In President Barack Obama‘s big speech on the economy Thursday, the president touted his party’s economic agenda and repeated a claim similar to one he’s made before: “It is indisputable that our economy is stronger today than it was when I took office.”
Then he added, “It is also indisputable that millions of Americans don’t yet feel enough of the benefits of a growing economy where it matters most — in their own lives.”
Behind Mr. Obama’s frustration: A striking divergence between the growing economy and the share of that growth going as income to the median American household.
In the economic expansions of the 1980s and 1990s, roughly coinciding with the presidencies of Ronald Reagan and Bill Clinton, the amount of gross domestic product for each person in the economy, or GDP per capita (red in all the charts), was growing. And the median household income — the earnings of the middle household (blue in all the charts) — was also growing.
Income inequality surely existed in the ’80s and ’90s, but the pie available was growing and Americans in the middle were getting a piece of it. Then incomes slid during the 2001 recession at the beginning of George W. Bush‘s presidency and never quite recovered, even as GDP per capita continued to grow. The recession that began in December 2007 sent both measures falling.
Since Mr. Obama took office, GDP per capita has reclaimed its lost ground. But these gains have not accrued to the median household.
A look at the year over year change shows the breakdown. In the 1980s and 1990s, median incomes and GDP per capita both rose. But beginning around the year 2000, per capita GDP has posted a number of solid years, while median household income has had few years of positive growth.
In 2013, median household income climbed for the first time since 2007, but by only a tiny bit — less than $200.
Since 1999, this has opened a widening gyre between the two measures. GDP per capita has risen, while median incomes have fallen. Mr. Obama would like credit for the recovery of the former. But it’s the stagnation of the latter that has left so many households dissatisfied.
How Obama Is Caught Between Economic Growth and Shrinking Incomes
Fri, 03 Oct 2014 12:00:08 GMT