The Boom that Went Bust

David Leonhardt has an article in the NY Times that examines why the 2000-20008 period of the Bush presidency was a "boom that wasn't" for the majority of Americans.

The bigger problem is that the now-finished boom was, for most Americans, nothing of the sort. In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.

This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens? ...

“We have had expansions before where the bottom end didn’t do well,” said Lawrence F. Katz, a Harvard economist who studies the job market. “But we’ve never had an expansion in which the middle of income distribution had no wage growth.” ...

Real median family income more than doubled from the late 1940s to the late ’70s. It has risen less than 25 percent in the three decades since. Statistics like these are now so familiar as to be almost numbing. But the larger point is still crucial: the modern American economy distributes the fruits of its growth to a relatively narrow slice of the population.

Floyd Norris writes a NY Times article that highlights another aspect of the problem: a lot more people are not working. The "unemployment" rate may be relatively low, but that "rate" is interpreted in a way thay overlooks a large -- and growing -- number of people who haven't or can't make it into the workforce. Here is a graphic from the NY Times that illustrates this point: