note that the picture isn’t completely bleak. But that isn’t true. It is true for certain segments of the population. The top 20% of income earners have seen their incomes go up by 4.3% over the last four years. And people with college degrees have seen their incomes go up a whopping 1.1% over the same period. But families over all have seen their incomes go down by almost 5% over the last four years. That’s shocking. According to FRED, during the same period, the economy grew by 8%.
This always makes me wonder about Milton Friedman. Whenever anyone would complain about income inequality, he would counter that although the vast majority of productivity gains went to the very rich, the poor were nonetheless seeing their standard of living increase. What would he say now? I can’t say in terms of details. But I know that as the conservative ideologue that he was, he would have come up with a new apologia for why it wasn’t true or didn’t matter. He may have just fallen back on the old libertarian crutch, “The practical effects don’t matter because… Freedom!”
Regardless, you may be wondering how it is that the economy grew by 8% when even the top 20% of income earners only saw their incomes go up by half that much. It’s that economic gains are just as unequally shared within the top quintile as they are overall. I suspect that those at the bottom of the top 20% didn’t see much if any increase in income. The vast majority of the economic growth went to enriching the already rich 1% and above.
As it is, the total income coming from wages is down from 68.1% in 2010 to 62.4% now — almost six percentage points. The biggest change is that capital gains is up almost four percentage points. And who makes money from capital gains? Well, if you listen to the ranters on CNBC, you will hear that everyone makes money from capital gains through their retirement programs and other investments. Such claims show a shocking disconnect between the power elites and the average family. Many poorer families have been forced to liquidate retirement plans just to get through this crisis. Here is the change in the households who own stocks for the period 2007 through 2013:
Notice in this graph that even households at the bottom of the top quintile (80% – 90%) have seen a large sell off of stocks. This is indicative of a power elite that has totally lost its way. This is exactly the group that is supposed to act as the safety value for society. It is what is supposed to protect the power elite from the poorer classes picking up torches and pitchforks. This is what Chris Hedges wrote about in Death of the Liberal Class. But now we have a power elite that is so greedy that it isn’t even willing to allow this group to do okay. (Of course, as Hedges discussed, that class gave up doing it’s job long ago and so hardly deserves to be protected.)
So how is America doing? Terrible. But certain Americans — those who were doing great before the bursting of the real estate bubble — are continuing to do great. And since they are the ones who drive public policy, nothing is not going to change. They don’t care about same sex marriage. That doesn’t have an effect on how much money they have, so sure, let’s the prols have that one. But economic policy that would have a widespread positive effect? Forget it! Or at least forget about them providing it out of some sense of fairness. Remember what Frederick Douglass taught us a century and a half ago, “Power concedes nothing without a demand. It never did and it never will.” We must demand our birthrights.