The US Economy: Just How Strong Is It?

We hear that the US economic numbers are great: low unemployment, stock markets strong and manufacturing activity moving ahead at a good clip. But a recent piece by David Leonhardt in the New York Times with supporting data from Piketty, Zucman, and Saez (PZS) indicates that the “usual” economic data do not tell the whole story. And far from it. PZS break income growth numbers down by income bracket. I have asked around if any agency in the Federal government does this. And with the exception of the Internal Revenue Service, the answer is no.

In the following, I highlight their findings.

A Static View – The Current Situation

Table 1 provides data for 2014, the most recent year in the PZS database. Note the income differentials: the post-tax average income for all was $46,500 while the top 1 percent earned $790,000. It is also clear from the table that government expenditure and tax policies reduced the income differentials substantially.

Table 1. – Income by Income Bracket, 2014

Source: http://gabriel-zucman.eu/usdina/

How Things Have Changed

Table 2 indicates how incomes have changed over three time periods. Several things worth noting:

In the 1962-80 period, the income growth mainly occurred in the lower income brackets, with the largest rise (53%) happening in the bottom 50% of income earners.

But from 1980 on, growth was highest in the top income brackets.

The income of the lowest 50% of income earners has not recovered to the level it was before the 2008 – 09 banking collapse/global recession.

Table 2. – Post Tax Growth in Income, by Income Bracket

Source: http://gabriel-zucman.eu/usdina/

I quote from David Leonhardt in the New York Times:

The financial crisis remains the most influential event of the 21st century. It left millions of people — many of whom were already anxious about the economy — feeling much more anxious, if not downright angry. Their frustration has helped create a threat to Western liberal democracy that would have been hard to imagine a decade ago. Far-right political parties are on the rise across Europe, and Britain is leaving the European Union. The United States elected a racist reality-television star who has thrown the presidency into chaos.