The 70's is widely regarded as the low point for the US economy in the last 30 years. You would think that the average American worker is in much better fiscal shape today then he was in the bad old days of stagflation. Not according to a
study by Harvard professor Elizabeth Warren. In the early 70's a typical ONE-earner family had to devote 50% of it's income to non-discretionary expenses, today with both husband and wife working the average middle class family devotes around 65% of it's income to non-discretionary expenses. Single earner families today have seen discretionary income drop by staggering 72% compared to the early 70's.
A Growing Divide
The decline of working Americans economic status has mirrored the decline of organized labor. Unions were first demonized by the Republican spin machine and then destroyed by anti-labor laws, union busting and outsourcing. But what about the executives that insisted that their companies could not be competitive paying living wages and benefits?
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From the mid-1940's through the 1970's, the pay of chief executives and workers grew at about the same rate. Then between 1970 and 2001, median pay among the top 100 executives rose from 35 times that of the average worker to more than 500 times as much. Last year alone the average pay for chief executives increased 27 percent according to a survey of 200 large companies by Pearl Meyer & Partners.
Northwestern economics professors Ian Dew-Becker and Robert Gordon wrote recent productivity gains have not increased real income for the average American but have led to a concentration of wealth
Median family income fell by 3.8 percent from 1999 to 2004 and grew cumulatively from 1995 - 2004 at an annual rate of 0.9 percent per year, much slower than the growth rate of nonfarm private business (NFPB) output per hour over the same period of 2.9 percent...
The micro data tell a shocking story of gains accruing disproportionately to the top one percent and 0.1 percent of the income distribution.
The Republican Pyramid Scheme
So how to manage this huge transfer of wealth from the many to the few without suffering the economic and socio-political consequences? Replace real earnings with cheap credit and inflating asset prices. The Fed created housing bubble has enabled America's middle class to maintain it's standard of living and continue consuming by borrowing against the ever increasing value of their homes. Exotic financing has gotten consumers who would never been able to purchase a home on board with the Republican "ownership society".
It's Deja Vue all over again
The last time the Republican's controlled all the levers of power was in the 1920's. The 20's was another period of exploding consumer spending driven by exotic new forms of credit. Over leveraged financial markets funded the asset bubble through loans on securities and real estate. Sound familiar?
Normally in periods of economic expansion nations and households get there economic house in order so they are better prepared to weather the inevitable periods of economic contraction. That has not happened during the Bush recovery. The government has run up an unprecedented debt, consumers have a negative savings rate for the first time since the depression, while poverty and infant mortality rates have increased. The orgy of debt expansion and Ponzi financing that the Bush kleptocracy ushered in is now beginning to unravel.
Republican apologists gush about the new economy: "they sweat (the Chinese) and we think", "the jobs go to the low-cost countries while the profits go to us". They have traded away the greatest income producing economy in history and replaced it with a pyramid scheme where we buy and sell houses to each other with money that we borrow from China.
We are about to rediscover the fact that you can't borrow your way to wealth. That asset speculation and credit powered consumption is not a sustainable foundation for an economy and that you should never ever trust the Republicans with your money.