A Few Pictures to Keep in Mind

October 6th, 2011 at 12:52 am

As I mentioned earlier, I’ve been collecting stuff on kids and their economic well-being.  Here are a couple of figures that provide an intersection of a number of points I’ve tried to stress a lot in recent weeks.

It’s just a simple plot of real median income for families with kids, 1989-2010, followed by two bars showing the trough to peak of income growth in the two recovery periods.

The difference between how middle-income families fared in these two periods is really quite remarkable.  I mean, when it comes to income growth, there are always lots of moving parts, but at first blush, if you’re a middle-income family with kids, you might want to keep these pictures in your mind when listening to the economic agendas of those who would be President.

That is, it’s hard to take seriously those who claim that “supply-side” tax cuts, as in the Bush years—large breaks tilted toward the top that are supposed to trickle down to the middle—will deliver for the middle class, compared to the more progressive tax regime of the Clinton years.  It’s even harder to imagine how “shuttering the EPA” will make the difference.

There were important, real differences between these periods: the job market was much tighter in the former decade, job growth was about four times as fast on an annualized basis—importantly, the 1990s recovery lasted longer than that of the 2000s, in part because the only way for many families to get ahead amidst the flat income growth of the latter period was through cheap, easy credit.  (In other words, there’s a linkage here between flat middle class incomes, the debt bubble, and the big crash.)

But so far, the road map I’m hearing from the R’s sounds like that of the 2000s, and that shouldn’t inspire anyone in the middle class on down.

Source: US Census Bureau, Family Income Tbl F-9.

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11 comments in reply to "A Few Pictures to Keep in Mind"

  1. Rick Schaut says:

    I still think of Galbraith any time trickle-down is mentioned. I’ve not been able to find the direct quote, but my recollection of it is that trickle-down is “the doctrine that if sufficient oats are fed to the horse, a few grains will pass through to the road for the sparrows.”

  2. joe says:

    Amazing that median income flat lined even while the 8 trillion housing bubble was expanding from 2001-2006. Unlike the dot com bubble, the income growth generated from the housing bubble all went to the top.

  3. marcel says:

    Typo alert:

    “shuddering the EPA” or “shuttering the EPA”

  4. Comma1 says:

    Although, families with kids is obviously important. You should look at birth rates. I’m just guessing here, but I bet you will see something unpleasant in those numbers.

  5. marmico says:

    Aren’t all census income tables the same relative shape as the F-9 series?

    The 1992-2000 large cycle expansion, followed by the contraction through 2002 and a smaller rise through the 2007 business cycle peak followed by a further contraction through 2010. The median 95/50 (the ratio of the 95th percentile to the 50th percentile) ratio rose from 4.25 in 1992 peaking at 5.49 in 2000 and closing at 5.19 in 2010.

    If anything, the rich were better off under Clinton than under Bush.

  6. Th says:

    It is easy to look at the 00’s and conclude that large tax cuts for the wealthy don’t lead to economic gains for everyone else. But we do need to come to grips with the fact we increased education spending through NCLB, increased drug spending in the Medicare drug program, increased CHIP funding, increased federal employment both directly and as contractors through the Homeland Security Dept. and fought 2 wars all without stopping the slide of the middle class. Something is seriously awry.

  7. IZZAREP says:

    Maybe I am misunderstanding the issue but I think trickle down does work. I am a business owner and because of the accelerated depreciation, bonus depreciation, and increased section 179 of the past 10 years I have invested heavily in capital equipment. I then hired people to run that equipment and support it. Most of those people were unemployed or underemployed prior. The wages that these people earn are in excess of $20/hr with full benefits which is considered a family wage occupation in my area. If it would not have been for the incentives of the aformentioned programs I would not have invested as heavily nor hired as many.

    Maybe you would want to picture in your mind what those kids would think if Mom or Dad did not have a job if we did not have a trickle down effect.

    • pjr says:

      Izzarep “trickle down” doesn’t really have much to do with tax breaks for investment activities, as I understand it. It refers to lowering your taxes generally, giving you the freedom to spend the money as you like, and in theory you would choose to spend the money as you did to thereby be a “job creator.” You could have taken advantage of low taxes to buy some Bentleys, more and bigger homes, real estate, lots of imported jewelry and gold chandeliers, skyboxes at multiple stadiums, or maybe a politician or two if your business if big enough. There’s the rub–most people aren’t exactly like you. Turns out that in the bad old days, when income tax rates were extremely high for the highest earners, they were more likely to behave like you. Especially when the tax breaks for investment were strong (in the past, these would come and go).

    • pat b says:

      so if you had no business would you still buy in the advance of credits?

      Would you lease gear if the incentives werent there?

  8. Tyler says:

    How did the Bush tax cuts reduce median income? It seems to me that an income tax cut would boost one’s income.

    The booming economy of the 90s was due to the internet bubble, not Clinton’s tax increases on the rich.

    Raising taxes on anyone takes money out of the economy, thus slowing economic growth.