Prosperity Amid the Gloom
"Worst economy since Herbert Hoover," John Kerry said in 2004, while that year's growth (3.9 percent) was adding to America's gross domestic product the equivalent of the GDP of Taiwan (the 19th-largest economy). Nancy Pelosi vows that if Democrats capture Congress they will "jump-start our economy." A "jump-start " is administered to a stalled vehicle. But since the Bush tax cuts went into effect in 2003, the economy's growth rate (3.5 percent) has been better than the average for the 1980s (3.1) and 1990s (3.3). Today's unemployment rate (4.6 percent) is lower than the average for the 1990s (5.8) -- lower, in fact, than the average for the past 40 years (6.0). Some stall. ... President Bush's tax cuts were supposed to cause a cataract of red ink. In fiscal 2006, however, federal revenue as a share of GDP was 18.4 percent, slightly above the post-1962 average of 18.2. And the federal budget deficit was $247.7 billion, just 1.9 percent of the $13.1 trillion GDP. That is below the average for the 1970s (2.1), 1980s (3.0) and 1990s (2.2).It is said that employee compensation has been stagnant. But to tickle that bad news from the statistics you must treat "compensation" as a synonym for wages and then ignore the effect of taxation on individuals' well-being.
Kevin Hassett and Aparna Mathur of the American Enterprise Institute, writing in National Review, say annual wage growth since 2000 has been 0.6 percent, but the annual increase in real hourly compensation, including benefits -- and if you do not include them, why are they called benefits ? -- has been 1.3 percent. And taxes -- particularly those paid by middle-class families with children -- have declined substantially.
Furthermore, as Hassett and Mathur write, consumers, by modifying their behavior, protect or enhance their well-being in ways not captured in economic statistics. For example, an American who, prompted by higher energy prices, traded in a Hummer for a Prius has served his or her standard of living. "If I ate 80 apples last year, and the price of apples increased this year to a million dollars, my welfare would not go way down; I would just switch to oranges," the authors write.
Sometimes I think America's greatest need (after a return to traditional morality) is an economically literate opposition party.