Wednesday, December 1, 2010

Are We Poorer Than We Used to Be?


Here's an interesting perspective on today's economy vs. a more prosperous (and recent) time when things weren't much 'better' than they are now.

How much sacrifice is needed to bring this country out of recession? In taxes? In spending cuts? In standard of living and quality of life?

"Life did not seem so terrible for most people back in 2006 or 2007, did it? So why are so many people glum now? Why are so many actually suffering, losing their houses or their jobs? Why are there so many stories like the one on the front page of The Washington Post on Nov. 19 about a woman who used to be a nursing-home executive with a six-figure income and this year will clear $11,000 selling chicken dinners? Changes in GDP are not a perfect reflection of changes in the average citizen’s prosperity at any given time. But it’s not a bad one. Why does $13 trillion feel poor today, although as recently as 2007, it felt rich?"

"There are all sorts of reasons. Among them, the relation between making or having money and feeling prosperous is far from linear. America’s GDP in 1985 dollars back in 1985 itself was $6.8 trillion — barely half what it is today. Yet 1985 was the apogee of President Ronald Reagan’s “morning in America” boom, when you were far more likely to find stories in the media about chicken-dinner sellers who became nursing-home executives than the other way around. In judging our own prosperity, we don’t compare it with long ago — or even 20 years ago. We compare it with how other people are doing and how we ourselves have been doing recently. It’s no comfort to be told that you’re a thousand times richer than a caveman. If a caveman killed a wildebeest, he felt rich and actually was rich by the standards of his time."

"A more important reason that $13 trillion doesn’t feel as rich this time as the last time we passed through it is the increasing inequality of wealth and income. In 1984, a family income of $81,365 (2009 dollars this time) put you in the top fifth of all American families. In 2009, it took 23 percent more, an even $100,000. To make the top 5 percent required income of $180,000 in 2009, compared with $68,500 (in 2009 dollars) back in 1984..."

Read the rest of the column by Michael Kinsley here.

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