Political Cortex: Brain Food for the Body Politic

Over the last 26 years working Americans have seen their incomes remain stagnant or reduced (when inflation is taken into account), while the cost of living has risen steadily. After paying for health care, housing, and basic needs, the typical worker has very little left. While the top 1% of the country has seen their accumulated wealth increase dramatically (up about 63%), the bottom 40% have seen their net worth reduced by 43%.

If you want to see a pretty good animated illustration of how wealth in this country is distributed, check out our Ten Chairs lesson at Teaching Economics As If People Mattered. Though not nearly as dramatic as Al Gore's crane stunt, you could do the Ten Chairs exercise with your friends and maybe open a few eyes.

Implications of Tax Cuts for Rich

With the gap between the haves and the have nots widening most dramatically since President Bush's tax cuts, the implications for the middle class and working poor are starting to become more visible. In fact, the economic signs of these times are quite frightening.

Black Friday - Blue Saturday

The post-Thanksgiving "Black Friday," when retailers try everything in their bags of tricks to get shoppers in the doors, was, according to reports, terrific. People spent more this year on Black Friday than last year. But, as WalMart sent a gloomy message to Wall Street about their overall prospects for this holiday season, reports are now coming in from retailers that say sales for the rest of the weekend were down from last year.

What's happening? Easy. Working Americans have less money to spend. Want proof? Ask the government! Based on a 2005 Labor Department report, the Center on Budget and Policy Priorities says:

"MOST AMERICANS TREADING WATER OR FALLING FURTHER BEHIND, CONSUMPTION DATA SHOW: Only High Earners Spending More Than Before Recession
by Jared Bernstein (EPI) and Jason Furman (CBPP)

Widely reported data on Americans' incomes paint a disappointing picture of the current economic expansion, especially for low- and middle-income families.  By most measures, Americans' real (inflation-adjusted) incomes in 2005 were still below their level in the recession year of 2001.  Less-well-known data on consumer spending -- including newly released Labor Department data for 2005 -- add an important element to this story, showing that only high-income households have been able to raise their living standards in recent years.

Examination of the Labor Department data by CBPP and the Economic Policy Institute shows that:

1. Between 2000 and 2005, consumption grew among high-income households, remained stagnant among middle-income households, and declined among low-income households.

2. Disparities in consumption between high-income households and all other households are widening.

3. Middle-class consumption during the current recovery has been weak in historical terms.

4. Tax cuts have boosted consumption for high earners but have done virtually nothing for low-income households."

In order for the American economy to thrive, people need to have disposable income. For a working American, struggling to provide housing, health care, food, and a tank of gas, there's little left over at the end of the week. That reality is starting to hit home, and people are finally wising up. For the last 20 years consumers have used credit cards to make up the difference between the lifestyle they think they deserve and the lifestyle they can really afford.

Today - that canary in the coal mine seems to have finally tipped over and died. American consumers aren't spending because they can't!

What's An Incoming Democrat To Do?

With the Democrats about to take over the House and Senate, the time is ripe to roll back some of the Reagan/Bush stupidity. The tax cuts for the very wealthy need to be rolled back. Policies need to be put in place to rebuild THE most critical element of America's economy - a healthy middle class. Universal health care, living wages, educational opportunities, and significant investment in America's infrastructure (schools, roads, mass transit, levees, etc...) can help to turn this mess around.

The economic situation is as dire as climate change and if something isn't done soon, we are headed for a train wreck. Now is a golden opportunity for the Democrats to show some leadership and turn that train around.

For more information, visit these web sites:

Teaching Economics As If People Mattered

Center on Budget and Policy Priorities

President Bush's Rosy Picture