Taking a break from blogging World War III — Paul Krugman describes a typical “debate” on the economy with a rightie:

Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.”

Informed economist: “But it’s not a great economy for most Americans. Many families are actually losing ground, and only a very few affluent people are doing really well.”

Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.”

Ain’t it the truth?

“To a large extent,” Krugman continues, “this dialogue of the deaf reflects Upton Sinclair’s principle: it’s difficult to get a man to understand something when his salary depends on his not understanding it.” But there is data showing that, in fact, most people are not enjoying the benefits of our wondrous economy.

Here’s what happened in 2004. The U.S. economy grew 4.2 percent, a very good number. Yet last August the Census Bureau reported that real median family income — the purchasing power of the typical family — actually fell. Meanwhile, poverty increased, as did the number of Americans without health insurance. … growth didn’t just bypass the poor and the lower middle class, it bypassed the upper middle class too. Even people at the 95th percentile of the income distribution — that is, people richer than 19 out of 20 Americans — gained only modestly. The big increases went only to people who were already in the economic stratosphere.

Even the real income of college graduates fell in 2004; a college degree is no guarantee of shelter from a failing economy. Bottom line, it’s only a great economy “if you’re a high-level corporate executive or someone who owns a lot of stock. For most other Americans, economic growth is a spectator sport.”

Ezra Klein provides an interesting analogy to describe what’s happening to our economy:

Growth is almost a misleading word for this phenomenon: When we think of growth, we imagine what happens to us during adolescence — we get bigger. But imagine if all the growth happened in your forehead. Limbs, torso, weight — all the exact same. But your forehead was now six inches long. Would you be excited about that change? Would you celebrate your newfound height? Would you categorize that as normal “growth”? …

…In fact, it’s no longer just the middle class and the poor who’re falling behind. The distribution has grown so uneven that the 95th percentile is making meager headway — even the merely rich are falling behind. It’s the richest of the rich making headway. But they now account for so much wealth and holdings that their acceleration can effortlessly outweigh everyone else’s deterioration.

Some of the best economic blogging on the web goes on at The Blogging of the President, provided by Stirling Newberry, Ian Welsh, and Hale Stewart. Last week Hale posted “Income Inequality In the US: A Primer.” He quotes the CIA World Factbook:

“Among countries with modern economies, the United States is the clear leader in income inequality under the gini measure. Income inequality in the U.S. is more comparable to the third world.”

According to the CIA Factbook, the US has a Gini index of 45. By way of comparison, a large number of countries with a higher gini number are in South America and Africa. From South America: Argentina, Bolivia, Brazil, Chile, Columbia, Honduras, Nicaragua and Paraguay. From Africa: Botswana, Central African Republic, Lesotho, Namibia, Niger, Sierra Leone, Zambia and Zimbabwe.

FYI, according to the chart linked in the paragraph above, Hungary, Sweden, Norway, and Belgium have the least income inequality. Eastern Europe and Scandinavia generally are less economically unequal than most other parts of the planet.

In the United States, income inequality declined from 1947 to 1968; since 1968, inequality has increased. As these graphs show, however, inequality increased dramatically during the Reagan and Bush I Administrations (especially the Bush I Administration) and leveled off during the Clinton Administration.

(Remember “It’s the economy, stupid“? Republican folklore says that Bush I lost the 1992 election because he had reneged on his “no new taxes” pledge, but I have never believed that. The income shift from 1989 to 1992 was palpable, and Poppy clearly was oblivious to people’s concerns. I don’t think most folks who were not movement conservatives gave a hoohah about the tax increases.)

Via Economist’s View, a report from the Center on Budget and Policy Priorities discusses recent trends:

The data show that income gains between 2003 and 2004 were particularly large for those at the very top of the income spectrum, resulting in a nearly unprecedented one-year increase in income concentration. …

From 2003 to 2004, the average incomes of the bottom 99 percent of households grew by less than 3 percent, after adjusting for inflation. In contrast, the average incomes of the top one percent of households experienced a jump of almost 17 percent, after adjusting for inflation. (Census data show that real median income fell between 2003 and 2004. …[T]he 3 percent rise among the bottom 99 percent seems to largely reflect gains by households in the top quintile of the income spectrum…)

The top one percent of households garnered 36 percent of the income gains in 2004.

This disparity produced an exceptional jump in income concentration in 2004. The share of the pre-tax income in the nation that goes to the top one percent of households increased from 17.5 percent in 2003 to 19.5 percent in 2004. Only five times since 1913 (the first year that this data set covers), and only twice since World War II has the top one percent’s share risen by as much in a single year (in percentage point terms). Each percentage point of income is equivalent to $68 billion in 2004.

The share of total U.S. income that the top one percent of households received in 2004 was greater than the share it received in any prior year since 1929, except for 1999 and 2000.

Income gains were even more pronounced among those with the very highest incomes. The incomes of the top one-tenth of one percent of households grew more rapidly than the incomes of the top one percent of households. The share of the national income received by the top one tenth of one percent of households increased by 1.3 percentage points from 2003 to 2004; in other words, more than half of the increased share of income going to the top one percent of households actually went to the top one-tenth of one percent of households.

Here’s the punch line:

In May 2006, CBO suggested that continued growth in income inequality may be one cause of the recent rapid growth in federal revenues. Increases in income inequality boost revenue growth, in part because high-income households are subject to higher federal income tax rates than are households of lesser means.

In other words, the revenue increases Dubya is so proud of are a symptom of economic pathology.

Finally,

It should be noted that wage and salary growth has been unusually weak during this recovery, while the growth of corporate profits has been exceptionally strong. This contributes to growing income inequality, since high-income households own a highly disproportionate share of corporate assets and derive significant income from those assets. With weaker-than-normal wage growth and stronger-than-normal growth in corporate profits having continued into the first part of 2006, it is likely that the increase in income inequality that Piketty and Saez have documented through 2004 has continued since that time and that the nation’s already-large disparities in income are growing yet wider.

As Hale points out, income disparities are a major cause of civil and political instability. “[N]ot only is the US a debtor nation in the tradition of Latin America circa the 1980s,” he says, “we are also following a similar path in the area of income distribution. It’s very important to ask ourselves: is this what we want?”

This is not what most of us want, I suspect, but discussion of this issue by the MSM mostly consists of Chris Matthews chirping about how great the economy is. We as a nation aren’t exactly being asked what we want, are we? We’re just being told what we want by the VRWC echo chamber.

See also: Hale Stewart, “Bush’s Historic Tax Revenues Aren’t So Historic” and “If the Deficit’s Decreasing, Why Is Total Debt Increasing?“