The Economy: Bush and GOP Deserve Credit Until Sept. 30, 2007
American paychecks are rising again at a pace not seen since the 1990s.
The pay increase amounts to 4 percent on average over the past 12 months, and it comes at a very helpful time for millions of households.
For three years, pay increases haven't kept pace with the rising cost of living. Then came this year's housing slowdown, which has further squeezed family finances.
Those setbacks, however, are now being offset by rising income. Four percent may not sound like much, but you have to look back to 1997 to find a calendar year with a gain that big.
First, a correction: Trumbull's statement about pay increases not keeping pace with inflation "for three years" is incorrect. Start with this chart from the Census Bureau (go to the bottom half of the link for the "real income" version):
By "cleverly" referring to three years, Trumbull is conveniently able to ignore the fact that real incomes went up in every quintile in 2005 to levels that were in almost every case above those of 2003.
Second, Trumbull's argument doesn't even fly if you play the game on his three-year turf and look at what people really receive (i.e., take-home pay, also known as disposable income).
The 2005 real income figures are slightly lower than 2002 for all but the highest 20% of earners. But, as the Census Bureau's overview page relating to its income reports states, these figures are essentially what most of us would call gross, or pre-tax, income. The Bush tax cuts of 2001 and 2003 (5% of gross pay in the lowest tax bracket, and at least 3% in every other bracket), along with the more generous Earned Income Credit that also took effect, mean that in reality every income group had a higher real disposable income during 2005 than it did in 2002. (Class-envy holdouts should also note that the households that took the biggest income hit before taxes from 2001 through 2004 were those in the top 20%, and especially those in the top 5%.)
(Aside: How the housing slowdown has "squeezed family finances," except of course for those in the housing industry, is a mystery to me. Lower or stable prices for homes make them more affordable to those who are in the market. Increases or declines in the value of homes are not considered part of "income.")
Maybe the press thinks it's safe to trumpet good economic news now that there's a divided government with Democrats in control of Congress. I should caution suddenly optimistic WORMs (members of the Worn-Out Reactionary Media, formerly known to most as the Mainstream Media) who might be eager to finally report the economy's good news, after all these years of ignoring it, of four things:
- First, wage increases tend to be greater the deeper you get into an economic prosperity -- like the one (ahem) we've been living through during the past four-plus years.
- Second, the rise in real income that Trumbull is citing has taken place in the past year, while you-know-who has controlled the White House and Congress.
- Third, the GOP will have control of Congress until roughly January 15, 2007, so no good news can conceivably be attributed to the change in congressional control until then.
- Finally, and most importantly, the most recent budget passed by Congress covers the fiscal year that will end on September 30, 2007. Almost any fiscal measures passed by the new Congress when it convenes in January, unless they are retroactive, will not have any effect on the economy until the next fiscal year that begins in October 2007 (except for tax increases, which would in all likelihood cause a negative reaction in the stock market and the investment community). Therefore, almost any economic good news that is reported until the end of September, 2007 should properly be attributed to actions taken by Congress and the President in 2006 and previous years.
So, since Bush and the previous Congress get to take credit for the next 10 months or so of positive economic news, I say: Let the Good Times, and the Good News, Roll.
Cross-posted at BizzyBlog.com.