How do you feel about your buying power over these past few years since the recession supposedly ended? Barely treading water?
You’re not alone. Median household income for the nation was flat when adjusted for inflation, at $51,017 last year compared with $51,100 in 2011, the U.S. Census Bureau said Tuesday.
That’s the fifth straight year of flat or falling incomes, with declines totaling 8 percent. If you think the stagnant median — the point where half the nation’s 122 million households make more, half less — is a result of economic malaise, think again. Just since the end of the recession, buying power for the household in the middle is down by more than 4 percent, while total inflation-adjusted income in the United States is up by more than 5 percent and the major stock market indexes have doubled.
This is the national report card on the prosperity of the middle class. The grade: a big, fat D. And it’s not just a few lousy years: Median household income has fallen or stayed the same in 11 of the past 14 years since the last great run-up of the Clinton era, as income has jumped ahead by more than a quarter.
On Thursday we’ll see the state’s median, and we have no reason to believe it will be any better — especially since Connecticut’s four metro areas were all near the bottom of the pack in overall economic growth in 2012, reported separately Tuesday.
Poverty was also unchanged in the nation in 2012, at 15 percent, the Census report showed. The number of Americans with health coverage edged up, reflecting more people eligible for Medicare and slightly more young adults covered under their parents’ plans. But the tally of uninsured Americans, 48 million, was statistically unchanged from 2011.
Connecticut can expect to fare better in reducing the ranks of the uninsured when the numbers come out Thursday, as preliminary figures show. Poverty may also show a decrease in the state, which added an earned income tax credit in 2011. And there are straightforward ways to improve both of those measures.
But when it comes to the median household income figure, the Census report is a deep disappointment with no hope of an easy solution. Forecasters had predicted a small increase, but even that — which didn’t happen — would not have masked the struggle of typical families.
“For well over a decade households that would have, in prior periods, gotten ahead have failed to do so,” said economist Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities and a former ranking adviser to Vice President Joe Biden. “The extent of this disconnect is so profound that if it doesn’t wake policymakers up … I can’t imagine what would.”
To put it in perspective, the median climbed by 15 percent during the Clinton years, from $48,884 to $56,080 (in 2012 dollars), before the long declines. And even that Clinton-era run-up wasn’t as strong as in the glory years of 1947 to 1973, when the nation’s median multiplied, unfettered by global competition, with union membership near or above 25 percent.
Connecticut, usually in the top three states for median income, is following a similar pattern, except with more ups and downs as key industries rise and fall.
So how should we think about what’s happening?
Clearly, based on the fact that overall income is rising and income at the bottom is falling, the rich are seeing more gains. But it’s not just the plain vanilla rich, according to a recently released study based on IRS data — it’s the super-rich, the 1 percent, that has sucked in a disproportionate share of recent gains in income.
This isn’t class warfare. The problem isn’t that the rich are getting richer; power to them, at their best they create jobs. The problem, as Bernstein says, is the disconnect between economic growth and typical pay.
I tend to think the situation is hopeless at a time when Democrats and Republicans can’t even agree to pay the nation’s previously promised debts, when China is launching its own aerospace industry, when armies of insurance workers are losing their jobs to cheaper workers on visas from India, when large numbers of U.S. high school graduates basically can’t read.
In that view, we’re in a sort of permacession for vast tracts of working families, a downturn beyond the boom-and-bust cycles, in which the American empire declines in a more or less orderly way. A stagnating median household income number is not a sign of the empire’s decline, it is the decline itself. The median is to the economy what stock prices are to a publicly traded company.
Bernstein and others, without sugarcoating the lousy numbers, are more optimistic. After all, the U.S. economy is growing decently and, most important, it’s creating income at a nice clip. What we have is a failure of policy, they argue. It’s just a matter of finding a way to get that income back into the hands of the mass population — preferably right in the paycheck rather than at the back end with government supports.
“What we should focus on … is how we as a state and a community make sure that people are equipped to deal with the changes in the economy,” said Matt Santacroce, a policy analyst at Connecticut Voices for Children, a New Haven-based advocacy and research group.
Santacroce mentioned the unemployment trust fund, the minimum wage, the earned-income tax credit, programs for child health and job training. “On a broader level, what we can do is make sure that the state is producing workers that come out of our K-12 school system and out of our public university system who are equipped to handle the 21st century economy … really ready to go to work.”
All good stuff, all of it worthy, but it costs taxpayer dollars. Conservatives tend to think the middle class would do well if the government would get out of the way and stop spending money, and that disagreement is why it’s hard to gain much traction either way.
Bernstein sees a higher path than arguing about government income supports. The key is workers’ bargaining power, which only happens in times of full employment, when the jobless rate is low — such as the 1960s and the ’90s.
“If you conclude that the only thing we can do to help middle- and lower-income households is provide benefits once they’ve been smacked around by market outcomes, you’re really giving up the game,” he said. Instead: “Worry less about tweaking the tax code and the budget deficit and worry about what would it take to get the unemployment rate down.”
One of his possible solutions is to view the government as an “employer of last resort,” just as the Federal Reserve is a de facto lender of last resort.
That gets us right back to the partisan debate, but is also reminds us — on the fifth anniversary of the Lehman Brothers collapse and the government’s dramatic rescue — that if bailing out workers is socialism, then so is bailing out banks and automakers, and so is offering a tax-free ride to pharmaceutical firms and other companies that employ people and conduct research, and so is handing $115 million in state taxpayer dollars to the world’s biggest hedge fund to make sure it stays in town.