Tuesday, December 23, 2014

The 16 Million Children Living in Poverty Must Be Really Excited About the News about the Dow

I've seen a lot of Democrats and liberals talking on Twitter today about how GDP growth in the last quarter was 5% and how the Dow topped 18,000, with the S&P at a high as well. This is all treated as a sign of how wonderful Obama has been for the economy.

First of all, the Dow and the S&P are stock indices. Only about half of the adult population in the US own stocks, a record low. And those gains will be going disproportionately to the wealthiest among that half.

GDP is also not a measure of well-being; it is a measure of aggregate economic activity. And as it is an aggregate number, it ignores distributional concerns. Moreover, the GDP will treat all economic activity as normatively the same, regardless of whether it serves an extractive or generative purpose.
Because of the limitations of these statistics in reflecting economic well-being, we can have such positive stats coexist with others that show a much less rosy view of the economy.

Take, for instance, the fact that the child poverty rate is at a record high, which translates to 16 million children living in poverty. (And that says nothing of those above the federal threshold for poverty who are nonetheless living in precarious economic conditions). There are 1.3 million students in public schools who are homeless. I'm sure they're all thrilled about the Dow.

Last year, the median income was at 1988 levels, a sign of the often-cited phenomenon of wage stagnation for the middle class.

The recovery has been predominantly limited to the wealthiest, with the top 1% receiving 95% of post-recession income gains. (Granted, the data for such analysis ends in 2012, but I have yet to see compelling evidence that such gap narrowed significantly over the past two years.)

Just as it hasn't been a recovery for the 99%, it hasn't been one of "good jobs" either. 44% of the jobs created since the start of the Great Recession have been low-wage jobs ($9.48-$13.33 per hour), whereas only 22% of the jobs lost were such low-wage jobs.

And although the unemployment rate has fallen significantly (if still not enough) since the worst of the recession, it provides only a partial picture because it excludes discouraged and underemployed workers. Data from the Bureau of Labor Statistics show that the decline in such numbers has not been nearly so great.

Democrats risk sounding like cold, removed technocrats if they tell people that they should be celebrating a recovery that they have not yet felt.

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