The Economic Expansion Is Finally Helping the Middle Class

http://www.nytimes.com/2016/09/14/upshot/the-economic-expansion-is-helping-the-middle-class-finally.html

by sethbannon • 10 years ago

86 102 10 years ago

nytimes.com

cryoshon• 10 years ago

enough to offset the debt economy?

dubious

tostitos1979• 10 years ago

I am seriously confused. Most intelligent people I meet are aware of the "debt economy" aka debt supercycle aka shop-till-you-are-maxed-out phenomenon being caused by ultra low interest rates. Surely this theory is not just held by zerohedge readers any more and by normal people.

Once consumers are maxed out, how the heck will they spend in the future? Surely the fed knows this and has a viable plan. Else, they are kicking bigger problems to the future, aren't they?

smaddox• 10 years ago

Prior to the global financial crisis, Neoclassical Economists, i.e. the ones running the US Fed, would not even consider the level of private debt as a significant macroeconomic metric. That's changed slightly, but not really. They still delusionally believe that private debt doesn't matter UNLESS there's an exogenous shock which forces interest rates to the zero lower bound. They seem unwilling to accept the reality that rising private debt drives macroeconomic demand and that stabilizing or reducing private debt triggers an endogenous crisis a la Hyman Minsky's financial instability hypothesis.

withdavidli4• 10 years ago

By normal people? I think you are greatly overestimating people's knowledge of economic theory. Most probably only know of trickle down because it's mentioned in the news.

There was a recent article by NYT about the Chase Sapphire Reserve credit card. Look at the comment section, most don't know how to do cost benefit analysis. All they saw was a $450 annual fee. A good amount still talk about paying with cash only.

This doesn't mean I'm much better off. When you mentioned debt super cycles I have no idea what you mean. I'm only starting to get into economic theories. I'm 27, can be considered upper middle income, and given millennial income calculators in top 1% of earnings (not saying much since most people in the valley can get that, ~$70k income for that level). These theories does not have a perceived effect on people's day to day lives. So a lot don't know about them or don't care. Example, every few weeks I see an article in the front page about negotiating salary. This isn't a gauge of knowledge, but of interest. Everyone goes through negotiation situation, value is obvious, more people learn about it.

ArkyBeagle4• 10 years ago

But household debt peaked in 2007.

hx874• 10 years ago

What's wrong with a debt economy? It allows startups to overthrow incumbents with relative ease, and without it you get an economy like Germany's, dominated by conservative companies founded 150+ years ago. There are certainly advantages to the German system, but it has plenty of disadvantages too.

djschnei4• 10 years ago

savings and accurate interest rates fuel a health economy, not debt.

Retric6• 10 years ago

Median household income shows similar growth levels for ’92–’97 (7) and ’10–’15 (6). However, bottom 20 percent income vs. Top 20 percent income looks like 1/2 the growth at the bottom 92–’97 (10) ’10–’15 (5) vs top 92–’97 (20) ’10–’15 (10) for both periods.

So, it might be broader recovery, but the bottom is still failing further behind and the middle is not keeping up with the top.

MrTonyD2• 10 years ago

Agreed. I feel like this is a "can't see the forest for the trees" story. A median moving a few percent is pretty much meaningless in the context of the many millions who are struggling and suffering. The fundamental causes of inequality are not being addressed.

hx874• 10 years ago

Those few percent mean that millions who aren't at the top are moving ahead.

throwaway12938• 10 years ago

You mean the transition to an information based society but without author-centric notions of copyright?

Most of the successful companies of the last few decades deal mainly in intellectual properties. Most of the successful companies in technology derive their profits from other people freely giving away their intellectual property.

tjic2• 10 years ago

Serious question: how do you propose to address

(a) some people can't make meaningful contributions to the economy because they lack the intelligence to compete with machines

(b) some people can't work because globalization means that their potential contributions can be done cheaper by someone in the middle class overseas who is happy to work for less than US minimum wage allows them to work for

(c) some people refuse to work because the benefits safety net (including disability for unverifiable conditions (source: http://www.theatlantic.com/business/archive/2013/03/disabili... ) is more comfortable than work

oldmanjay• 10 years ago

Once again, I foolishly wonder why the problem people identify boils down to envy and why I should care that people want things they don't have. I get that calling it "inequality" as opposed to "envy" makes it more emotionally resonant but it doesn't provide any actual reasons for me to latch onto.

Is it some sort of attempt to head off a revolution that will never happen?

eli_gottlieb• 10 years ago

The fundamental causes of inequality are not being addressed.

Well of course not! That would require breaking up monopolies and oligopolies, restarting the intellectual property treadmill that moves ideas into the public domain, and fighting rentiering in land, natural resources, and means of production by spreading ownership through the working population.

A society built on rents cannot reduce inequality without re-building their society on actual, useful production.

refurb2• 10 years ago

The people in the bottom, middle and top aren't always the same people.

Retric6• 10 years ago

Going from a medical resident to doctor moves you from one income strata to another. It's not a sign of income mobility.

There is some income mobility in the US. However people generally make more money by changing what they do. Which generally means someone else ends up in the old job. AKA if a janitor goes to night school and becomes a mechanic that does not change what janitors makes.

m52go3• 10 years ago

Nominal income growth means nothing. Real income is not growing.

smallnamespace10• 10 years ago

From the article:

  inflation-adjusted incomes for the mass of Americans have finally started to rise in a meaningful way

ArkyBeagle4• 10 years ago

People are leaving the middle in threes - one goes to the lower bracket, two move up.

It's not like we have wildlife ear tags; these are abstract atoms in an aggregate measure.

maxxxxx• 10 years ago

Judging from the last few decades the economy is due for a blow-up soon so incomes will drop again. This is a little late in the cycle.

roymckenzie• 10 years ago

Could have fooled me

jazzyk3• 10 years ago

All the while the three major expenses in real-life:

1. health care premiums -up 15%/year,

2. college tuition -up 5-7%/year,

3. real-estate/rentals -up 6-10%/year (varies depending on the market)

Nice spin.

Get ready for more "positive" news about the economy, only to be "adjusted" after Nov's election.

smallnamespace10• 10 years ago

These figures are already inflation adjusted. From the article:

inflation-adjusted incomes for the mass of Americans have finally started to rise in a meaningful way

Now, we can have a nice technical argument about whether CPI truly represents the cost of living of your average American, but I suspect that wasn't the point you were trying to make.

http://www.bls.gov/cpi/cpifaq.htm

  What goods and services does the CPI cover?
  ...
  HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
  ...
  MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
  ...
  EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);

jazzyk3• 10 years ago

Yeah... The BLS lists medical services/commodities inflation rate for 2015 at 4.1%/3.6% respectively [1]. Why did my premium go up 20%, then? Why did most people's premiums go up at least 10% or more? Their methodology just doesn't match reality. Just like the 4.9% "unemployment" rate.

BTW, the government has vested interest in under-reporting inflation - the COLA is indexed to it.

[1]http://www.bls.gov/news.release/pdf/cpi.pdf

[2]https://www.ssa.gov/news/cola/

metaphorm• 10 years ago

I don't think inflation adjustment is what OP was referring to be "adjusted". It's a very common practice for the Fed bank and other econometrics outfits to release "revisions" several months after the initial publication, and with startling regularity the revisions are much less optimistic than the original "headline numbers".

turar• 10 years ago

https://pbs.twimg.com/media/Cr9hqjsWcAA_liW.jpg

[Fig. 1]

kuschku• 10 years ago

Luckily, #1 and #2 don’t affect most europeans, but the economic expansion still affects us.

And while Germany is decreasing taxes, it’s increasing spending, and paying off debt.

The best place to live if you’re middle class and young seems to be Germany right now.

Shivetya• 10 years ago

well, three categories which we can blame government intervention for spiraling costs.

1) setting so many requirements while still upholding rules preventing competition across state lines. formulating laws so the costs are passed onto those who pay the insurance bills

2. making loans with out determining worthiness of the student or schools.

3. preventing new housing being built to protect a valued voter and donation base.

RandyRanderson• 10 years ago

Note that "inflation" and "inflation adjusted" are not what you'd expect.

http://www.financialsense.com/contributors/lance-roberts/inf...

This is a natural consequence of tying social security (and other benefits) to inflation and Goodhart's Law:

https://en.wikipedia.org/wiki/Goodhart%27s_law

I've been meaning to do an analysis of inflation based on hours worked. It;s hard to redefine hours but I'm sure politicians will find a way!

greggyb• 10 years ago

I've been meaning to do an analysis of inflation based on hours worked. It;s hard to redefine hours but I'm sure politicians will find a way!

The cynic in me says that they simply record fractional portions of FTE and FTE takes on different values over time and across industries.

conistonwater• 10 years ago

The financialsense link looks a bit dodgy to me. The first thing that pricks me about it is the way he complains about some change that happened in BLS's CPI calculation in 1997 (which is described here: http://www.bls.gov/cpi/cpigmrp.htm). His response: But the manipulation of the data did not stop there. He seems to think that any change, no matter if it's justified on methodological grounds, is "manipulation". I imagine he highlighted this change because the shift after the change in methodology was down. He's entitled to his opinion, of course, but that doesn't make him correct.

His discussion of core CPI and the remark that "average consumers who quickly point to the fact the food and energy are big part of their daily lives" is also wrong, and the reason for using core CPI is usually discussed in textbooks (e.g., http://krugman.blogs.nytimes.com/2010/02/26/core-logic/). It has to do with the fact that people need to predict future price levels when signing current contracts, and thus having a volatile measure of inflation would not be a good thing.

For an example of how methodological issues can remain for a long time without being fixed, consider that the Dow Jones Industrial Average index is still an arithmetic average of share prices, not weighted by market capitalization like other indices. So fixing methodological issues is something worthwhile, and should be rewarded, not denounced as some kind of political manipulation.

SilasX4• 10 years ago

If you're only attenuating inflation signals because of quality improvements, but never amplifying them because of product debasements, then yes, it would be fair to write that off as (politically driven?) manipulation.

Btw, here's a particularly egregious use of the logic: "oh, your cost of living isn't going up, because iPads are faster." http://www.reuters.com/article/us-usa-fed-dudley-ipad-idUSTR...

dredmorbius• 10 years ago

I've been thinking of better models for inflation. HH debt as a percentage of income strikes me as a possibly useful metric. It indicates the extent to which expenses are outstripping income, though some of that may be due to demographic effects, e.g., student loans (for a young-skewed population) and medical or nursing home expenses (for an old-skewed one).

The Economic Expansion Is Finally Helping the Middle Class

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