There’s a very good post from Derek Thompson at Atlantic which explains why the recovery looks so good to some people, e.g. President Obama, but not so good to a lot of people. And it has nothing to do with racism or ideology but with the structure of the American economy today:
The U.S. economy’s power-law features, in which averages disguise massive inequalities in outcomes, go a long way in explaining how Obama can tell a story about the economy vastly different from the ones that are propelling some presidential candidates. A prime example is the pattern of income growth. Between 2009 and 2013, most measures of real personal income showed slow but steady improvement. Average hourly earnings for private sector workers grew about 7 percent. But what about the distribution? The top 1 percent saw its disposable income grow by 11 percent. Everybody else got close to nothing. For the bottom 99 percent, income actually declined through the first five years of the recovery. “So far all of the gains of the recovery have gone to the top 1 percent,” the economist Justin Wolfers wrote.
which if you will recall is what I’ve been saying for some time.
Left unaddressed is what to do about it. We could produce a lot more growth. Enough so that it would trickle down to a higher proportion of the people. Unfortunately, nobody knows how to do that. Everybody has an idea and many of the ideas are mutually exclusive.
We could raise taxes on the beneficiaries of the growth of the last few years and transfer the proceeds to those who haven’t benefited. That has two problems. First, getting the taxed to sit still long enough to pay is harder than it sounds. And second when the proposals get filtered through the Congress somehow rather than going to people in the bottom 90% of the economy the transfers always end up going to people in the top income percentiles. On behalf of the bottom 90%, natch.
My proposal—stop subsidizing the rich—never seems to get any traction. To do that you’ll need to let banks fail, make the ownership of assets (as opposed to work or the production of goods) less profitable, and kill a sacred cow or two, e.g. the home mortgage interest deduction, an astonishing proportion of the benefits of which go to the highest income earners. Funny, that.