Can an Economic Stat Help Narrow Our Grand Economic Divide?

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

Why do so many Americans deeply distrust government? One part of the reason, two top economists suggested to a key congressional committee this week, just might be the most basic — and familiar — of the economic statistics the federal government produces.

That stat — gross domestic product, or GDP — “measures the market value of the goods, services, and structures produced by the nation’s economy,” as calculated by the federal Bureau of Economic Analysis. The Bureau generates new GDP figures for every quarter of the year, and the release of these figures regularly makes headlines. Are we heading for a recession? Is the economy booming? Reporters and pundits scour the GDP stats for clues to our future, and presidents and lawmakers rush to hail a rising GDP as proof their policies are working.

But these journalists and pols are all ignoring the most basic of questions: Working for whom?

A half-century ago, in an America much more equal than the nation we have now, this distributional question seldom came up. Back then, average Americans shared in the nation’s economic growth. If the GDP figures had the national economy growing nicely, economist Heather Boushey told the congressional Joint Economic Committee yesterday, most Americans saw their personal incomes growing nicely as well.

In our strikingly unequal contemporary economy, notes Boushey, this linkage no longer holds. GDP growth has become “decoupled from the fortunes of most Americans.” Growth is benefiting “only those at the very top of the economic ladder.”

“Incomes for the working class and the middle class have grown slowly for decades,” explains Boushey, the co-founder of the Washington Center for Equitable Growth, “while incomes at the very top have exploded.”

Today’s GDP numbers don’t capture any of this reality. As an aggregate figure, GDP fudges the difference between our economy’s winners and losers. You can drown, the old quip puts it, in a lake with an average depth of six inches. By the same token, you and your neighbors can be taking it on the chin in an economy with a rapidly rising GDP.

And average Americans have been taking it on the chin. Our rising GDP numbers are masking the chronic economic insecurity that huge swatches of the American people have been living.

In 1980, University of California at Berkeley economist Gabriel Zucman told this week’s Joint Economic Committee hearing, Americans in the bottom half of the nation’s income distribution averaged $18,000 in income, in today’s dollars. Our GDP numbers have shown enormous economic growth since then. But Americans in the nation’s poorer half have seen precious little of it. Their average income today: only $18,500.

By contrast, America’s most affluent 10 percent have seen their incomes double over the same period, with top 1 percent incomes up an even heftier 162 percent.

With headlines trumpeting GDP figures showing a “high growth that does not reflect” the economic lives average Americans are living, adds Heather Boushey, we shouldn’t need to wonder why so many Americans are “feeling alienated.”

And we shouldn’t need to depend on academics with limited resources — like Zucman and his colleagues Emmanuel Saez and Thomas Piketty — to give us the data we need to see how unequally distributed the benefits from America’s economic growth have become.

Zucman and his colleagues have worked diligently over recent years to “disaggregate” the official “National Income and Product Accounts” reports behind the GDP calculations, in an inspired effort to show just who exactly is prospering from the nation’s growth and who isn’t.

The resulting “Distributional National Accounts” that the Zucman team has come up with trace who’s been benefiting from America’s economic growth since 1962. But the economists involved take pains to emphasize that their work offers just a prototype of the work that ought to be done. The Distributional National Accounts they’ve developed, Zucman is hoping, “will eventually be taken over by government, improved, and published as part of the official toolkit of government statistics.”

Rep. Carolyn Maloney, the New York Democrat who serves as the vice chair of the Joint Economic Committee, is hoping that, too. She has introduced legislation — the Measuring Real Income Growth Act — that directs the Bureau of Economic Analysis to report GDP growth by income decile and the top 1 percent.

Taking this step, says Rep. Maloney, “will help us understand not just how fast the economy is growing but who is benefiting from that growth.”

The Center for Equitable Growth’s Boushey is calling the new metrics that Rep. Maloney’s legislation seeks “GDP 2.0.” Putting these metrics in place, she posits, will focus public and policy maker attention on what matters most, the economic well-being of American families up and down the income spectrum.

Even better, stresses Boushey, “these metrics will allow citizens to hold their elected representatives accountable to delivering an economy that works for all.”

In a government that delivers that economy, trust can start rebuilding.


Reposted from

Sam Pizzigati edits Too Much, the online weekly on excess and inequality. He is an associate fellow at the Institute for Policy Studies in Washington, D.C. Last year, he played an active role on the team that generated The Nation magazine special issue on extreme inequality. That issue recently won the 2009 Hillman Prize for magazine journalism. Pizzigati’s latest book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives (Apex Press, 2004), won an “outstanding title” of the year ranking from the American Library Association’s Choice book review journal.

Posted In: Allied Approaches

Union Matters

Steel for Wind Power

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities. 

Siemens Gamesa last month laid off 130 workers at its turbine blade manufacturing plant in Iowa, just months after GE Renewable Energy decided to close an Arkansas factory and eliminate 470 jobs.

The companies reported shrinking demand for their products, even though U.S. consumption of wind energy increases every year.

America’s prosperity depends not only on harnessing this crucial energy source but also ensuring that highly skilled U.S. workers build the components with the cleanest technology available.

Right now, the nation relies on imported steel and turbine components from foreign manufacturers like China while America’s own steel industry—well equipped for this production—struggles because of dumping and other unfair trade practices.

Steel makes up the bulk of turbine hubs and the wind towers themselves. It’s also used to make the cranes and platforms necessary for installing the towers.

Yet the potential boon to America’s steel industry is just one reason to ramp up domestic production of wind energy infrastructure.

American steel production ranks among the cleanest in the world, while China has the highest carbon emissions of any steelmaking nation and flouts environmental regulations.

The nation’s highly-skilled steelmaking workforce must play an essential role in the deeply-needed revitalization and modernization of the nation’s failing infrastructure. Producing the components for harnessing wind energy domestically and cleanly is an important step that will put Americans to work and position the United States to be world leaders in this growing industry.


More ...

There is Dignity in All Work

There is Dignity in All Work