Economy on meth, but it's smiling

The difficulty in communicating the true condition of our economy to the larger public lies in the fact that the rotting walls are concealed behind flowery wallpaper. Enormous federal and private borrowing have created an artificial demand which obscures the decay. It won't take much of a tremor to severely damage the structure. Even the current tepid situation cannot be sustained, much less built upon. But there is demand, and the house hasn't fallen apart yet.

Because many on the left are convinced of the underlying weakness of the Bush economy, we sometimes fudge the numbers to show it. An EPI snapshot last week compared productivity to income and net worth. The period 1998-2001 was compared with the next three year period 2001-2004. Not surprisingly the boom years of the late 1990s treated people better than the best years following Bush's tax breaks for the rich. But it looks suspicious when we cherry pick the time periods.

I won't reproduce the chart for fear of copyright infringement, but the sums are Productivity 8.2% v. 11.7%, first period v. second, and Median Family Income 9.5% v. 1.6%. A bit more ambiguity occurs if you look at the stream of productivity vs. real hourly compensation, as below.


The underlying point is valid. Under Bush and the corporate domination of government and the economy, the fruit of productivity increases has been stolen from working people. Ravi Batra has made the wage-productivity gap a cornerstone of his analysis. This is an intriguing if not completely convincing tack, and certainly points in the inevitable direction. One should also note that productivity can be got by several means, one of which is cutting hours and producing the same product. Hours suffered under the Bush regime.

Economic understanding is at a postwar low, however, and even after six years of bullshit and spin, with massive deficits and little to show for it, Bush has not needed to change his line. His doofus economics still gets a hearing.

"Losing jobs is painful, so let's make sure people are educated so they can find – fill the jobs of the 21st century. And let's make sure there's pro-growth economic policies in place. What does that mean? That means low taxes; it means less regulation; it means fewer lawsuits; it means wise energy policy."

... pitiful.