Stones Keep Raining
Update January 2017: I redid the figure with more recent data
Paul Krugman hits hard on one of the most cherished american myths, the golden years of Reaganomics. He shows that using the middle class as a benchmark (the median family income of the economy), the Reagan decade saw a disappointing performance; this, not only if compared to the longest expansion in post war history, during the Clinton presidency, but also with respect to the much less glorious 1970s.
But, maybe, Krugman is telling a story of inequality, and not of sluggish growth. The fact that median income did not grow much during the Reagan years may not mean that growth was not satisfactory, but simply that somebody else grasped the fruits.
For curiosity, I completed his figure with average yearly growth rates for two other series: Income of the top 5% of the population, and the growth rate of the economy.
Well, it turns out that Reaganomics yielded increasing inequality and unsatisfactory growth. And well beyond that, median income consistently under-performed economic growth in the past forty years.
What seems extremely robust is the performance of the top 5% of the population. Their income increased significantly more than output over the past decades. It is striking in particular, how the very wealthy managed to cruise through the current crisis, when income of the middle class was slashed.
Nothing new, Ken Loach in 1993 said it beautifully: it is always raining stones on the working class. But I guess it does no harm to remind it from time to time…