What Economic Boom?

What Economic Boom?

October 25, 2006

In the past few days, President Bush has tried to turn Americans' attention away from the growing chaos in Iraq and toward the "good news" of the economy. Unemployment is at a "historic low" and core inflation remains under three percent. The right wing is also pointing to record Dow Jones levels as evidence of the success of Bush's tax cuts. However the public refuses to buy the administration's talking points on the country's economic "progress." According to a new USA Today/Gallup poll, 54 percent of Americans believe the economy is getting worse. "It comes down to the issue of credibility. And so many voters feel so pessimistic about the direction of the country," said Amy Walter, a senior editor of the Cook Political Report. Most Americans —including the middle class — have been left behind by Bush's tax cuts and continue to see the costs of living rise, wages stagnate, and financial insecurity increase.

• People are working harder, longer hours for the same money. American middle class families are drowning in debt. Americans "know the economy is white hot," says political analyst Charlie Cook, "but they also know they aren't in it…There's a feeling that some people are getting theirs, but we aren't getting ours." Moreover, American Progress notes, "In the second quarter of 2006, families had to spend 14.4 percent of their disposable income to service their debt — the largest share since 1980." Family savings are -0.6 percent, the second lowest level since the Great Depression. Wages continue to stagnate, even though Americans are working harder than ever. Median household income has actually declined under the Bush administration, from $47,599 in 2000 to $46,326 in 2005, even though productivity is up 18.4 percent. Americans are also having to spend more and work longer to pay for basic middle-class items. In the first quarter of this year, "a typical two-earner, middle-class couple had to work 31.2 weeks to pay for housing, medical care, and transportation and to save for their kids' college education," an annualized increase of 1.3 percent in just one quarter.
  
  
• Many Americans are feeling the adverse effects of a slumping housing market. Most Americans have their money tied up in the housing market, which is bad and "about to get a lot worse." A higher number of homes on the market is putting pressure on prices, which are starting to fall. An analysis by the Center for American Progress reports, "Homes for sale now stay on the market longer than at any point since 1995. In August 2006, the real estate market had 6.6 months of supply available — a 44 percent jump from a year earlier." Even the National Association of Realtors estimates that the "median price of a new U.S. home probably will drop 0.2 percent to $240,500" this month alone. While homes are worth less, median monthly home ownership costs — including mortgage payments — have increased more than 49 percent since Jan. 2001.
  
  
• The “American Dream” is increasingly out of reach for many Americans. Under President Bush and his tax cuts, the American dream has been thrust further out of reach. Fifty-four percent of Americans now believe the American dream is impossible for most people to achieve. CBPP notes that most American families will likely lose money from Bush's tax cuts over the long run. Additionally, the tax cuts have done very little to help the majority of small businesses. Bush's tax cuts reduced the top individual income tax rate, from 39.6 percent to 35 percent. But just 1.3 percent of filers with small business income are subject to the top income tax rate and actually benefited from lowering it.