The Lost Decade

Even the words sound terrible. Ten years that just don’t count. Ten years where established workers earned less in buying power and where new workers started at unprecedented lower levels… where they were even able to find jobs. Basic employment statistics skipped over those who have dropped out and stopped looking and those forced to settle for part-time or below-skill-set jobs. While the stock market soared, in part because labor got a whole lot less expensive, the average American worker suffered. We just earned less. But the officially-reported job numbers said we are recovering. High-end employment and the larger increase in the number of retail clerks, hospital orderlies and food service workers were lumped into the same category. The numbers looked optimistic, but the kinds of jobs too many Americans were settling for mostly certainly could not remotely support earnings expectations, much less “the American dream.”

Wages for average entry-level American workers began to fall well before the most recent recession. “From 2000 to 2011, a period of disappointing overall wage growth, wages actually fell among every entry-level group regardless of education. Wage losses occurred for each group of entry-level workers between 2000 and 2007, as well as during the recessionary years between 2007 and 2011. This stands in sharp contrast to the extremely strong wage growth for each of these groups from 1995 to 2000.” Economic Policy Institute report, March 7^th. While college grads got socked in the teeth, those with only high school degrees got truly slammed… dropouts were simply decimated.

While stars in the financial sector and in some technology companies have seen their take-home pay flying through the roof, for most Americans the last decade plus has been a period of declining buying power, a factor that has contributed to the seemingly sustained collapse of the U.S. housing market… people just cannot afford to buy homes at anything like earlier prices.

Here’s an interesting analysis of exactly how much those earnings have fallen – again well before the most recent recession – based on numbers supplied by the Bureau of Labor Statistics. 

“The blue line shows inflation-adjusted earnings using government CPI, and shows a small but steady increase in real earnings since the mid-1990s. The green line, however, shows what inflation adjusted earnings would be today had the US Bureau of Labor Statistics not made changes to the CPI in the early 90s, and reveals that average weekly earnings have actually been in contraction for over 17 years. Forget blaming our current woes on the hangover from 2008-2009. The average American worker has been losing income in real terms since the late 1990s. This is clearly a long-term trend which has compounded itself over the last ten years. Weakness begets more weakness.” DurableFaith.com, November 1^st.  Call it global competition, over-consumption, too much debt, a flood of college-educated workers taking jobs once relegated to high school grads or an economy inevitably heading for a fall… but it happened.

What makes all of this particularly difficult to stomach is that most of the policy decisions directed at improving our economy are made by politicians posted to and senior bureaucrats living in Washington, D.C., a region of the country that has been spared most of these recent economic ravages. So folks who are making policies to cure the agony really haven’t experienced that pain themselves and even live in a metropolitan district that really doesn’t provide any real world examples of the deficiencies they are expected to fix.

Take for example the housing bubble that destroyed so many American lives. “[A]fter it burst, a remarkable inversion occurred: as the country withered, Washington bloomed. Since 2007, the regional economy has expanded about three times as much as the overall country’s. By some measures, the Washington area has become the richest region in the country. It is now home to the three highest-income counties in the United States, and seven out of the Top 10…

“How Washington managed this transformation, however, is not a story that the rest of the country might want to hear, because we largely financed it… Billions in federal spending, largely a result of two foreign wars, were pouring into the local economy by the early 2000s…. As the size of the federal budget has ballooned over the past decade, more and more of that money has remained in the District. ‘We get about 15 cents of every procurement dollar spent by the federal government,’ says Stephen Fuller, a professor of public policy at George Mason University and an expert on the region. ‘There’s great dependence there.’ And with dependence comes fragility. About 40 percent of the regional economy, Fuller says, relies on federal spending.”

It’s not really the “fault” of the government bureaucrats trying to do their jobs in one of the most expensive cities in the country. Bring in the leaders who made the wrong-headed decisions at the time. It is their fault. It was a government that had no problem declaring wars and advancing the massive build-ups to implement those decisions… without extracting the necessary tax dollars to pay for it. They even passed tax cuts! It’s about adding workers with long-term commitments to their pensions… without a willingness to pay for it with current cash flow. That legacy of rising debt has effectively been eroding buying power for years. And now, when consumer demand has crashed and burned in the absence of buying power, the government is pretty much the only major source of demand left in the country.

Which party led the country into these stupid decisions? Which party argued to wage those wars, add troop surges, extend our combat commitments while reducing taxes? Which party argued that Wall Street was already over-regulated and that we need not worry about the banks that were “too big to fail”? Which party is currently in denial over who caused this economic malaise and now wants to cut programs that impact those slammed the most by their decisions? And where does that pompous, self-righteous attitude come from… I guess by ignoring the history of their decisions.

I’m Peter Dekom, and once again we have evidence of our nasty proclivity to ignore history… even our own.