We're Broke! (Well, No, Not Really)

Digby at Hullabaloo has an article entitled Umm, don't tell anyone, but we're not broke.

Not so, she says.  In fact:

While the recession has led to job loss and shrinking incomes in recent years, the economy has produced substantial gains in average incomes and wealth over the last three decades, and economists agree that we can expect comparable growth over the next three decades as well. Between 1980 and 2010, income per capita grew 66.4%, and wealth per capita grew 73.2%. Over the next 30 years, per capita income is projected to grow by a comparable 60.6%. In other words, “we” are much richer as a nation than we used to be and can expect those riches to rise substantially in the future.

The problem is one of perception. The great majority of the money generated since the election of Reagan has gone to the few at the top; the average wage has hardly increased at all.

When most of the wealth is going directly to the very top while everyone else is stagnating or falling backwards, it's easy to get that impression. But the fact is that the US will be able to deal with its financial obligations in the future. Our real problem is income inequality.

Digby links to another article on the subject, Lawrence Mishel's
We’re not broke nor will we be, a PDF from the Economic Policy Institute dated May 19, 2011:

For instance, the top 10% of the income distribution has claimed almost two-thirds of the gains in income since 1979, with the top 1% alone claiming 38.7% of those overall gains. Moreover, the wealth of the median (or ‘typical’) household was lower in 2009 than in 1983, in spite of the 40.3% growth in the average household’s wealth. When the median is substantially lower than the average, it indicates very lopsided growth, which has been the case for the past 30 years: there was no growth in wealth for the bottom 80% of households, while those in the top fifth enjoyed a 50% increase.

Mishel's conclusion:

There is an old joke about the Lone Ranger, who turned to Tonto and said, “We’re surrounded by Indians,” and Tonto responds, “What do you mean ‘we,’ kemo sabe?’”

That same logic applies to policymakers who claim that “we’re broke.” It matters who is included in “we.” We, collectively, have been gaining income and wealth and will continue to do so. “We,” the broad middle class, have not been gaining wealth and have not received much of the income gains of the past 30 years. Whether the broad middle class prospers in the next 30 years does not hinge on whether there will be substantial income growth; there most definitely will be. The future prosperity of the broad middle class hinges on the economic policies and structures that determine how that income is generated and shared.

Are our federal and state governments “broke”? They certainly face deficits. Whether those governments provide the services we need will totally depend upon the political decisions made regarding taxing and spending. Taxation and revenues have diminished, both due to policy choices and the impact of the Great Recession.

So, are we broke? Only if we choose to be.