Monday, August 28, 2006

Something's not Trickling

I'm not conversant in supply side economics in the same way that I'm not clear as to how creationism can explain the fossil record as resulting from a few thousand years of natural history.
I do know that supply siders make two fundamental claims:
1. Cutting tax rates will lead to higher tax revenues.
2. Cutting tax rates for the wealthiest among us will benefit all of us.
I discussed the canard that cutting taxes results in higher tax revenues in a series of posts in July, prompted by blogger and Club for Growth enthusiast Dave of First State Politics.
As for the fairy tale that helping rich people get even richer benefits all of us, we have today's news about real wages lagging behind productivity in the last few years as reported in the New York Times:
The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.
As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s.
Now trickle down economics makes the claim that benefits to the richest among us will trickle down, as it were, to the rest of us, given enough time. I would think that five or six years would be enough time for this ostensibly rational phenomenon to be evidenced in economic statistics. So why hasn't it happened?

3 Comments:

Blogger FirstState said...

Real compensation is up. So, employers are giving more to employees for their labor, even if the wage component of that compensation is flat.

7:46 PM, August 28, 2006  
Anonymous Anonymous said...

FS - just stop it.

The idea that workers' declining wages are somehow being made up by fringe benefits is just ludicrous. It ain't happening in the real world.

Total compensation has been chopping over and under the flatline for the entire Bush Administration, until it began a definite decline in 2005 and has been lagging inflation for the last year.

"Real Compensation" statistics are notoriously choppy since they are tied to long-term contracts. But the trend is down.

Your graph conveniently ends in 2005, but if you look at the top right you will see the trend going down. (where did you get that thing anyway?) Inflation started ramping up around that time, driven by the allegedly Katrina-induced energy prices, and joined by Fed rate increases. The new inflation has quickly eaten away any claim to gains in benefits. And of course, real wages continue to show undeniable declines.

even if the wage component of that compensation is flat.

The wage component is DOWN, not flat.

The benefits component is DOWN, not growing.

Next I expect you to concede real compensation is down, and then explain why that's not a bad thing, or how it's all the workers' fault.

3:04 PM, August 30, 2006  
Anonymous fsp said...

I look at the chart and I see the line go up faster from 2000-2005 than at any time before it.

12:26 PM, August 31, 2006  

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