Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Tuesday, March 1, 2011

Presimetrics and the Great Stagnation

Presimetrics, by Mike Kimel and Michael Kanel is subtitled: "What the Facts Tell Us About How the Presidents Measure Up On the Issues We Care About."

The two Mikes explore economic changes and social phenomena as they relate to the administrations of presidents, mostly since shortly after WW II - because that is when most of the data sets begin. And this is an exercise in examining the data, and seeing what conclusions they drive.  I've done a lot of the same stuff here on this blog, so I can assure you from my own looks at the data that by almost any metric you can dream up, the country is better off with a Democrat in the White House. This looks like a partisan statement, but it is, in fact, a data-driven conclusion.  By some measures, every Democrat is better than every Republican.  Other measures give more mixed results, but Democrats are always better on average.  The consistent best performers are Kennedy-Johnson, taken collectively, and the worst performers are Bush Sr. and Bush the Lesser, taken individually.   My take away is simply that policy matters, and that Democrats and Republicans have historically followed greatly different policies. 

As I pointed out here, using one of Mike Kimel's graphs, the policy differences can be collected and summed up as the degree to which Keynesian economic principles have been employed. Very simply and generally, this means running government surpluses when the economy is expanding, and deficits when the economy is either flat or contracting.  The surpluses fund the deficits, aid in recovery, and do not lead to an accumulating deficit problem.

Another one of Mike's charts that tells this story is Figure 5-1 in Presimetrics which graphs Real Median Income per capita and Real GDP per capita, in 2008 dollars from 1947 on.  Median Income increased in the period 1947 to 1973, then actually decreased for about a decade. Since then it's gone up by fits and starts, but was dead flat in the first part of this century, and by 2007 was only a bit above where it had been in 1973.  Meanwhile, GDP per capita increased pretty steadily since about 1980  (except during recessions, and at a lower rate than earlier) and at a much faster rate than median income.

Here is a different way of presenting the same data, this time in constant 2009 dollars.

What we see is that median income as a percentage of GDP has decreased from 78% in 1972 to 63% in 2007. What this means is that every penny of economic growth, and then an additional 15% of the total, has gone to the richest Americans.

The Great Stagnation, in a nutshell, is the direct result of the capture of enormous wealth by the already wealthy, at the expense of the poor and the disappearing middle class.

This suggests that some policy changes are in order. I know what I think.

Do you have any suggestions?

Data sources:
Real Median Income per Capita
GDP per Capita (xls file)

Afterthought:  What I've presented in this graph is the infamous ratio of ratios.   However, for both Median  Income and GDP, the denominator is the same - U.S. population.  As I learned back in grade school, these identities cancel what we end up with is Median Income as a Percentage of GDP.


Jerry Critter said...

This is what a policy of lower taxes creates. A tax decrease shifts income from the lower paid to the higher paid. It is time to reverse that policy.

The Arthurian said...

Hi, Jazz. Well you cracked me up with that "epidermis" thing over at Macromania, so I stopped by to read the post you linked. Sounds good to me, what you wrote.

I'm pretty sure it was policy changes that changed the trend from a stable distribution of income to a concentrating one. I don't know what policies, exactly.

But I do know that there were problems in the 1970s, and they killed off Keynesian economics and put Reaganomics in place. That's the place to look.

Also, and more important I think, is that there needs to be an alternative to Reaganomics, but something other than the policies that failed in the 1970s. (This is where you might want to check out my stuff.)

Will be in touch.