September 27, 2006
BUSH ADMINISTRATION
TO THE AMERICAN PEOPLE:
“Who are you going to
believe, us or your own wallet?”
Dear Democratic Colleague,
In July, President Bush’s chief economic advisor Allan Hubbard said,
“obviously, it’s frustrating to us that the American people don’t recognize
how well the economy is doing.” Mr. Hubbard would do better to ask the
question, to paraphrase Chico Marx, “who are you going to believe, me or
your own wallet?”
The truth is, the Bush administration is partly right. By some measures,
the economy overall is doing well. Growth in GDP, aggregate national
income, and productivity have all been strong since the end of the 2001
recession. The fundamental problem is that the vast majority of American
workers have seen little to no benefit from the “strong” economy of the past
five years.
Below is a link to a report prepared
by the Democratic Staff of the Financial Services Committee, which helps
explain what has been happening to workers in the real Bush economy.
Here are some of the important facts:
-
Real wages, adjusted for increases in the cost of living, have declined.
Workers are more productive, but they aren’t being compensated for their
higher productivity, as they have been in every other period in our
economic history. Federal Reserve Chairman Ben Bernanke recently told the
House Financial Services Committee that wage increases up to the level of
productivity growth would not be inflationary and therefore agreed that
there is room for substantial increases in wages in the current
environment.
-
Faced with this evidence, the Republicans have countered that the “total
compensation” that workers receive has increased. This is simply an
effort to avoid the topic of falling wages. In reality, the increases in
total compensation are due to higher contributions for health insurance
premiums, increased pension fund contributions, and corporate accounting
for stock options -- none of which translate into higher take home pay for
most workers or make them better off in any meaningful way. In fact, the
Federal Reserve’s most recent economic report to Congress indicates that
higher pension payments are not an actual boost in payments to workers,
but are simply a shift in the corporate balance sheet to “bolster pension
assets” in order to meet existing obligations under PBGC rules. According
to data provided by the Federal Reserve, take-home pay is a declining
share of total compensation, while health insurance, something that is
costing employers and workers more to provide the same benefit, is the
fastest growing portion of compensation.
-
The bottom line is that virtually all of the increased wealth generated by
a growing economy since 2001 has gone to corporate profits and the very
small group of individuals who stand to benefit the most from corporate
profits. While workers’ share of national income has declined by nearly
3% since 2001, the corporate profit share has increased by nearly 6%, an
extraordinary shift by historically standards. The result has been an
unprecedented rise in income inequality. While the wealthiest 10% of
families have seen strong gains in real income, the remaining 90% have
seen their real incomes fall since 2001. And as incomes fell for the vast
majority of families, the very wealthiest in our society, the 14,400
families making more than $5 million a year, enjoyed income gains of
nearly 14%.
It’s no mystery why a majority of Americans say they are not better off even
as the overall economy continues to grow. By the measures that matter most,
they aren’t.
BARNEY FRANK
Report: How
Workers are Faring in the Real Bush Economy
http://www.house.gov/banking_democrats/ReportJobsandWagesinBushEconomy22Sept06.doc
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