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America’s hidden pains

from William Neil

We begin with some gross numbers from Das’ Age of Stagnation: the loss of wealth from the Great Recession of 2008-2009. Citing the work of three economists at the Federal Reserve Bank of Dallas (Tyler Atkinson, David Luttrell and Harvey Rosenblum), the figures they put on the loss to the U.S. economy come to 6-14 trillion dollars, “equivalent to U.S. $50,000 to U.S. $120,000 for every American household, or 40-90% of one year’s economic output”. We’ve seen figures of family distress ranging from $20,000-$60,000, largely representing losses in the stock market, which seem on target from direct personal experience. The other factor driving towards a more lasting economic pain are those who lost enough in straight financial terms to forestall market re-entry, matched with a psychological aversion to ever trusting it again. Additionally, pension fund retirement viability was affected by the same dynamics. These factors must be considered, as difficult as they are to quantify, to qualify the otherwise impressive performance after 2010 in the financial markets, they being supported by all the permutations known as Quantitative Easing, American and European versions.  

In the fall of 2015, and in many ways now seeming to be an overlooked clue as to what was about to unfold in the election of 2016, Nobel prize winning economist Angus Deaton and his wife Anne Case (both of Princeton University) caused a sensation in the news. It was because of their research findings disclosing a dramatic rise in the death rates, by 22%, among whites 45-54 years old, among those who only had a high school degree. The dramatic mortality increase occurred in the years 1999-2014. According to the coverage and commentary in the New York Times, this dramatic increase in mortality rates wasn’t caused by the usual suspects – heart disease and diabetes – but by “an epidemic of suicides and afflictions stemming from substance abuse: alcoholic liver disease and overdoes of heroin and prescription opioids”. Professor Deaton declared that “Only HIV/AIDS in contemporary times has done anything like this…”

Additional commentary in the Times’ article, by Dartmouth College economists Ellen Meara and Jonathan S. Skinner, put the findings in further relevant context for our purposes here:

“The least educated also had the most financial distress… in the period examined by Dr. Deaton and Dr. Case, the inflation-adjusted income for households headed by a high school graduate fell by 19 percent.”

On the trail of further hidden economic distress, the Federal Reserve itself has been conducting surveys since 2013 entitled “Report on the Economic Well-Being of U.S. Households”. The most reported finding of these surveys, contained in the formal reports issued now annually by the Board of Governors, was that nearly half of the respondents, 47%, “said they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money”. In other words, almost half of American households have no personal savings or personal financial “safety net”.

As reported in an Atlantic magazine article by Neal Gabler in the spring of 2016, in the heat of presidential campaigning, “The Secret Shame of Middle-Class Americans”, the distress goes beyond the inability to meet small financial emergencies of $400-$1,000, the range covered by the Federal Reserve surveys. Gabler introduces the research of Edward Wolff, an economist at New York University who has found that “median net worth (family net worth) has declined steeply in the past generation – down 85.3 percent from 1983 to 2013 for the bottom quintile, and down 63.5 percent for the second-lowest quintile, and down 25.8 percent for the third, or middle, quintile.”

So we are getting closer now, much closer, to answering two of our key questions: how much economic pain is “out there” in America, and how do we explain the divergence between the good “formal” economic numbers of low unemployment (under 5%) and very low inflation (2.5% average for 2016) touted by the President and his “heir apparent,” Secretary Clinton, and those remarkable pre-election poll numbers showing 70% or more Americans feel the nation is on “the wrong track”. Economist Wolff, from NYU, summarizes the crux of the matter this way: “… the typical American family is in ‘desperate straits’.”

This would be bad enough, the precarious imbalance in American household finances, which must be coupled with what William Greider and John Gray have told us is also a permanent sense of precarious employment and career uncertainty, the result of nearly four decades upheavals in production and distribution methods, and labor markets world-wide. But we have also called attention to the role of cultural upheaval in our search for the reasons underlying the triumph of Trump in 2016. While economists are likely to have a strong inclination to keep the two strands of reasoning quite separate, our contemporary dilemmas and a fuller interdisciplinary methodology calls us to inquiries resting on a broader foundation.

Major miscalculations: globalization, economic pain, social dislocation and the rise of Trump

  1. charlie
    April 28, 2017 at 12:40 am

    economic disaster for the common man … overlooked by democrats but amazingly obvious to Fox and friends economic ideology …

  2. April 28, 2017 at 1:19 am

    Tactically useful charlie; they want to “capitalize” on the pain politically; but as many of the authors in the two editions on “Trumponomics” have pointed out, what he has put together is bound to lead to more inequality…James Galbraith has this blow up take away page in the new issue of Dissent magazine: “Trump’s economic strategy amounts to little more than a firm determination to drive an old car, at high speed, into a wall.”

    A destructive re-run, at an even more incongruous time and set of circumstances, of classic Reagan style supply side make the rich richer even if business is already loaded and in a daze about where to put their surplus profits. I can only shake my head – and hang it – over where this is going.

    Good luck to us all.

  3. May 2, 2017 at 1:10 pm

    Two simple questions:

    1. “The least educated also had the most financial distress… in the period examined by Dr. Deaton and Dr. Case, the inflation-adjusted income for households headed by a high school graduate fell by 19 percent.” “… the typical American family is in ‘desperate straits’.”

    Why would any civilized or supposedly civilized society allow such obvious and counterproductive cruelty? We’ve spent 250 years working up to something near a democracy. Is this the reward we get for all that work?

    2. Certain parts and groups within the US have been in extreme stress economically and more importantly culturally since the 1970s. This is not in dispute among social scientists, the media, and many churches and charities. For some reasons, it seems the US has not been able to find ways to fix these problems. Although, the means to do just that and the paths to these fixes are well known. Is this failure a problem of class oppression as some suggest or ideological division that hinders many from helping others with whom they disagree ideologically? The last time the US had this level of outright hatred of Americans for one another was during the 1850s. And we know how that turned out!

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