The Ten Year Expansion

The editors of the New York Times celebrate the tenth anniversary of the economic expansion that began in 2009 by telling us what they think is wrong with it:

Through the first quarter of 2019, the nation’s gross domestic product had increased by 25 percent during the current expansion. Between 1991 and 2001, economic output expanded by 42 percent. Between 1982 and 1990, output increased 38 percent. And between 1961 and 1969, output grew by 52 percent.

The distribution of the gains is even less satisfying.

Truck drivers still earned, on average, slightly less in 2018 than in 2009, after adjusting for inflation. Executive compensation, by contrast, went up, up and away. Chief executives of companies in the S&P 500 stock index — a list that includes most of the nation’s largest corporations — made an average of $14.5 million in 2018, increasing by $5.2 million in the past decade, according to data compiled by the A.F.L.-C.I.O.

The wealthy have also reaped most of the gains from rising stock prices. The least affluent 70 percent of American households had less wealth at the end of 2018 than at the beginning of 2007, according to the Federal Reserve. The top 30 percent of households saw at least some increase, but the big gains were heavily concentrated at the very top, in the hands of a small proportion of extraordinarily wealthy families.

Unfortunately, they don’t provide us with an explanation of why this has happened or how it may be remediated. The evidence it can be remediated via the tax system is zero. It’s one of those facile answers that just don’t pan out in real life.

I’ve expressed my opinion of what caused the distribution of income from poor to rich many times:

• The Clinton era change in business taxes that allowed businesses to compensate management with stock options without incurring tax liabilities.
• The feckless policy of opening trade with China without ensuring that the Chinese authorities actually followed through with their promises.
• Increased migration of unskilled workers. That of itself creates greater income inequality. Sit down with a piece of graph paper, draw it out, and you’ll see what I mean.
• Competition with relatively unskilled immigrant workers at the low end and with outsourcing and H-1Bs in the middle.
• The explicit policy of the Federal Reserve.

Mitigation and remediation require that those issues be addressed. So far I’ve been disappointed by the Democratic presidential candidates. They don’t seem to want to address any of them. I also have yet to see an explanation of how increasing taxes on businesses and increasing the taxes on capital gains will encourage investment, the most obvious need in our current economy which, to their credit, the editors do mention.