Why Many Americans Feel Like They’re Getting Poorer

Time Magazine ^ | March 5, 2013 | Michael Sivy

[lbryce]

Data released by the Commerce Department last week showed that personal income fell 3.6% in January, the biggest decline in 20 years. The drop was even bigger when taxes and inflation are taken into account. Real personal disposable income fell by 4%, the biggest monthly drop in half a century.

In part, this is a statistical blip. Companies accelerated certain payments – giving year-end bonuses in December rather than January, for example – so that employees could avoid higher taxes going into effect for 2013. But even if that blip is smoothed out, real aftertax income is lower than it was six months ago.

What this means is that the U.S. economy is not merely recovering from the recession more slowly than one might like, but is actually getting worse for many Americans. Despite three-and-a-half years of uninterrupted growth in real GDP and a decline of more than two percentage points in the unemployment rate since 2009, the standard of living is falling for as much as half the population, particularly if you look beyond monthly numbers to longer-term trends.

Commentators assessing a recovery in progress naturally tend to focus on changes from one month or quarter to another. But what really matters is not how the economy compares with where it was in earlier time periods, but how it compares with where it would now be if it were fully utilizing all of its resources. Economists call this level “full capacity,” and it rises over time as the population grows, technology improves and facilities are upgraded.

[1rudeboy]

The government doesn’t include food in its official inflation stats.

[lbryce]

This guy in the picture, I see him once in a while, seems not to have much tolerance for important, long standing issues. :-)

[backwoods-engineer]

I got a cheap-azz 2% raise this year. That does not even cover increases in health insurance premiums, not to mention inflation. I am BACKWARDS from where I was in March 2012.

[SamAdams76]

I always tell people who bitch about their pay raises to go start their own companies. That way, they can give themselves all the raises they want.

[nascarnation]

I nearly fainted when I saw this was from Time Magazine online. Seriously.

[1rudeboy]

Important, long standing issues? Such as the government doesn’t include food in its official inflation stats, except when the government includes food in its official inflation stats?

[expat_panama]

This is data from a defunct research group plotted by an English prof:

This is BEA data from the Fed's website:

"...Real personal disposable income fell by 4%, the biggest monthly drop in half a century..."

Right after a 4% surge over the previous 2 months.  

[American in Israel]

My take home is considerably less as my hours were cut back due to downsizing.

Thanks to Obama and his cadre of Czars. But it was a change I expected and believed would happen when the Communists took over the government.

[HangnJudge]

[expat_panama]

Excellent graph!

It clears up two misunderstandings in the leftwing Time article, the first being that Obama inherited the problem with incomes from Bush, and the other that somehow that 4% drop was anything other than a return to a general climb. 

Reality is that incomes were fine until the disastrous policies since '09.  Something else is that the drop we just had was simply a conformation that incomes haven't really shown a lot of progress with our glorious "recovery".

[ilovesarah2012]

My hours have been cut and no overtime and higher taxes, higher food prices, higher gas prices. Yeah, I’m feeling poorer but that’s what Obama wants. And as we have seen for the last four years, Obama gets what Obama wants.