When questioned, virtually every politician will at least pay lip-service to the concept of faster economic growth. But the parties are divided on how to achieve it. Most economists will recommend tax cuts to encourage industries to expand and create new jobs.
And among a variety of tax-cut choices possible, a cut in capital gains taxes stands out as a favorite.
Another study, by DRI-McGraw Hill, claims:
Economists see capital gains tax reforms as win-win-win public policy, with the three winners being taxpayers, workers and politicians.
Source: Editorial, "Politics vs. Growth?" Investor's Business Daily, March 6, 1996.
In this campaign season, some politicians have been jumping on business -- claiming that corporations are enjoying big profits at the expense of lowly workers. But many economists say that is not really the case.
A better gauge of economic well-being is per capita real personal income, which has been rising an average of 1.4 percent per year since 1973.
As for corporate lay-offs, they are off 28 percent from their 1993 peak.
Source: Editorial, "Corporate Witch Hunt," Investor's Business Daily, March 8, 1996.
Recent studies point to a shift in the nature of the U.S. population which could lead to slower economic growth.
And there is also evidence that an aging, slow-growing population is returning to old-fashion values, according to some researchers.
Source: Perspective, "Counting People," Investor's Business Daily, March 8, 1996.
The wealth of American households rose 17 percent between 1989 and 1992, with those further down the economic ladder owning an increasing portion and the share of the top 1 percent declining by 8 percent, according to a survey by the Federal Reserve and the Internal Revenue Service.
Thus the proportion of wealth held by the different income groups reverted to about what it was in 1983, when the top 1 percent of households held 31.5 percent, the next 9 percent held 35.1 percent and the bottom 90 percent held 33.4 percent.
Particularly striking was the rise in ownership of stocks and bonds among the lower 90 percent.
The survey defines wealth as household net worth (the total of a household's assets, including real estate, stocks, bonds, insurance policies, self-owned businesses and savings accounts) minus its liabilities -- all debts including mortgages and credit cards.
Conducted every three years, the "Survey of Consumer Finances" is the most comprehensive of its kind. The survey contradicts claims of increasing economic inequality, and some economists have already suggested that the results are unreliable this time around.
Source: Richard W. Stevenson, "Rich Are Getting Richer, but Not the Very Rich," New York Times, March 13, 1996.
The gold standard, under which a nation's currency could be exchanged for a fixed amount of gold, acted as a "good housekeeping seal of approval" in the financial markets.
The modern global economy, with goods and capital flowing across national borders, took shape from 1870 to 1914. During that period:
During this 44 year period, Canada, Australia, the United States and Italy issued gold-backed bonds that paid about 4 percent. Argentina, Brazil and Chile, all of which broke the gold standard and devalued their currencies, had to pay yields of about 5.5 percent on their gold-backed bonds.
The gold standard acted as a check on government attempts to finance deficit spending by issuing bonds and paying them off by inflating the money supply, that is, printing more currency.
Source: Michael D. Bordo and Hugh Rockoff, "The Gold Standard as a 'Good Housekeeping Seal of Approval,'" Working Paper 5340, November 1995, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, (617) 868-3900.
Some employment researchers are wondering aloud about those 705,000 new jobs reported for February. They suspect the statistics may have been an aberration or a fluke.
Nevertheless, there are some other aspects of today's employment picture that they caution should not be overlooked:
Economic growth was a dismal 1.4 percent last year and by most estimates is growing only about 1 percent in the current quarter. Experts contend all this is hurting millions of Americans and threatens to hurt millions more if the economy doesn't begin growing at the 3 to 4 percent levels needed to meet labor force demands and create better-paying jobs.
Source: Donald Lambro, "Anemia Lurking in Jobs Data," Washington Times, March 14, 1996.
Is the U.S. downsizing, as some contend, or is it simply in a period of change? Some economic analysts think it's the latter. They contend that the story of America in the 1990s is slow growth and rapid change, rather than contraction and decline.
Some of the significant changes:
During the current five-year-old business expansion, the number of civilian workers has risen by about eight million. Employed Americans, as a share of the population over age 16, is close to the record of 63.2 percent set last winter.
Anemic as job growth may seem compared to the record of the 1950s through the 1980s, so far in the 1990s:
Furthermore, there is no evidence that corporations are favoring stockholders over workers. Worker compensation and dividends each increased by about five percent last year.
Source: H. Erich Heinemann (Heinemann Economic Research), "The Upsizing of America and How It's Happening," Washington Times, March 15, 1996.
Presidential campaign watchers predict that President Clinton will devote much of his political message this election year to the charge that Republican policies favor the rich at the expense of the poor and middle classes. Some in the media are already laying the groundwork. Steven Pearlstein of The Washington Post, for example, asserts that since 1979 "all of the income growth has gone to the top 40 percent of households." However, Pearlstein leaves out an important fact: The top 40 percent doesn't include simply the super-rich; it includes all those households with an income over $40,100 a year. Furthermore, his assertion is flatly wrong.
Here are the facts from the Census Bureau:
The problem with analyses using income shares is that they fail to convey the significant effect of income mobility, with people constantly moving up or down the scale. New data from the Federal Reserve Bank of Dallas show that 95 percent of those in the bottom quintile in 1975 were in a higher quintile by 1991. And almost 40 percent of those in the top quintile were in a lower one 16 years later.
Source: Bruce Bartlett (National Center for Policy Analysis), "Distribution Deliriums...and Wage Wars," Washington Times, March 18, 1996.
Political observers warn Americans to get ready for plenty of debate this campaign year on the economic status of the family. Some economists are urging Republicans to recall data from the Reagan years to counter Democrats' claims that incomes have been falling for the past 15 years.
Source: Donald Lambro, "Distribution Deliriums...and Wage Wars," Washington Times, March 18, 1996.
Despite dramatic stories about a widening inequality of incomes and a disappearing middle class, the data show that income is about as widely distributed today as at any time in American history, and is less concentrated among top earners than it was prior to World War II.
According to a recent analysis of data from the Census Bureau, Bureau of Labor Statistics and the Federal Reserve:
Real income per person rose by 40 percent between 1969 and 1992, outpacing average growth in family income. Average family income grew at a much slower pace due to the increasing number of single-parent families. The reason middle-class families have shrunk as a percentage of all families is mainly due to the increasing percentage of higher-income earners.
Finally, historical data show that the earnings of all income groups rise and fall together, and that no group gained in those periods when higher-income families lost ground.
Source: John H. Hinderaker and Scott W. Johnson, "The Truth About Income Inequality," December 1995, Center of the American Experiment, 1024 Plymouth Building, 12 S. 6th Street, Minneapolis, MN 55402, (612) 338-3605.
A new study establishes that more and more corporations are offering stock options and bonuses to their rank-and-file employees -- even down to the lowly mailroom clerk. To note just one example, Merck gave 6,200 employees bonuses and 8,300 employees stock options.
The consulting firm Towers Perrin reports that:
Source: Tom Lowry, "Rank-and-File Workers Get Stock Options," USA Today, March 22, 1996.
People in the upper income brackets got there by working more, according to a new study by Kenneth Deavers of the Employment Policy Foundation.
Most of the growth in real income since 1970 has gone to families in the top 60 percent of household incomes, while income (exclusive of welfare benefits) for those in the bottom 40 percent has barely budged.
Here are some of the reasons:
Income inequality has risen over the past two decades largely because more wealthy women work.
Families in the "middle class" have gotten richer. Between 1970 and 1990, the share of families with real income of less than $35,000 declined about nine percent -- while those making more than $50,000 swelled more than 34 percent.
Those who stress that average income has fallen in the lowest quintile fail to note that since welfare is not counted as income, and there are fewer in those households who work, inequality is bound to increase.
Source: Perspective, "Class Warriors," Investor's Business Daily, March 22, 1996.
Many economists think President Clinton is overly proud of the American economy. But present growth rates would be viewed as a cause for alarm by President John F. Kennedy.
If, over that time, the economy had grown at the rates Clinton calls healthy, 1995's GDP would have been 15.7 percent smaller than it was -- which translates to a loss of nearly $1.1 trillion in annual output, or more than $4,000 per capita in 1992 dollars. It would also amount to 13.4 million fewer jobs.
Economists place the blame for lower growth rates squarely on the twin burdens of high taxes and regulatory drag.
Source: James Carter (Republican National Committee), "Economic Health: Clinton vs. JFK," Investor's Business Daily, March 26, 1996.
The evidence refutes the idea that Baby Boomers and Generation Xers are falling from the middle class in great bunches, even faring less well than their parents.
Yet many Americans are convinced we live in a time of stagnation rather than the reality of record prosperity. One reason is the revolution of rising expectations; another is that we view things once considered luxuries as if they were necessities.
The idea of decline is also fostered by government yardsticks. For example, the consumer price index (CPI) used to track price inflation underestimates real income growth by about 1.5 percent annually. If the CPI were corrected, we would find:
Other statistics also have problems. Cash earnings don't reveal that the share of workers' compensation taken in fringe benefits has doubled since the early 1970s. Median family income statistics don't indicate that the average family had 12 percent fewer members in 1993 than in 1970.
Today's raging debate on "fairness" and family incomes is traditional class warfare rhetoric and should be taken with a grain of salt.
Source: Karl Zinmeister, "Coming This Year: Marx for Dummies," On the Issues, February 1996, American Enterprise Institute, 1150 Seventeenth Street, NW, Washington, DC 20036, (202) 862-7178.
Despite hand-wringing on the part of some politicians over the plight of the middle class, statistics show that if it is disappearing, it's disappearing upward.
Statistics developed by John Hineracker and Scott Johnson at the Center of the American Experiment confirm that those who are moving up are doing so because they are working harder.
Hineracker and Johnson came to the obvious conclusion: upper income families earn more because they work longer hours at more jobs.
Some contend that the 19 million new jobs created during the expansion of the 1980s were mostly low-wage, deadend jobs. But data from the Bureau of Labor Statistics tell a different story.
Consider income mobility, in the light of data from the Treasury Department.
Source: Walter Williams (George Mason University), "Income Lies and Political Posturing," Washington Times, March 29, 1996.