Media Massage

For months now, the mainstream press has latched on to the story of the looming-or-already-happening recession, basing much of its reporting, as always, on the ups and downs of Wall Street. But in a refreshing column in today’s NYT, David Leonhardt touches on a key point that gets lost in the shuffle:

The bigger problem is that the now-finished boom was, for most Americans, nothing of the sort.

He goes on to cite these disturbing stats: At the end of the last economic expansion (in 2000), the median American family made an inflation-adjusted $61,000. At the largely accepted end of this most recent one (2007), the median family income was actually less, at $60,500.

Over the past few years, folks I know who work on Wall Street have certainly been “booming,” making upwards of $400k (these folks are under 30 years old). Meanwhile, most of the people I know — the professors, writers, journalists, and creative professionals — have had a harder time. This is felt in extreme in a place like New York, where the median cost of everything seems to be brought up by those hard-charging Wall Streeters (especially after they decided en masse that homelife in Greenwich Village was preferable to homelife in Greenwich, Ct.).

Speaking for myself and my fiance, we haven’t been doing too bad. In fact, we’re making more money now than ever before. But our wages have risen at a rate less than the costs of living in this new gilded age.

Leonhardt goes on to propose some solutions, namely a new economic program “with job-creating investments in biomedical research, alternative energy, roads, railroads and education.”

He also points out the tax code is a total disaster. As Daniel Brook noted in his great book The Trap, the current tax code isn’t some given — it wasn’t always this way. Writing about Franklin Roosevelt’s actions, Brook notes

To hold down the top, he proposed, first in 1936 and again in 1942, capping annual incomes by instituting a 100 percent income tax bracket. … Congress found his proposal too radical but met him halfway, instituting a 94 percent tax on income over $200,000 (a couple million dollars in today’s money). After the war, the top rate was lowered to 91 percent.

And what happened?

With these policies in place, when the postwar boom (ed: referred to glowingly in today’s Leonhardt column) came, it turned America back into a middle-class society.

Of course, we’ve brought that way down since then. Reagan, upon election, slashed top tax rates for millionaires from 70 to 28 percent, and we’ve only kept rolling down that hill since. It seems like the only way we can come out is to put in place radical plans like FDR’s. But, as the current presidential campaign has shown, that’s far from likely.