Recession

On December 13, 2011 the Asset Building Program hosted Professor Sheldon Garon, author of Beyond Our Means: Why America Spends While the World Saves. While economists often claim people save according to universally rational calculations — saving the most in their middle years as they plan for retirement and saving the least in welfare states — there are substantial differences in savings rates across high income countries. For example, Europeans save at relatively high rates despite generous welfare programs, while Americans save little, despite weaker social safety nets. The assumption that generous social benefits will provide a disincentive to save doesn’t hold up.

There are many ways to measure inequality. You can compare those at the very top and to those in the middle or the very bottom. You can look at the overall distribution of resources among the total population. Or you can look at the degrees of concentration among segments of the population. Each of these measures tells you something different. But it’s more consequential in what you choose to measure.

Jason Deparle writes in the New York Times of new data that shows how income inequality declined during the recession. He sprinkles in some quotes from a professor of entrepreurship, Steven Kaplan, implying inequality is a thing of the past and we shouldn’t be worrying about it anyway since economic growth is the problem. Likely, there are some debates over the data Deparle is citing. Is it best to use Social Security data or tax returns? Should we include earnings with wages? 

Regardless, I don’t find it hard to believe incomes at the very, very top have come down off their pre-recession highs (although I would still like to see more data). But this does not mean inequality is lessening or a problem of the past. We need to look at both income and wealth. Just because it is harder to shine a light on wealth but doesn’t mean we should not look for its impact.

As I wrote previously, inequality in America is still ascendant but the dynamics have changed. The bursting of the housing and stock market bubbles momentarily stemmed the wealth inequality tide. Yet by 2010, stock market losses were largely recouped. This wasn’t the case for housing equity, which is the largest item on the family balance sheet.

The divergence between housing values and security prices will be the main driver of wealth inequality for the foreseeable future.

Without major changes to the housing market and policy efforts designed to help families de-leverage, such as large-scale loan modifications and principle reduction, wealth holding for the majority of American households will remain depressed. Wealth at the very top will be determined by a combination of executive pay, tax rates, and returns to capital. Interestingly, it seems like the recession has ended for those at the very top but continues for the majority.

This is the fourth and final installment in a series of interviews with policy experts who participated in an event we hosted on November 22nd, "Poverty, Inequality, Mobility, Oh My," where we explored different ways of assessing how families are doing post-Great Recession and how applying these different approaches to the design of public policies might improve the conditions and opportunities of low-income families.

It’s a busy time of year. Perhaps you didn’t hear President Obama’s December 6^thspeech in Osawatomie, Kansas. It’s worth a closer look—both for its specific language and general themes. The speech was a billed as a thematic statement of Obama’s vision for the economy and if that’s the case, we can expect to hear more in the coming campaign about inequality, mobility, opportunity, and even fairness. Given the state of the economy, we should expect these issues to attract attention, but still the speech sounded like a departure for a president who has often shied away from taking a populist stance. 

I’ll be honest and say that Osawatomie had not previously been on my radar. But the choice of using this heartland town as the site for a major economic address was not accidental. In 1910, Teddy Roosevelt delivered what’s been called his “New Nationalism” speech, a milestone for the progressive era, where he called upon government to regulate capitalism and elevate the public interests above those of money and property. The press reports piqued my interest and I tracked down TR’s address. Reading it, I was surprised by how contemporary it felt.

TR used his address to rail against the rising power of corporations and moneyed interests that “too often control and corrupt the men and methods of government for their own profit. We must drive the special interests out of politics.” The very triumph of America was at stake, which at that time held the hopes of anyone believing in the desirability of democratic and popular government. Property was to be respected and protected but not given undue influence – and certainly not “the right of suffrage.” (We should send this speech to the current Roberts Court.) TR believed that the unleveled playing field was tipping the scales of justice and the promise of America could only be realized with “practical equality of opportunity for all citizens.”

“…when we achieve it, will have two great results. First, every man will have a fair chance to make of himself all that in him lies; to reach the highest point to which his capacities, unassisted by special privilege of his own and unhampered by the special privilege of others, can carry him, and to get for himself and his family substantially what he has earned. Second, equality of opportunity means that the commonwealth will get from every citizen the highest service of which he is capable. No man who carries the burden of the special privileges of another can give to the commonwealth that service to which it is fairly entitled.

I stand for the square deal. But when I say that I am for the square deal, I mean not merely that I stand for fair play under the present rules of the games, but that I stand for having those rules changed so as to work for a more substantial equality of opportunity and of reward for equally good service.”

Pardon the dated gender language and my bolding of the passage, but for me all it would take to make this passage ring true today is a few new pronouns. Now, let’s see how President Obama picks up on these ideas in his speech delivered over a hundred years later. 

This is the third in a series of interviews with policy experts who participated in an event we hosted on November 22nd, "Poverty, Inequality, Mobility, Oh My," where we explored different ways of assessing how families are doing post-Great Recession and how applying these different approaches to the design of public policies might improve the conditions and opportunities of low-income families.

This is the second in a series of interviews with policy experts who participated in an event we hosted on November 22nd, "Poverty, Inequality, Mobility, Oh My," where we explored different ways of assessing how families are doing post-Great Recession and how applying these different approaches to the design of public policies might improve the conditions and opportunities of low-income families.

China’s surplus fell from 10.1% of GDP in 2007 to 5.2% in 2010.  Whether its current account will continue to decline or will return to higher levels seen in the mid-2000s is a subject of considerable disagreement.

In the coming days, we will be releasing a series of interviews with policy experts who participated in a event we hosted on November 22nd, "Poverty, Inequality, Mobility, Oh My," where we explored different ways of assessing how families are doing post-Great Recession and how applying these different approaches to the design of public policies might improve the conditions and opportunities of low-income families.

Two years after the official end of worst recession since the Great Depression, the economy is recovering but families are not. According to a flurry of new data, poverty and inequality are reaching historic highs and the current of economic mobility is flowing most forcefully down the economic ladder. 

On November 22^nd, the Asset Building Program hosted a panel of experts to discuss how Americans are faring in the years since the Great Recession according to different measures. (Video from the event is available here.) Speakers from Wider Opportunities for Women, the Half in Ten Campaign, Center on Budget and Policy Priorities, and Pew’s Economic Mobility Project joined moderator, Rachel Black, for a discussion of current data and indicators, who’s falling short according to these measures and by how much, and policy ideas for  making progress.