As we move into an election season there will be numerous issues fighting for the spotlight - and there are a ton of them. Iraq, the Port Deal, Corruption are just the top of the list. But as Democrats move into election mode, it's vitally important to remember Bush's economic policies have hurt the average American. Below is the simple chain of events that led to the problems most are now facing.
Weak Job Growth
According to the Bureau of Labor Services, there were 132,471,000 jobs in January 2001 when Bush was inaugurated. In January of 2006 there 134,564,000 for a net gain of 2 million jobs since Bush took office. That breaks down to 34,310/jobs/month. In short, that's a terrible record of job creation.
And in case you are wondering, I am not the only person who has noted the weak rate of job creation. The Boston Federal Reserve first noted the problem in the Spring of last year. The New York Federal Reserve noted the problem last Fall. This study by Global Insight covering the same material and situation was published this January.
The Boston Fed Study sited above highlights the main reason for the low unemployment rate: people have left the labor force. The only age group to increase their labor participation rate over the last 4 years is the 55+ group. If the labor market is as good as the Republicans claim, shouldn't people be rushing into the labor pool to take advantage of the great labor market?
Weak Wage Growth
Poor job creation has led to weak wage growth. As the Federal Reserve noted in its recent report titled Recent Changes in U.S. Family Finances.:
The change in real before-tax family income between 2001-2004 stands in strong contrast to the change for the preceding three-year period. Over the more recent period [2001-2004], median income rose 1.6%, while the mean fell 2.3%. Over the preceding three-year period, the median had increased 9.5% and the mean had increased 17.3%. The change over the 01-04 period was strongly influenced by a 6.2% decline in the overall median amount of wages measures in the survey and a 3.6% decline in the mean; wages represent the largest share of family income. Investment related incomes also declined.
So, the average and median incomes rose more slowly during the Bush expansion. In addition, we have another report that confirms the drop in wages over the last 4 years. In short, this is not a good time to be counting on big increases in wages.
Poor Growth in Net Worth
From 2001 to 2004 real net worth (wealth) - the difference between families gross assets and their liabilities - rose, though the mean rose notably more strongly than the median. The median rose 1.5% while the mean rose 6.3%; the corresponding values for the period from 1998 to 2001 were 10.3% and 28.7%.
This statistic is one of the favorite RWNM economics division statistics. However, the Federal Reserve has now shot their use of this statistics down in flames. The increase in net worth during the 01-04 period was much slower than the preceding 4 years. In addition, net worth increased nearly 100% (21 trillion to 41 trillion) under Clinton, but 24% (41 trillion to 51 trillion) under Bush's policies.
Negative Savings
Overall, from 2001-2004 the proportion of families that reported that they had saved in the preceding year fell 3.1% to 56.1%, although the proportion remained higher than in the 1995-1998 surveys. Across most of the demographic groups over the recent three-year period, the predominant pattern is also one of a decline in the proportion of families that saved. In contrast the 2001 survey had predominantly shown increases from 1998.
Several sources confirm this pattern. The Bureau of Economic Analysis' National Income statements show that for the last year, people spent more than they made. The Flow of Funds Report shows that highest percent of GDP to retirement plans occurred in IRAs at about 3% of GDP. The latest RWNM spin in this situation is to look at the total amount of consumer assets in financial intermediaries. What this argument fails to mention is this number is an aggregate of all US citizens. Assuming that all US citizens are on the same financial footing, this total breaks down to about $20,000/person. Considering the US income totals have become highly stratified over the last 20 years, this $20,000/person total is not possible. What is more far more likely is a disproportionate amount of this money in financial intermediaries is owned by the top 10% of US income holders.
Massive Increase in Debt
Liabilities and assets increased substantially from 2001-2004, but the rise in liabilities was more rapid overall. Over this time, the principal changes in different types of debt as a share of total debt were an increase in the share of loans for other residential property and a decrease in the share of installment loans. The largest share of total debt was the debt secured by the primary residence, the amount of which kept pace with the increase in total debt.
Because liabilities increased faster than assets, the ratio of the overall sum of family debts to the sum of their assets rose 2.9% from 12.1 to 15%. This increase follows a 2.1% decrease over the preceding years. If the calculation is restricted to families hat had debt, the leverage ratio was 19.9% in 2004 and increase of 3.4% from 2001.
The overall median and mean values of total outstanding debt for families that had any each rose 33.9% from 2001-2004. From 1998-2001, median debt had increased 9.5% and the mean 5.2%. Across demographic groups, median debt tends to rise with income and wealth and to rise and then decline with age. The decline among older age groups is driven in large part by the paying off of mortgages on primary residences.
This shouldn't surprise anyone. The US is currently engaged in a huge debt orgy, spurred on by Greenspan's lowering interest rates to negative levels for several years. As a result, total consumer debt has increased from 7.1 trillion in the first quarter of 2001 to 11 trillion in the third quarter of 2005.
So here's the bottom line. Weak job growth has led to weak income growth is weak which leads to increased borrowing and diminished savings.Tell me again how good the economy is?