Friday, September 27, 2013

Poverty and economic growth

 (swiped from, cited below)

Hovering around this month's kerfluffles over the budget and raising the debt limit is the state of the economy which, five years after it melted down, is in a state of slow and unsteady recovery. Forbes magazine is calling it "meek growth," which sounds spot on to me. The U.S. economy grew at an annualized rate of 2.5 percent in the 2nd quarter of 2013, the 9th straight quarter of growth (albeit a couple of those, including the 4th quarter of 2012, were downright anemic). The stock averages have been way up, with the Dow Jones Industrial Average closing at a record high last week before renewed concerns about what Congress might do drove prices down. But other indicators are less favorable: national income grew a mere 0.1 percent in the 2nd quarter; overall real median household income has fallen roughly 10 percent since 2007, and is as low as it's been since the mid-1990s. Unemployment remained high at 7.3 percent, and would be higher with a less stringent definition of "actively seeking work;" most of the reduction in unemployment has been due to creation of low-wage jobs, as Richard Florida argues in The Atlantic [citation and link below]. Poverty remains at 15.0 percent, a statistically insignificant difference from 2010. "The poverty and income numbers are a metaphor for the entire economy," Ron Haskins of the Brookings Institution told The New York Times. "Everything's on hold, but at a bad level." [Most data are from your one-stop shop for economic indicators, the St. Louis Federal Reserve site "FRED" at; poverty rate is from]

The overall economic picture is good for corporate profits, dividends, and the income of the very wealthy; for ordinary people it remains static to sucky. The complaint of those who were Occupying Wall Street and various other places a couple of years ago is still pertinent. National economic policy is stuck between the desire of the Obama administration and the Federal Reserve to provide stimulus, and congressional Republican concerns about government spending and the budget deficit. For about three years, Congress has put the brakes on fiscal policy, while the Fed has attempted to counteract that despite having few options to stimulate with since lending rates are at near zero. So the annual budget deficit has been cut from 1.4 trillion in fiscal 2009 to less than 1.1 trillion in fiscal 2012, and is projected to be about 750 billion in fiscal 2013 []. This is some kind of achievement, but maybe not a good kind: Fed chair Ben Bernanke, among others, argue that fiscal contraction has notably slowed the recovery, even as congressional Republicans threaten to shut the government down if they don't get even more deficit reduction.

To be fair: It's not clear how long we can continue these deficits as we hope for a more robust recovery. And looming in the not-too-distant future--about 2016, to pick a year--is the actual train wreck of entitlement programs for the elderly. However, neither party is addressing that, as the Congressional Budget Office warned September 17; the mindless across-the-board sequestration has hit discretionary domestic and military programs which represent a diminishing share of the budget. All the sound and fury that have accompanied the sequester may create the impression that something is being done, but it isn't, really.

In this blog I address issues of our common life. Therein lies an assumption that we have a common life. Economically, we may not. "Trickle-down economics" has always been a pejorative term, but the concept surely had some validity when the well-off spent most of their money in local economies. In today's economy, the rich scatter some of their money across the globe while they save the rest, leaving their immediate neighbors stuck in the mud. The premise of the 2008-10 stimulus as well as the various bailouts was that cutting taxes on the rich, and cutting the cost of borrowing, would stimulate consumer spending and business investment. All it has seemed to do was improve incomes and profits at the top. Trickling down no more.

It shouldn't be controversial to argue that we cannot live together if the rich are flourishing while the middle class is running hard just to stay in the same place, and the poor are sinking ever more deeply into the soup. (The Thomas B. Edsall column cited below lists all the ways, from usurious payday lenders to the rising cost of basic necessities, that the poor pay dearly for being poor.) Unemployment and budget numbers are projected to improve marginally in coming years, but this is the economy we'll be living in unless we figure out economic opportunity. Sheldon H. Danziger of the Russell Sage Foundation has a couple suggestions, for starters: (1) an improved poverty measure that incorporates benefits from government anti-poverty policies like food stamps and the earned income tax credit, which would show the ongoing value of those programs; and (2) an increase in the minimum wage, which helped reduce poverty in the 1990s when "even low wages rose in step with productivity, and poverty fell more sharply than it had in a generation." That is one public policy, according to Danziger, "that can spread the gains generated by economic growth." He hopes for more such. So do I. A society such as we've got can't be sustained for much longer, and I'm unfit by nature for revolution.

P.S.--A prerequisite to economic opportunity in 2013 is access to health insurance, and the various disadvantages faced by the uninsured (shorter and unhealthier lives, more out-of-pocket costs for treatment) are big parts of the cost of being poor, though unmentioned in Edsall's post. For all its imperfections, the Affordable Care Act, much of which goes into effect October 1, is going to help. Is it time yet for conservatives to stop screaming about doom, making spurious claims, and trying to defund it, and to make a serious effort either to improve it or come up with a better solution?


Abram Brown, "An Unrevised Q2 GDP Estimate Leaves Picture of Meek Growth Unchanged,", 26 September 2013,

Jackie Calmes, "Budget Office Warns That Deficits Will Rise Again Because Cuts Are Misdirected," New York Times, 18 September 2013, A13.

Sheldon H. Danziger, "The Mismeasure of Poverty," New York Times, 18 September 2013, A21.

Thomas B. Edsall, "Making Money Off the Poor,", 17 September 2013,

Richard Florida, "The Uneven Growth of High- and Low-Wage Jobs Across America," The Atlantic Cities, 27 September 2013,

Annie Lowrey, "Household Incomes Flat Despite Sunnier Economy," New York Times, 18 September  2013, A15.

Chuck Nelson, "Income and Poverty Rate Held Steady in 2012,", 17 September 2013,


  1. Great thoughts, but it seems to me that the problem is in figuring out how to communicate the poverty issue. The great majority of my conservative friends have a picture in their head of a poor person who has smart phones, a 52" tv, and a shiny SUV parked outside. When that is the archetype that people have in their minds, it's easy to refuse to help.

    The other issue that I see is that the strong anarcho-libertarian nature that conservatism has taken on recently. People want to be left alone. It seems short sighted to me, in that it ignores the government function as a protection against people/organizations that profit at the expense of individuals. For instance, the EPA didn't come about because the government wanted to create job killing red tape, it came about because companies were burying drums of junk in an abandoned canal in New York, and because the Cuyahoga was on fire. But when Rick Perry can remember that it's one of the things he wants to get rid of, people cheer.

    Bottom line, the perception of the people is everything. The social philosophy that wins the PR battle wins the war regardless of the impact to the people who are deciding which to support.

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    My site; Ricky Salvador

    1. Food is good! I support food! So, great story.


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