And I remember what she said to me
How she swore that it never would end
I remember how she held me oh, so tight
Wish I didn’t know now what I didn’t know then
—Bob Seger, Against The Wind
We’re into election season, and as candidates (typically those opposing the incumbent) look to simplify the choice facing the voters we often hear the question posed: are you better off now than you were four years ago? It’s a fair question, and I suppose it is reasonable to assume that most rational voters will tend to vote in their own personal self interest.
But I think it may be a little misguided.
To begin with, the question oversimplifies the calculus. Most people will look at it and consider the question to be presenting an economic inquiry: Do I have a job? Am I making (and keeping) more money than I was, and is the purchasing power of that money equal to or better than what it was? Of course, individual well-being should take into account more than just dollars. Are you safer than you were? Is your individual liberty as broad and protected as it was? Everyone will consider these questions differently.
Even just looking at the economics, the question is too narrow (or, more aptly, too self-centric). In my personal situation, a number of factors combine to make my economic picture better today than it was four years ago. But just because things are better economically for me doesn’t mean that the policies of this administration are moving this country in the right direction, nor does it mean that I would answer “yes” to the question are you better off?
More to the point, it doesn’t mean I will vote for Barack Obama, which I won’t.
The more pertinent question for election purposes is are we better off now than we were four years ago? In his 1980 race against Jimmy Carter, Ronald Reagan tried to illustrate this proposition with the “misery index,” which attempted to quantify the relative collective economic well-being in easy-to-understand terms. The concept is simple enough: unemployment rate + inflation rate = misery index. And it makes for a convenient shorthand for making rough comparisons of our collective economic situation at one time relative to another. For Reagan, the index in late 1980 was around 20, owing mostly to the astronomical inflation of the Carter malaise. Today, with inflation nearly non-existent, the misery index is a more pedestrian 9.79, although that is up 32% from the 7.39 at the end of 2008 as Obama was taking office (which was up only 0.10 from the 7.29 index Bush 43 inherited when he took office eight years earlier).
I want to take a little different tack and introduce you to a couple of people. One is James, a very average high school teacher in Omaha, Nebraska. James is married, has two kids, two cars, a mortgage; everything you’d expect from the typical American household. In short—and not coincidentally—he is very representative of the median U.S. economic situation, from which the numbers representing James’ situation are derived.
According to the U.S. Census Bureau, James made $50,054 last year. That’s down from $50,303 in 2008, and his income has dropped every year since Obama took office. Not surprisingly, his net worth has also taken a hit, dropping from $102,844 in 2005 to $66,740 in 2010 (constant 2010 dollars). And where he had savings of $4774 in 2008, he has only $4746 today. By comparison, James’ income rose from $42,228 to $50,303 during the eight years of the Bush administration, and although his savings dropped from $5672 in 2000 to $4774 in 2008, his net worth increased from $101,200 in 2001 to $120,300 by 2007 (constant 2007 dollars). The data covers slightly different time periods and is presented using different index dollars, but the basic point is this: James makes less and has less today than he did four years ago, while his income and net worth increased from the beginning of the Bush administration to its conclusion.
Like Merle Travis’ coal miner in Sixteen Tons, James is also another day older and deeper in debt. Using the same debt clock calculator we did above for savings, we see that he has managed to reduce his family’s personal debt from $215,649 in 2008 to $190,120 in 2012 (up from $113,865 in 2000, I suspect almost entirely due to increased mortgage debt incurred though upgrading his family’s residence during the housing bubble). But his family’s total debt, including personal debt and their share of federal, state, and local public debt, increased from $636,712 in 2008 (up from $327,252 in 2000) to $683,734 in 2012. This increase is caused in no small part by the increase in his family’s share of the federal debt, which rose from $129,601 in 2008 ($78,381 in 2000) to $192,531 today. So not only does James make less than he did, but he’s increasingly deeper in debt.
Meanwhile, although inflation itself has remained essentially nil, consider James’ economic situation as it relates to some staples. A gallon of regular unleaded gasoline cost $1.59 in December 2008 ($1.38 in December 2000); today it is $3.87, more than double what it was when Obama took office. A pound of ground beef cost $2.99 in December 2008 ($1.98 in December 2000). Today it’s $3.45. Coffee cost $3.67 a pound in December 2009 ($3.21 in 2000). Today it’s a whopping $5.69. James has less, makes less, and owes more, and it takes more of what little he has left just to buy a lot of every day items. And all that is before the myriad express and hidden taxes associated with Obamacare start taking effect next year, whether Obama is re-elected or not.
Taken in a purely economic sense, we cannot say that the average American—which is what the above figures reflect—is better off today than he was four years ago.
What about the broader situation of us as a whole? For that, consider Barry, a more affluent attorney in Washington, D.C. His figures are taken from the federal government’s income/outgo situation (again from the debt clock calculator), reduced by a couple of orders of magnitude to bring the numbers down to a quantum that we mere mortals can grasp. Barry makes a healthy $239,900 a year today, but that’s down 5.4% from $253,586 just four years ago. Like James, Barry makes less today than he did when Obama took office. And as with James, by comparison Barry’s income rose 28.7% from $197,160 to $253,586 during the eight years of the Bush administration.
And, of course, there’s Barry’s spending. Barry (like his predecessor) has trouble living within his means. He spent $291,449 in 2008, in itself more than he brought in, and way up from the $176,604 (less than his income) spent in 2000. But although his income is less today than it was in 2008, his spending increased 22.6% to $357,367. Not surprisingly, Barry’s debt situation is rapidly deteriorating. Barry owed $1,030,332 in 2008, up from $569,292 in 2000. Today, just four years later, Barry owes an astonishing $1,605,165 and climbing.
Whether viewed on a median micro (individual) level, or a collective macro level, the results are the same. Income is dropping, spending is rising, debt is increasing. We make less, have less, what we have is worth less, and we owe more than we did four years ago. As discussed in my last post, thousands and thousands of people are flat leaving the work force. 48.5 million of us—a record 15% of the population—are on food stamps, more than at any time in history.
Are we better off than we were four years ago?
I submit not.