Tuesday, May 29, 2007

The American Dream

I've fought an uphill battle at forums such as this by arguing that the Bush economy is not as impressive as it may seem. While we have enjoyed a good deal of economic prosperity for the past half-decade, I think it pales in comparison with prior cyclical booms of recent times. However, with the stock market at an all-time high, inflation nearly non-existant, low unemployment, and very manageable interest rates, it is not an easy case to make.

And yet I've still felt that the economy was something of a house-of-cards. It may stand pretty tall, but it's going to make a real mess when it falls. I blame factors including an overly meddling tax code, wild government spending, massive budget deficits, an over-reaching foreign policy, a failed energy policy, unrestricted and unfair free trade, illegal immigration and cheap labor, and unquestioned corporate deregulation as the major government-created negative influences on otherwise solid economic growth. I sadly don't see any signs of these items getting better regardless of political party. However, Wall Street is counting on it never happening.

So many of us have thus made the argument that in this new economy Wall Street and Main Street are at a crossroad. The issue of illegal immigration is a perfect example. Afterall, what else could bring together the most ardent of Milton Freidman and Cesar Chavez supporters? But with near daily record-setting Dow Jones numbers, it's not been an easy case to make.

Until today. I noticed the release of an interesting but ignored study that I think reveals a lot about our economy and, indeed, the state of the American dream. Check this out.

American men in their 30s now earn less than their fathers' generation did at the same age, potentially reversing longtime assumptions that each successive generation will be better off than its predecessor, according to a study released yesterday.

Between 2000 and 2005, productivity rose 16 percent while median income fell 2 percent, challenging the notion "that a rising tide will lift all boats." Several factors could explain the divergence: a growing share of income going to the highest-paid workers, or to profits; an increased share of labor compensation going toward benefits such as health care; or a decline in the number of wage earners, or hours worked, in the typical family.

American families, which experienced a 32 percent increase in income levels between 1964 and 1994, saw household income growth slow to 9 percent between 1974 and 2004, according to the report.

There are many other interesting elements of this study released by the Pew Foundation. I would encourage those interested to look further into them. I suppose we can debate how much of a problem it is that people like me will (on average) make less than our dads did when dollars are adjusted for inflation. Maybe it's not a problem at all? Maybe it was ineveitable with all the changes we've made to the American economy?

But, for me, this being the first time this has happened since WW2, it sure does sting. And it causes me again to ask are we really going in the right direction? Has the American dream taken a blow from which it may never recover? While there are positive aspects to globalization (who doesn't appreciate fuel efficient Toyotas, stylish Nikes, low Wal-Mart prices, and countless new cell phones and other gadgets?), there are also some real negatives.

I wonder when/if the bad will seem to outweigh the good? Wall Street apparently says never. Main Street just might be saying right now.


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