There has been a recent poll in which 55% of Americans approve of Bush’s handling of the US economy. Fox News from where I have gotten this poll is saying that this number will show that the Bush re-election is inevitable. However there are several major caveats that need to be made. First the last two paragraphs are interesting as most people expect the national economy to be getting better but a small majority of people expect that their local economies will either be the same or getting worse in the next six months.
This finding is intriguing as it shows the divorce between perceptions and realities that are occuring. The American economy is splitting into two sections; those who own captial are doing extremely well, and those who sell their labor are doing poorly. The rest of this essay will expand upon the basic economic uncertaininty that the majority of the American public faces.
The average American worker is not gaining ground. Real wage growth is decreasing and as Uber Alles shows that median income has dropped for two years in a row. This is at a time when basic necessities such as natural gas and healthcare are rapidly increasing in price. Matt Yglesias links to a Fortune column which states that “Many of his clients say they’ll be giving raises of even less than 3%. Why so stingy? “Inflation is low. At the same time, many businesses have only recently gotten their costs in line, producing earnings that are much improved, and they want to stay the course until uncertainty about demand has really lifted,” LeBlanc explains. “Another thing is, the labor market is still soft, so few employers are worried about turnover.” Don’t we know it. “For most workers, the situation will be very discouraging,” he predicts. “More people will be getting zero pay increases in order to allow for bigger raises for top performers. After taxes, pay raises may not even be enough to offset higher health-insurance deductions from paychecks. On top of that, many employees are doing more work than ever because co-workers have been laid off.”
These data points are the result of a declining share of national income which is going to labor. Brad DeLong is linking to an article in which the share of profits and productivity gains are shrinking for the average worker while profits are aggregating into smaller and smaller concentrations of people. Included in the share of national income which goes to labor are the costs of fringe benefits which people can not eat and these benefits are under pressure to be cut as their costs have also increased rapidly. These low wage gains are leading to a record number of personal bankruptcies. As Calpundit notes, organized labor in the service industries is the difference between barely scratching by and at the mercy of any emergency and being able to live a life that has some uncertainity insurance and asset accumulation made possible. However unionization is at a relative low rate.
Under the Bush administration, these trends will not be changing. Instead they will continue to accelerate as there are further proposals to favor the wealthy and attack union and other pension plans which give economic security to the working class. Angry Bear notes that the Republican Party wants to continue moving to a consumption based tax system in order to shelter as much wealth as possible from any and all forms of taxation. The propaganda will be one of fairness and social mobility but as Paul Krugman recently wrote that income and wealth mobility in America has signifcantly declined in the past generation as the strong institutions in American civil society which created a great Compression of wealth after the Second World War lost their strength and political consensus.
Retail sales for December are projected to be weak. Deep discounters had success as well as the very high end luxury stores while the middle ground department and mall stores had difficulty. This continues to show the bifurtification of the American economy right now. The rich truly are getting richer and benefitting from the tax and incentive policies that the Bush Administration has instituted which favor an aristocracy of incompetents.
If you are a working stiff, the Bush economy has not been a good economy for you. It has created a massive amount of uncertaininty for most people, as there has been increased job competition, high real debt service costs as wage inflation and wage growth are minimal and a continued assault on the ability of people to accumulate small amounts of wealth. For these reasons, Bush is extremely vulnerable on the economy.
Crossposted at Fester’s Place