Monday, September 04, 2006

YOU NEVER HAD IT SO GOOD. The idea that, despite their misgivings, Americans are actually living like kings was addressed here and has been taken up by the Ole Perfesser. Among his linkees, Jane Galt seems to think that, despite our great wealth, we little people (or maybe it's just liberal economists -- it's hard to tell) are jealous of those who actually do live like kings.

Others challenge the numbers that are alleged to support the negative analysis. David R. Henderson mentions that, though corporate profits have risen and "marginal tax rates have increased for most people except the highest-income people," the money is actually coming back to us in spades because "employers have paid a higher and higher percent of compensation in the form of untaxed benefits" to workers. Well, it's not a small-government argument, anyway. Also more Americans have cars and houses than previously, though the debt amassed in their getting is not mentioned, nor their condition.

This discussion was originally spurred by reports that voters are leaning Democratic on the economy, which some attribute to said voters smelling a rat in the positive numbers attributed to that economy. So Henderson's argument -- and those of the others -- is already being considered, on less elevated terms, by citizens.

The issue will be decided, assuming the voting machines work OK, on the tricky grounds of perception. Democrats have a natural and, it must be said, unfair advantage going in, as the alleged party of the little guy. To combat this, Republican supporters offer good numbers and a sunny outlook. This is an optimistic enterprise, and when it does not seem to get traction, Republicans can be counted on to attribute the disconnect to media bias.

But, as previously observed, citizens do not observe the economy from above or afar, but live in it. In a sunny-side analysis in the Washington Post, AEI's Nicholas Eberstadt seems to acknowledge this: "the official poverty rate is utterly incapable of tracking material deprivation in the United States with any accuracy." Here is part of his picture:
Among low-income households in the United States, the gap between reported income and reported spending has widened gradually since the 1960s and now has taken on chasm-like dimensions. In the early 1960s, the poorest quarter of U.S. households spent 12 percent more than their annual incomes. In 1973, spending by America's poorest fifth surpassed their income by almost 40 percent. And in 2004, spending by the poorest fifth of American families exceeded income by a whopping 95 percent; in effect, spending was nearly twice as much as income.

These patterns might be due to easy access to credit, with many consumers maxing out their credit cards or engaging in other unsustainable borrowing. (Curiously, however, recent credit surveys suggest that the net worth of poorer Americans has been rising, not falling.)

Another important factor could be the increasing instability of American incomes. Scholars such as Jacob Hacker at Yale University and Robert Moffitt at Johns Hopkins University have noted that the income of American families is likely to bounce around much more today than it did three decades ago -- whether due to greater global competition, increasing rewards for education or other factors. Intensified swings, in turn, mean that more households may, in any given year, earn low incomes and be temporarily classified as living in poverty. But they continue to spend as they did before, anticipating that their incomes will bounce back. Such oscillations also mean that the incomes reported by families in annual surveys -- the backbone for the official poverty estimate -- are a steadily less accurate indicator of true living standards.
What reality does this suggest to you? A class of Americans outspending their official incomes surely shows a problem with our intelligence-gathering -- and, the citizens who are doing the outspending must feel, a good thing too. They are job-hopping madly, not, as the Eberstadts of the world might, to beef up their resumes, but because jobs come and go rapidly -- they might be doing light carpentry one month, cleaning out a storeroom the next, and getting it under the table when they can. They spend not because they are "bouncing back" but because they have to: some citizens may be buying Porsches, but they are probably buying milk, blankets, light bulbs, etc. When they fall short, somebody is always willing to stake them, at ever-rising rates and with ingenious penalties.

The last thing they need is government tracking. Actually, they might think that the last thing they need is this Government.

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