The Reagan Question: Are You Better Off Now Than You Were Eight Years Ago? Comments for The Reagan Question: Are You Better Off Now Than You Were Eight Years Ago? at , comment 1 to 27 out of 20 comments Fri, 30 Jan 2015 06:26:01 +0100 FeedCreator 1.7.3 replica watches I appreciate for your post! I hope you will keep it on. I also want to make friends with you and share my favorite replica watches to you. I am focus on you.[url=]replica fossil watches[/url] - sean.waches Thu, 09 Sep 2010 14:59:19 +0100 Graet thoughts There is potential for 10 million or more in foreclosures? The housing bubble is a core economic problem and until it stabilizes no recovery is possible. The continuing housing slide may push 20 million households into negative equity by 2009.i found this informative and interesting blog so i think so its very useful and knowledge able.I would like to thank you for the efforts you have made in writing this article. - casinoconsejos Sat, 11 Apr 2009 07:24:37 +0100 Economists...? Does the unemployment rate talk about how people are better off in a snapshot? No, because what matters is where they came from as well as opportunity costs. Better yet, consider the destruction of manufacturing jobs. That's a GREAT thing. Do you wish we were all still farmers from the 1500s? Or slaves? It's a good thing we sent those jobs away. Real wages, when total compensation is included (fringe benefits, etc.), have gone up significantly in the past ten years. Your gas figure is wrong, your GDP growth figure is spurious (the economy started expanding under George HW Bush, it started contracting under Clinton), the President **does not control all those things**, inflation figure is dead wrong... I mean... seriously...? The authors wouldn't last 2 seconds in a discussion on how economics really works. Unfortunately, UChicago isn't what it once was. Try Northwestern for an advanced degree nowadays. - Admiral Sun, 23 Nov 2008 17:18:07 +0100 Comparing with the boom? It is pretty ridiculous to take the period that includes the boom with the period in which it crashed and in which we were hit with 9/11. Considering those things, I think we were doing very well until recently. - Don Thu, 30 Oct 2008 11:15:02 +0100 Am I bettor off??? Am I better off today than eight years ago? It is not even a logical question if the following is reasonably accurate. The value of the dollar against world currencies is what? Down The toxic securities market is multi-trillions of dollars down? Distressed households are up or down? The Financial Credit bubble is taken care of? Hedge funds are in the money or collapsing? We are facing a multi-year recession or expansion? There is potential for 10 million or more in foreclosures? The housing bubble is a core economic problem and until it stabilizes no recovery is possible. The continuing housing slide may push 20 million households into negative equity by 2009. Wall Street is imploding or exploding? We are looking at inflation or deflation or neither? With a $516 trillion derivative "time-bomb" we are looking at what Warren Buffet calls, "financial weapons of mass destruction." We understand the following financial instruments and have proper government regulations and enforcement: swaps, forwards, futures, puts, calls, caps, floors, collars, captions, CDOs, CMOs, CMBS, MBS, SIVs, SPVs, pass-through securities, etc. "the world's biggest black hole because they comprise a shadow financial system." A pyramid type chart of global liquidity from Bank of International Settlements/Independent Strategy shows: Derivatives 802% of world GDP; Securitised debt 242% of world GDP; Broad money 122% of world GDP. Bob Chapman's assessment. "Using Bank for International Settlements (BIS)P figures, he cites a "Quadrillion dollar (1,000 trillion) powder keg waiting to blow and places this problem at the heart of the financial crisis." George Bush's approval rating is about 21%. Congress scored just above 10% approval rating. This compares favorably with the public mood of the Great Depression's early years. Eighty two per cent of Americans believe the economy is getting worse. "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country....corporations (including bankers) have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." President Lincoln - Tony Arseneault Wed, 29 Oct 2008 02:17:21 +0100 Things are bad but why is the President to blame? First, let me state that I am neither Repub Or Dem here. I agree with each party on some things and strongly disagree with each on others. I like to look at the issues for what they are and try not to point the political figure. With that said, there is no doubt that we ae worse off now than we were in 2000. I think another person made a valid comment that we are comparing one of the best years in our economy to one of the worst and then asking whether it has improved or not. Duh, of course it has gone down!! But let's look at why. In 2000, we were in the dot com boom and the economy was thriving. Unfortunately, it was a bubble that was bound to burst. The effects of that weren't seen until Bush took office. With the housing bubble now popped, this has had an avalanche affect wiping out and affecting many industries that are only indirectly related. Banks made bad loans, consumers got bad loans, and these were all packaged up in the name of greed and stupidity to make as much of a profit as possible. As a result, the market collapsed. More importantly, this crisis revealed the larger concern (in my opinion) of our reliance on credit. I feel our economy has been overinflated for years. Household debt is now 131% of disposable income. This has gone up increasingly every year since 1949. We spend well beyond our means buying things we can't afford and sustaining an economy on credit. The housing crisis finally revealed how much we depend on credit. And now we see the effects of this drying up. Contrast this with France who is much more strict in terms of their credit. Their economy doesn't grow as quickly but neither has it felt the effects that the UK and the US have had. It is my opinion that consumers and businesses and the decisions they make are what drive our economy and the Pres and govt have little direct effect on what goes on. yet that will never be a popular political opinion. Why do I think that? Numerous examples from the Dem and Repub side. Tax cuts put money in the pockets of people for them to spend. Yet if people don't actually spend the money the govt gives us, it has ZERO effect on the economy. Stimulus checks were exactly the same. The govt HOPED that it would spur spending and for some people it did. But not as much as they had hoped. Govt now has bailed out banks and given them money. Yet very little is going towards spurring the economy again because banks aren't lending it out. Again, the effect of this lies with the banks regardless of what the govt does. The President has the power to appoint the Federal Reserve and Treasury heads you say. How has lowering the interest rates woked out in terms of spurring the economy? The govt can do whatever it wants but aside from consumers and businesses taking action, not much will happen. So we take into account the actions of businesses and consumers in this loan mess, the increasing use of credit by Americans to inflate our economy, and the lack of a direct sustained effect that the govt has on the economy and we see that the President gets way too much blame when things are bad and way too much credit when things are good. It's just how things are perceived but it doesn't make oit reality. Clinton didn't cause the dot coms to boom and he didn't cause them to fail. Same with Bush and housing. Sure, more regulations could have helped but greed, stupidity, the overuse of credit, and bad decisions on the part of consumers and businesses had far more effects. So while the President may be blamed for where we are now, that perception doesn't fit reality. If you look at all the factors that contributed to where we are now, the President himself is far down the list as far as where all the blame lies. That would be true regardless of who is President. IMO, the greatest effect the President can have is the confidence of the people to go out, live their lives, and spend their money. In this and with his decisions, Bush has failed. However, from a pure economics standpoint, he deserves nowhere near the blame he is getting. - Jeremy B Tue, 28 Oct 2008 22:49:59 +0100 ... In sum, this is a depressing list of economic indicators. Is there a reason the untenable rise in home prices was not included in this list? Why doesn't the CPI take into account real estate prices? - delaney Sat, 25 Oct 2008 23:20:35 +0100 Magical thinking on "productivity" Re anonymous: Russell is always a delight to read, but like most other 20th century thinkers, the essential underlying basis of so-called productivity gains goes completely ignored, much as water might be taken for granted by a deep-sea fish. Essentially "economics" came unto its own during a highly abnormal period in human society: that of increasingly overwhelming dependence on exhaustible energy resources. In 1860 the majority of economic output was the product of human or animal muscle power; by 1960 the percentage had dropped to virtually zero. The key phrase in Russell's piece is: "Someone makes an invention ..." One can read article after article, book after book, including many incisive critiques of technological civilization, with barely a word on the underlying fuel sources which made it all possible (Richard Heinberg's 2005 essay "Tools with a life of their own" tells of his own consciousness raising experience on this score.) Steve Meisner's comment is unremarkable in terms of the common cultural wisdom, but totally absurd if viewed objectively. "You can think of this as the most basic test of an economyâ€™s health: does it produce ever-rising living standards for its citizens?" - and attributing it all, at that, to "the fruits of their own extra labor." Would some economist have the courage to acknowledge the truth in this regard, just as Heinberg acknowledged his own former blindness, and in so doing begin to make themselves useful in helping us to manage the forced energy descent ahead? Steve Athearn P.S. The following is a highly telling comment on what we tend to take completely for granted - abundant electricity being regarded as simply a byproduct of "development," rather than as the product of levels of energy use enormously above that which might be sustained: â€œEven coal has some limits. We have thousands of years, apparently, of coal. But what we donâ€™t seem to have anymore is even tens of years of high quality, black, high-BTU, anthracite coal. And what weâ€™re substituting it now with, is brown coal thatâ€™s so brown that itâ€™s low sulfur, because it doesnâ€™t have much coal in it. Iâ€™d encourage all of you to go to the New Yorker magazine in early October. They had two back-to-back articles called â€˜Coal Train Iâ€™ and â€˜Coal Train II,â€™ written by John McPhee â€“ fabulously good articles. â€˜Coal Train IIâ€™ traces you through the activities to fill up a unit-train thatâ€™s a mile-and-a-half long, in the Powder River Basin. Itâ€™s a hundred and twenty-four rail cars of nineteen thousand tons of coal. And then he rides the rails for five days to get to twenty miles outside of Macon [Georgia]. And then he describes beautifully this process of flipping the rail cars upside down and pneumatically sucking out the coal, and then the train starts back five days being empty. But nineteen thousand tons of brown coal creates eight hours of electricity. Thatâ€™s low-quality coal.â€ Matthew Simmons, Chairman of Simmons & Co. International energy investment bank, in lecture at the Miller Center for Public Affairs, University of Virginia, November 30, 2005 - Steve Athearn Thu, 23 Oct 2008 01:23:09 +0100 Family income, productivity Steve M. questions the two "better off" check marks in the table for 2008. On family income, Steve cites an April 2008 New York Times article that says median family income actually fell between 2000 and 2007. The problem here is that the 2007 income data were not available in April 2008, so the NYT used an estimate for 2007 income (clearly marked in the NYT graphic) that turned out to be below the actual figure, which wasn't released until August 2008. Our table uses the actual figure and shows a slight increase in median family income between 2000 and 2007. On productivity, Steve raises an excellent point, which we make (though less forcefully) in the text of the full report. See: John - John Schmitt Tue, 21 Oct 2008 09:57:28 +0100 I question the two "better off" checkmarks 1) According to this New York Times article, median family income has actually decreased in that time period: In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureauâ€™s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less â€” about $60,500. 2) The other area of supposed improvement is actually quite harmful. Here's the next paragraph from that same article: This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economyâ€™s health: does it produce ever-rising living standards for its citizens? As this suggests, although the productivity of the American worker continually increases, they do not share in the fruits of their own extra labor. The owners and executives of American businesses are keeping the additional income that results from that increased productivity, sharing it only with speculators (and some relatively harmless investors), not workers. Additionally, most employers are cutting jobs, meaning that much of this added productivity is due to the remaining workers having to do more, work harder and longer hours to keep up with the additional workload. And, as inflation continues to more rapidly increase (but wages do not), that means lower and middle-class Americans are working harder and longer for LESS, while the owner and investor (the upper classes) are reaping the rewards of the increased labor of the working class. Some people (like me) would call that exploitation. Others would call it "the invisible hand of the market." I don't like that phrase because it tries to cast the greed of the upper classes as amoral. Therefore, the increase in productivity is harmful to all but the owners and investors in our society. Do more work for less money (after adjusted for inflation). I don't think anyone would consider himself "better off" being in that predicament. - Steve Meisner Mon, 20 Oct 2008 13:49:32 +0100 Main Street comments I saw Dean Baker on the Business Hour and what he said, he said for me. More please. The chart above is more than helpful for us ordinary folks to show to our "thought-less" friends. I also want to thank him for sticking to his guns about there being punative clauses arranged for those who have created this mess. Surely there are some restraints on the books for SEC funds, Banks and boards. I am rereading my "Power Failure" book by Sherron Watkins on Enron. - YM Wed, 15 Oct 2008 20:18:57 +0100 One line says it all. The end of oil is the overall global pressure on the economy. The line about a gallon of gas going up is the single most influential factor in the whole array of numbers. - rk Wed, 15 Oct 2008 14:09:51 +0100 Bertrand Russell, nice I, too, have read "In Praise of Idleness," and it's one of my favorite Russell essays. He says some very incisive things about economics on occasion. I wish I knew where to find more of his economic commentaries. - Ryan H. Tue, 14 Oct 2008 20:05:52 +0100 Re: Jeremy and President vs federal reserve chair While the Fed chairman holds significnat power the control of the President surpasses the Fed by a great margin: (1) the president apponts the Fed chair and all regional governors; the President apponts the head of the SEC, Tres Secretary and all other regulators of note, proposes the budget and certainly sets the overall tone of the finacial markets. While its certainly true that events such as the Arab Oil embargo in 1973 or the Great Depression (to name a few) can overwhelm the economy, I think its without question that the President exerts the greates sway over the financial and economic direction of the US economy. - Allan Tue, 14 Oct 2008 16:51:20 +0100 Productivity Growth always outpaces wage growth I look at financial charts online a lot. Usually you can change the timespan. That would be useful here. Of course we are better off technologically than we were a month ago, or any number of years ago, but are we (average Americans) better off (financially) than we were 8 years ago, or 20 years ago, or 80 years ago? It would be interesting to see how the numbers for greater durations of time compare. In the 60's, Alan Greenspan wrote papers and speeches on the gold standard and inflation, which clearly explain how (and more importantly why) inflation erodes the value of the wealth we average people manage to accumulate. They have always been my favorite works of economic writing, above even Smith, Keynes or Marx. Einstein and Russell also gave us very insightful writings on economic matters. After Greenspan's writings mentioned above, my next favorite piece is "In Praise of Idleness" By Bertrand Russell [1932] There is no better explanation of how and why productivity growth always out-paces wage growth, or why that is a flaw in the utopian free market which we are told we should hope for... "Suppose that, at a given moment, a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price. In a sensible world, everybody concerned in the manufacturing of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way, it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?" As you can see from his illustration, the productivity doubles, the wages remain the same, and half the laborers become unemployed. The answer to his final question is, "No." In summary, Russell argues that productivity gains (human invention which could lead to increased leisure-time) do not lead to such due to our work ethic, which has been instilled in us since the earliest days of civilization, and nurtured and cultivated by those in power ever since, for their benefit, and to our detriment. I highly recommend a stringent study of this piece of writing to those who do not wish to be hopelessly enslaved while under the incorrect impression that they are free, as Goethe put it, in so many words. - anonymous Tue, 30 Sep 2008 07:04:10 +0100 sales marketing executive I think stating the gross imbalances of our trade deficits would go a long way in showing why we're so much less better off. We import more than we produce. We owe more than we earn. Our economy is consumer based not manufacturing. We save nothing and borrow for everything. We have more lawyers than engineers. Lastly, we're the world's biggest debtor nation. In less than 20 years we've gutted our country's economy to the point where we're a pathetic caricature of our former dynamic self. For me the figures foretell a gloomy economic future for a long while. The economy may not be in depression, but I'm slowly sinking into one. - Dean Marshall Mon, 29 Sep 2008 08:20:07 +0100 Inflation-adjusted Yes, the median family income figure adjusts for inflation. ("2007$" is short for "in constant 2007 dollars.") All the dollar figures in the table are adjusted for inflation using the CPI ("consumer price index"). (Well, actually, the CPI-U-RS, which is a special version of the familiar CPI. The CPI-U-RS applies the current CPI methodology to earlier years and is the best way to compare dollar values over time.) The only dollar figure not deflated using the CPI is GDP growth, which is adjusted for inflation using the GDP deflator, which is the best way to put GDP figures on a constant-dollar basis. - John Schmitt Mon, 29 Sep 2008 06:52:31 +0100 adjusted for inflation does family income adjust for inflation? - pedandtic number guy Sun, 28 Sep 2008 23:45:14 +0100 Economies do not react instantly...there is a LAG I believe that Economies should be measure 2 or even 3 years after a new President is elected. In this case, a good comparison should be maybe Dec 2002 to Dec 2010. I believe the Economy is like a train that has a lot of Momentum and whatever a President or Congress does, has no substantial immediate effect, but takes 2-3 years. - Benjamin Landman Sat, 27 Sep 2008 23:18:53 +0100 Interesting, but needs a few caveats... While I certainly agree that the economy has been mismanaged over the last 8 years, I think the comparison (and the implied message) isn't quite fair for 2 reasons: 1. 2000 was the peak of a long economic boom. The economy was in great shape (at least on paper) due in a fairly large part to the dot-com bubble. The growth was truly unsustainable, and I have little doubt that regardless of the President elected in 2000, we would be in worse economic shape now than we were in 2000. Probably a comparsion with the post-dot-com economy of 2001-2002 would be more fair. 2. The President doesn't really have that much direct impact on the economy - Reagan's was wrong to claim that, and this post is wrong to imply it. The large bulk of our economic woes should probably be laid at the feet of the Fed, who was willing to support the housing bubble in order to avoid a post-dot-com recession. In a sense, our poor economy now is much more a result of the good economy of 2000 than it is a result of President Bush's policies. That being said, the cost of the war will impact the economy for years, or even decades to come. Bush and the Congresses he has served with certainly deserve no congratulations for fiscal responsibility. - Jeremy Sat, 27 Sep 2008 19:45:17 +0100