Growth In Median Family Income Has Decoupled From Economic Growth In The US

This article provides data on the growth in the economy and the growth in median income families. The growth in per capita income and median family income moved in lockstep between the end of WW ll and the mid-1970's. Since then, the growth in per capita income has continued on trend, but median family income has been much flatter. The median family's share of national income has not kept up with growth in the economy. We have had a growing economy since the mid-1970's that has been less equally shared compared to the prior period following the war.

This article should remind us again of the important difference between per capita income, which we typically use as measure of economic growth, and median income. If Bill Gates walked into a bar, the average income of those in the bar with skyrocket. The median income would not change much at all. Average income in the US has grown faster than median income because most of it has gone to folks like Bill Gates.

The US Treasury Secretary Defends Financial Reform And Attacks Lobbyists And The Media Who Oppose Reform

The US Treasury Secretary, Tim Geithner reminds us about the causes of the financial crisis that led to the Great Depression. He also tells us that government did not have the authority, or the tools to deal with the crisis. He has been compelled to remind us about the causes of the financial crisis because financial system lobbyists, and many in the media, including the WSJ which published this article, are opposing the reforms to the financial system that are contained in the Dodd-Frank bill passed by Congress. Geithner argues that the financial crisis may not have occurred, and that government would have been more able to deal with a financial crisis if Dodd-Frank had been in force prior to the crisis.

I am pleased to see Geithner stepping up to the plate and reminding us that Wall Street, left to its own devices, is designed as a compensation system for management and traders. Their level of compensation is dependent upon the levels of risk and leverage as well as the opaqueness of the derivative market. The intent of Dodd-Frank is to reduce the systemic risks to the financial system, without imposing unnecessary burdens on the operation of a much safer financial system. We should resist the efforts of bankers to return to the good old days that led to the financial crisis. Dodd-Frank is not perfect, but it is a much needed improvement over the under-regulated financial system that bankers prefer.

The Good And The Bad From Rising Productivity

Robert Reich explains the good and the bad of rising productivity. Output in the US is being produced with fewer people because of technological advances. We are producing as much as we produced before the crash in 2007 with 6 million fewer workers. We benefit from the increase in productivity in many ways. We get lower prices for many products along with higher quality. One problem is in the distribution of the gains from productivity. They used to be shared between labor and capital, but most of the gains are going to the owners and managers of capital. This leads to a problem in aggregate demand. The share of income that is spent by the super rich is less than the share of income that is spent by ordinary Americans. Some businesses can compensate by selling their products and services to the rising middle classes in emerging market economies. Other businesses, particularly small businesses, are unable to do so.

Reich proposes two solutions to the maldistribution of income. We need a more progressive tax system, and an expansion of public services that benefit everyone. Politically this will be difficult to accomplish because the public is badly served by the media from which they get most of their information. Moreover, one of political parties has an agenda to make the tax system less progressive and to drastically reduce investments in public services.

Reich's article focuses on the immediate issues that need to be addressed by rising productivity and the redistribution of income to the super-rich. Technological advances and rising productivity are going to continue well into the future. We will be faced with the problem of building an economy, and a demand system, that is less dependent upon labor as the source of income.

Greek Manufacturing Has Collapsed

This article has a graph that shows the collapse of manufacturing in Greece. The index is back to where it was at the trough in the financial crisis. I don't know how big manufacturing is in the Greek economy but it has not been helped by efforts to impose austerity.

Paul Krugman Has A Reason For Being Shrill

Paul Krugman explains why he has been criticized for being shrill. The article that I posted below provides a good example of what is regarded as objective reporting by the Washington Post. If reporters write something bad about the GOP, they must also find something bad to say about the democrats. Both parties are equally immoderate. It is improper as Krugman has done, to write about the radicalization of the GOP over the last 40 years without writing about growing radicalism in the Democratic party that has become the party of the center right.

No Matter How Bad The GOP Behaves, The Press Must Argue That Democrats Are Just As Bad

The GOP senator from Maine, Olympia Snowe, announced that she would not run for reelection. She has found it difficult to do her job as a moderate in an increasingly partisan party. For some strange reason, Dana Millbank has used Snowe's announcement as a reason for an article about a democratic senator who has complained that he has not enjoyed his work in the Senate either.
In other words, the issue of growing partisanship in the GOP has been shifted to that of growing partisanship in the Senate. He then lists several conservative democrats who have also announced decisions not to run for reelection. The democrats and the republicans are equally guilty of partisanship.

The US And Europe Should Focus On Exporting Business Services

J. Bradford Jensen has been one of the leading proponents of market liberalization and the benefits from globalization. In this article he argues that we should be less concerned about the loss of manufacturing jobs, and more focused on expanding our export of business services. We have a trade surplus in business services today, and the market should expand as emerging nations develop their infrastructure. It is a larger market in the US than manufacturing, and it pays good wages, but it is only a small percent of our export base. The US market, and the European market, have been open to the import of business services but many countries have placed barriers on the importation of business services. He suggests that government should work to open those markets to US exports.

It would nice if the US and Europe could expand their export base in business services. The banking industry has expanded its presence in global markets but its foreign branches have been staffed with domestic workers. We have also been a net importer of information technology services due to the availability of skilled workers who earn much less than US based information technology professionals. Its hard to see how the US and Europe have a comparative advantage in business services that would employ large numbers of domestic professionals.