Kinsley doesn’t touch on any of this. He mentions two reasons for this “feeling,” one of which is soaring income inequality, which is indeed a big factor. The other is not:
Among them, the relation between making or having money and feeling prosperous is far from linear. America’s GDP in 1985 dollars back in 1985 itself was $6.8 trillion — barely half what it is today. Yet 1985 was the apogee of President Ronald Reagan’s “morning in America” boom, when you were far more likely to find stories in the media about chicken-dinner sellers who became nursing-home executives than the other way around. In judging our own prosperity, we don’t compare it with long ago — or even 20 years ago. We compare it with how other people are doing and how we ourselves have been doing recently. It’s no comfort to be told that you’re a thousand times richer than a caveman. If a caveman killed a wildebeest, he felt rich and actually was rich by the standards of his time.
A more important reason that $13 trillion doesn’t feel as rich this time as the last time we passed through it is the increasing inequality of wealth and income. In 1984, a family income of $81,365 (2009 dollars this time) put you in the top fifth of all American families. In 2009, it took 23 percent more, an even $100,000. To make the top 5 percent required income of $180,000 in 2009, compared with $68,500 (in 2009 dollars) back in 1984.
Why would you use 1985 dollars to talk about 1985 GDP, and 2010 dollars to talk about 2010 GDP, but use 2009 dollars to talk about 1984 median income a paragraph later? There’s no good reason. And sure enough, using uniform numbers seriously undermines Kinsley’s case.
If 1985 GDP was “barely half what it is today,” as Kinsley says, what’s a dollar worth in 2009 compared to 1985? Fifty cents. Comparing these two numbers without adjusting for inflation is totally misleading.
If 1985 GDP was $6.8 trillion in ‘85 dollars, then 2010 GDP (as of the third quarter, which I think is Kinsley’s measure) was $7.3 trillion in ‘85 dollars. That’s a real increase of just 7.3 percent over a quarter century. To put it another way, 1985 GDP was “barely” 93 percent of what it is today.
But that’s not all the mess Kinsley makes of the numbers. Check out his second paragraph:
I ask because after the most severe recession since the Great Depression, and with a slow recovery, the U.S. economy, nevertheless, is back to producing about as many goods and services as it did in the third quarter of 2007. Adjusting for inflation and using 2005 dollars, our seasonally adjusted gross domestic product was $13.268 trillion in the third quarter of 2007. Three years later, it was $13.277 trillion. If you want to account for population growth, push the time machine back to the fourth quarter of 2006, when Jack Abramoff copped a plea and the real seasonally adjusted GDP was $13.060 trillion.
Say what? Why would you adjust for inflation to 2005 dollars? And how does this account for population growth?
More to the point: Why would you write this column?
Very nice. Exquisite excision of Kinsley's cranio-rectal impaction. I just love a numerate journo.
I vote Kinsley up to #10 on the Hack Thirty. He does this kind of thing *all the time.*
#1 Posted by James, CJR on Tue 30 Nov 2010 at 09:51 PM
We/USA were much DRUNKER than we are now. Look at the evident asset overpricings here, first chart:
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html
Reduced overpricing is increased rationality, NOT any actual collective wealth reduction.
Second chart shows collective misbehaviors diminishing lately -- surely impacting employment.
Re. credibility of ‘overpricings’ identifications, see “the 3 Fed Chair warnings, Real DJIA”; URL as above, but ending /ttsmyf/3warnsRD.html
#2 Posted by Ed, CJR on Wed 1 Dec 2010 at 12:00 PM
>> Why would you adjusting for inflation
Typo.
I really enjoyed the article. You cut Kinsley to ribbons. But I have to say the use of "you" is a confusing mess. Sometimes "you" refers to "nobody" - as in "You’ve got to be kidding me." Other times it is used for empathy "you’ve got bills" and other times "you" is pointing towards Kinsley.
Also, exclamation points are unneeded. Unless you want to sound like Gawker!
---
Salon has an amusing list: 30 hack pundits.
War Room's Hack Thirty
http://www.salon.com/news/war_room_hack_thirty/index.html
Kinsley isn't on the list. Perhaps Salon made a mistake.
#3 Posted by F. Murray Rumpelstiltskin, CJR on Wed 1 Dec 2010 at 02:21 PM
From Mike Kinsley: Response to Ryan Chillum blog item.
Ryan Chillum writes that I "flub the numbers and the argument" in my Politico column this week. He does not understand my argument: I'll take the blame for that. I guess I wasn't clear. I'll take the blame, too, for one wrong number. It's not a math mistake, and it doesn't affect the argument I was trying to make. Chillum will have to take the blame for his nasty tone.
My point was not that economic distress "is more of a feeling than a reality," as Chillum summarizes. In fact he quotes--and then ignores--what I say high up in the piece, which is that many people are "suffering, losing their houses or their jobs." The column had two purposes. First, it was an attempt to puzzle through why this should be the case when GDP in real terms is about the same as it was in 2007, when times seemed good. I concluded that the main cause of this is growing disparities in wealth and income. If a few have more and most have less, the total can still be the same. Chillum quotes this passage also, and then ignores it.
My second purpose concerned the deficit. It was to argue that despite all the talk (from me, among others about the "sacrifice" needed to solve the deficit problem, these GDP figures suggest that the sacrifice would not be all that great, if we were all willing to go back to where we were financially in 2006 or so, when times did not seem so bad. the difference between then and now would be enough to solve the problem.That would involve a greater sacrifice by wealthy people, who would have to give up their disproportionate share of economic growth (a point I didn't make but should have). I suspect that many of the unemployed and those who have lost their houses also wouldn't mind going back to where things stood in 2006. Maybe this is a dumb point, since there is no way we can actually go back to 2006. I thought it was interesting. Mea culpa.
It's true that this is all about income, and even those who still have jobs and houses have taken a big hit in wealth, at least on paper. But the houses are still there, as are the factories, etc., that are represented by shares of stock. Is their true value represented by their price in 2007, or their price now?In a way, the whole economy depends on what theatre types call the "willing suspension of disbelief."
I am a deficit hawk. I think the national debt is having serious negative consequences, and there is no sign of anyone doing anything about this. (I don't say do something about it now, when we're still coming out of the recession, but do something now that will convince the world that we are serious about doing it later.) I spent the 80s and 90s arguing with conservative Republicans who wanted tax cuts and said the deficit didn't matter. It looks like I'll be spending the next couple of decades arguing with liberals who want more government and think the deficit doesn't matter.
Anyway, my erroneous number, for which I apologize. When I cited GDP in 1985, I said that was in 1985 dollars. In fact, it was in 2005 dollars, just like all the other GDP figures I used in that column. And the point remains true: accounting for inflation (ie, in 2005 dollars), GDP has almost doubled, from $6.8 trillion in 1985 to $13.3 trillion in Q3 of 2010.
Thanks very much.
Mike Kinsley
Politico
#4 Posted by Mike Kinsley, CJR on Sat 4 Dec 2010 at 06:09 PM
You do realize, Mr. Kinsley, that you are among the top 5% most fortunate Americans in terms of social status, salary, and influence. You live and work within a tiny, limited, self-contained bubble of like-minded people of your exact background: race, class, educational background. You don't know crap about "how it feels" compared to 2007 to the vast majority of the American people.
I think that was the thrust of what Mr. Chittum (with two 'ts' not two 'ls') was getting at.
And, just exactly *what* negative consequences are you talking about with respect to the national debt? Specifically, how exactly is the national debt affecting you? Please tell us. I suspect you are a "deficit hawk" because it is fashionable right now to be a "deficit hawk" around the beltway. (And, you know, the national debt" isn't the same thing as "the deficit.") Where the hell were all you "deficit hawks" during the bush Administration?
I know that, unlike my friends, colleagues and family, the high unemployment rate isn't affecting you at all -- you are still free to pontificate on subjects about which you have no knowledge or expertise, no matter how wrong-headed, and yet you still get paid for doing that. That's a great racket you have going for yourself!
#5 Posted by James, CJR on Sat 4 Dec 2010 at 08:27 PM
You know, I was just trying to enjoy my evening playing a couple of Craig Ferguson clips and relaxing a little. I thought I'd just check some news and go off to some pleasant dreams about a world where the leaders of human society and their dialogues have an idea what they are doing and what they are talking about.
But I clicked on this Michael Kinsley thread and the stupid... it really annoys me. Not because I am annoyed by ignorance in general, hey I have my share on various topics at times, but because the people professing the ignorance should know better.
And they don't. They instead share their ignorance as publicly as they possibly can so that they can influence the discussion on things they have not bothered to understand. And because they have a position that demands some expertise, their audience is mislead.
There's ignorant and then there's ignorant and proud of it. The latter is the heart of the stupid which annoys me.
So please forgive my bluntness and allow me to educate you, Mr. Kinsley. This is your premise:
"I ask because after the most severe recession since the Great Depression, and with a slow recovery, the U.S. economy, nevertheless, is back to producing about as many goods and services as it did in the third quarter of 2007."
Yes, GDP has "only" fallen back about 5 years, but what is GDP? We measure it in money, it's produced over the course of a year, so let's categorize it as income. America's income has only fallen down 5 rungs on the economic ladder.
Is income the only way, even the primary way we measure wealth? There are a lot of rich people in the country who have retired from public working life and have no productive income to speak of. Why are they considered rich?
Because they have assets. (I'm sorry that I'm being so basic with you, but you and your editors don't seem to have a grip on these basics) They have properties with monetary value, they have savings, they have investments which produce capital gains, etc etc... Their value is derived by what they've accumulated, not by what they are accumulating. A man is not poor because he earns a lower salary at 70 than he did at 20. A man is poor at 70 because everything he has accumulated until 70 is worthless. He is short of assets.
Think hard about that and what has happened to the assets of Americans and America since 2006. It's not an income problem, it's an asset problem.
But still, 2006 produced a fairly large income. People had money to spend, every one was buying houses etc.. so what's is the problem with the same income that was good enough in 2006? I hate doing this since I was so enjoying Craig's "man eats beard" monologue and going over basic facts and realities, with people who should know goddamn better, really puts a damper on my good cheer but it has to be done. Is a man who's making $500,000 dollars a year a rich man? Ordinarily you'd say yes, but say he's paying 5% interest on a 10 million dollar loan? If he's making every single payment, his keepable income is 0. Nothing. Life is utterly, completely unaffordable.
Think about that and what has happened to the liabilities of Americans and America since 2006 when it seems any guy off the street could borrow a few million. It's not an income problem, it's a liability problem.
Now when you have a population that is stripped of its assets and is barely keeping about the water of its liabilities, you do not have the consumer base necessary for business to sustain income. And why would any business hire any of the flailing unemployed if there is little to no income to be derived from it? Consumers need jobs to produce income for those who hire consumers. When Consumers don't have income, they cannot participate in the economy that enables them to live. They have to derive that income from private sector sources, who require an expectation of increased profit in order to employ, or they have
#6 Posted by Thimbles, CJR on Sun 5 Dec 2010 at 10:30 AM
Chittum writes:
***If 1985 GDP was “barely half what it is today,” as Kinsley says, what’s a dollar worth in 2009 compared to 1985? Fifty cents. Comparing these two numbers without adjusting for inflation is totally misleading.***
Actually its worse than Ryan says because GDP per capita is the measure that tells us about how well off people are. Ansd Kinsley bizarrely uses 2005 valuations at one point without adjusting for population.
GDP in 1985 (in 2010 dollars) was $8.5 trillion, compared to 14.25 trillion today. That is 67% growth. But population grew by 70 million so per capita GDP in real numbers is up about 29%.
But GDP alone tells us nothing about distribution and burdens -- a point that Kinsley plainly wrote about.
The latest data shows that from 1985 to 2008, in 2008$, the average AGI income of the bottom 90% grew less than 2%.
At the threshold to reach the top 10 percent it grew just 5.3% -- hardly anything over 23 years.
In addition, while tax rates are lower, services have been cut so the actual cost of living is adjusted in ways that make the bottom 90% feel squeezed -- because they are squeezed. Sales tax rates overall are higher, housing costs more, fringe benefits such as health care and retirement set-asides have been cut, etc.
And the fact that every 34th worker in 2008 went all of 2009 with no work and that the median wage in 2009 was smaller than in 2000 scream about the reasons people actually are worse off and feel so.
GDP also has serious flaws and needs updating.
#7 Posted by David Cay Johnston, CJR on Wed 8 Dec 2010 at 02:02 PM