For Immediate Release: Thursday, May 19, 2011
Contact: Phoebe Silag or Karen Conner, news@epi.org 202-775-8810
The U.S. economy: broken, but not broke
Claims that a lack of money prevents federal policymakers from supporting public investments or employers from providing higher pay are misleading, a new Economic Policy Institute (EPI) Briefing Paper shows. The economy has seen steady growth in income and wealth over the past 30 years and will see similar growth in the next 30. In We’re Not Broke Nor Will We Be, EPI President Lawrence Mishel explains that a perceived lack of money has more to do with policy choices than with the fact that the U.S. government or employers are actually “broke.”
“The degree to which the federal government is broke is entirely within our control,” said Dr. Mishel. “Over the next three decades, according to all projections, income per capita will grow substantially. Whether this growth in income results in shared prosperity and a stronger middle class depends entirely on the policy choices we make.”
Over the past three decades, average income and wealth have grown substantially, both per person and in absolute terms. Between 1980 and 2010, income per capita grew 66.4% and wealth per capita grew 73.2%. In spite of the Great Recession, wealth per capita was higher in 2010 than it was in 1980. However, this growth has been unequal. The top 10% of the income distribution has received almost two-thirds of income gains since 1979, and the top 1% has received 38.7%. The wealth of the typical (or median) household was lower in 2009 than it was in 1983. In other words, in the past 30 years, the growth in wealth and income in the U.S. has been characterized by a growing inequality that has left behind the vast majority of workers.
Furthermore the large increases in the nation’s income and wealth have been decoupled from wage growth for the typical worker. From 1980 to 2009, income per worker grew 59.0% and wealth per worker grew 63.7%. However, during this time period, the median worker saw wage growth of just 11.2%.
Finally, governments at the federal and state levels seem broke primarily because revenue has declined substantially over the past few years due to the recession and tax cuts. Federal revenue for fiscal year 2011, for instance, will be the lowest revenue intake relative to GDP since 1951, at 14.8%. Additionally, the federal government can afford increased spending—between 1990 and 2010, spending on domestic discretionary programs grew by $327, just 2.7% of the per capita income growth in the same time period.