Most of America is Partying like it's 1989.
If the typical family thinks the Great Recession never ended, here's a good explanation:
Median incomes have dropped about 12 percent in real terms since 2007, just before the recession began. In inflation-adjusted terms, the typical family makes only about $200 more a year than it did in 1989.
There was some steady progress in median incomes from 1992 to 2004, but that's all been wiped away.
The
Survey of Consumer Finances is a comprehensive study of consumer wealth and debt prepared by the Federal Reserve and released every three years. The report has an intrinsic weakness in that it is released eighteen months after the data are collected. Thus, changing circumstances in that eighteen month period are not counted for. So the report must be viewed in light of rising property values and stock market gains which may have impacted median wealth in the intervening time frame. The only way we will be able to gauge the impact of such changes that have occurred over the last eighteen months is to wait for the next report to come out. However, in the interim, the news from 2013 is/was fairly dismal.
Some groups have done better than others: Incomes of the top 10 percent have risen about 18 percent in real terms since 1989. But those in the 60th to 80th percentile -- the once-prosperous middle class -- have seen their incomes rise just 4 percent in 24 years
For those who may have missed it, welcome to the new normal of stagnated wage growth. These numbers are just a cold reflection of the reality that affects millions of American families as they try to make sense of what was once held out as the American Dream.
The group that suffered the largest percentage decline in net wealth was the lower-middle class, those between the 25th and 50th percentile. Their wealth dropped by 9 percent between 2010 and 2013, largely because home values -- where they hold most of their wealth -- were rising less than the inflation rate.
The top 3 percent saw their share of total wealth rise from just over 50 percent to 54.3 percent, while the share held by all other groups -- even those in the 90th to 97th percentiles -- declined.
The share of total wealth owned by the bottom 90 percent declined from 33 percent in 1989 to 25 percent in 2013.
Ownership of stocks and assets has declined for all but the top 10%. As such, they are the only ones who have really benefitted from the exuberant stock market we have seen during the past year, and consequently they are the only bracket that has seen any gains in net wealth. And the rate of home ownership now is the lowest since 1995.
Our institutions have no ready answers to the problem of wealth inequality:
Fed Chairwoman Janet Yellen, during her Senate confirmation hearing last November, called widening inequality "a very deep problem" but cautioned that "many of the underlying factors are things that are outside of the Federal Reserve's ability to address."
Of course this is the same Federal Reserve that failed to anticipate the Financial Meltdown and ensuing catastrophic Recession in the first place. In the current edition of the
New York Review Of Books, Jeff Madrick analyzed the minutes of the FOMC in the months prior to what we now know as the Great Recession:
The newly published record shows an extremely limited state of economic knowledge and forecasting ability on the part of committee members. It also shows how undependable attempts to adjust the economy in the short term can be.
Like most economists, the Fed policymaking committee not only failed to anticipate the severity of the Great Recession, it was unaware even that the moderate recession that began in 2007 was underway until it was nearly one year old. “The Fed’s inability to forecast…is disconcerting,” wrote one commentator on the record. But many studies have shown that neither government nor private economists can forecast the economy with any consistency. While they often anticipate the direction of the economy, such forecasts have only limited success because the economy is growing 80 percent of the time. Predictions about when it will stop growing are almost universally inaccurate. Among the studies of the general forecasting record of economists, one of the broadest was recently undertaken by Hites Ahir and Prakash Loungani, both of the International Monetary Fund. They found that, based on a survey of forecasts in many different countries, not one official or private forecast in 2008 anticipated a recession in 2009. Yet there were recessions in forty-nine countries that year.
The prognosis for the future is....poor, for 90% of American families who face retirement:
Fewer American families have retirement accounts. For those between 35 and 64 in the bottom half of the income scale, less than 40 percent had a retirement account in 2013, and the mean value of their IRA or 401k account was only $39,100 for those who had one. By contrast, more than 90 percent in the top 10 percent had a retirement account, with an average value of $446,100 in their IRA or 401k.
The racial disparity among who holds the wealth in this country is now nothing short of
staggering:
Yesterday, the Federal Reserve released the latest installment of the Survey of Consumer Finances, this one from last year. Over at Demos, Matt Bruenig dug into the results and constructed the resulting wealth breakdowns by race. As most people would expect, there are some big gaps. But the scale of the difference is staggering. According to Bruenig's calculations, the median white family has about 10 times the wealth of the median Hispanic family, and 12 times that of the median black family.
Therefore, because white people are also more numerous than other groups, they own about nine-tenths of all the wealth in the country
Another way of putting it, is that the
top 10% of white families own almost everything in this country. One wonders how long a country that is undergoing such a rapid shift in demographics will allow that to stand.
One wonders.
The Christian Science Monitor has a pithy headline:
Fed report finds no one in the US is getting richer. Except the rich.
So much for that American dream.