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America the Satisfied and Bountiful

December 02, 2009

By Steven Malanga

It’s been a brutal economic year for some, and the first reports from the holiday shopping season suggest Americans aren’t yet in a mood to reopen their wallets. Yet in the midst of financial turmoil that has some people questioning the very nature of our economy, along comes a U.S. Census report that reminds us just how well our system of democratic capitalism has done over time at creating wealth and spreading it around.

What the report on the dynamics of U.S. economic well-being illustrates is that downturns aside, the standard of living of Americans across the income scale has continued to grow impressively over the decades as more and more of us gain access to modern household conveniences, new technologies and services, and even fancy electronic toys. Rather than wallowing in unfulfilled acquisitiveness, a very large majority of Americans of all income categories, the report also shows, say they are satisfied with their homes, their neighborhoods and their community services, while the number who have trouble affording such basics as utilities services has shrunk to minuscule levels.

The report is a reminder of why the politics of class warfare rarely works in the U.S., why studies of income disparities that don’t accurately measure all sources of earnings including government transfer payments or account for consumption levels are misleading, and why many short-term surveys and reports about widespread discontent among the masses, especially those taken amidst market turmoil, are overstated.

The latest data are from 2005, before our current economic woes, but over the years the results of the survey show a remarkably consistent upward trend since the early 1970s, only mildly affected by economic cycles. Indeed, the previous report in this series was based on 2003 data, when America was emerging from the post-9/11 recession and had suffered through the bursting of the technology bubble (peak unemployment in that cycle occurred in June 2003). And yet that report, too, reflected the same kind of momentum that we see throughout the years.

Progress is, in fact, so commonplace that we don’t think twice anymore about the degree to which our system provides new goods and services through innovation that over time become increasingly affordable, so that what were once considered luxuries are now commonplace, even among the poor. While there are various definitions around the world of what constitutes poverty, few of them probably include life in a society where 97 percent of those categorized as impoverished have a refrigerator, a stove and a color TV, but that is what the latest economic well-being survey tells us. In each of these basic household product categories, the percentage of poor Americans who possess one of these items is greater today than the percentage of all Americans who owned one in 1971, according to St. Lawrence University economist Steve Horwitz, who has studied the census data for years.

But Americans, including those at the bottom of the income scale, are in the process of incorporating an even wider range of durable goods into their homes. Although hardly a necessity, video recorders (including DVD and digital TIVO-style recorders) are now present in 92 percent of American households, including 80 percent of households in the lowest income quintile (annual income up to about $19,000) and 90 percent of homes in the second lowest quintile (annual income between $19,000 and $36,000). More than two-thirds of households now own computers, up from 20 percent in 1992, while 86 percent of households enjoy air conditioning, including more than 8 in 10 households in the lowest quintile.

How are these remarkable gains possible? Easy. Despite talk of income stagnation and of a country where only the rich get wealthier, the cost of many household goods has declined or risen only slowly relative to wages, making more items affordable to virtually everyone. Mark Perry, a University of Michigan economics professor, on his blog called Carpe Diem compares the average price over the last 35 years of durables like washing machines and televisions to the average wage of the American worker.

Whereas in the early 1970s it took 70 hours of work to buy a washing machine at the average worker’s wage, today it takes 21 hours. A refrigerator, which 35 years ago took a worker 90 hours of labor to purchase, now takes 23 hours of labor at the average wage to buy. A color TV: down from 97 hours of labor at the average wage to 16 now. And all of those gains in affordability don’t even account for upgrades in quality and features over the years.

Okay, but while no one in America complains about a “VCR gap” between the rich and the poor, in other crucial areas, the differences are great, no? Shaun Donovan, the Secretary of Housing and Urban Development, says we have an affordable housing crisis in this country and that millions of people can’t find acceptable homes. One of his undersecretaries says there are vast differences in how people live based on zip codes and that the federal government must remedy these through government interventions, such as forcing higher income communities to build more affordable housing.

What do the Census data show? For one thing, they demonstrate that 98 percent of higher income Americans are satisfied with their homes and 97 percent with their communities. But the differences in satisfaction levels are not great along the income scale: 95 percent of those in the second lowest income quintile say they are satisfied with their housing and their neighborhoods, while 93 percent of those in the lowest income quintile report overall satisfaction with their housing and 92 percent with their neighborhoods. Two Americas, one happy and the other disgruntled? Hardly.

During the presidential campaign, President Obama complained that America had become a harsher place under President Bush, where the individual’s safety net had disappeared and our sense of family and community was fraying. But that’s hardly what the data trend suggests. When asked whether they could expect help from outside sources if the need arose, 48 percent in the new report said they could turn to a family member, up from 42 percent in 1992, while 37 percent said they could expect help from a friend, up from 26 percent in 1992, and 23 percent said they could expect it from their church or a social service agency, up from 13 percent in 1992. None of those changes represent a single blip upward but all are part of a steady increase over the course of four surveys in 13 years taken during various economic conditions.

Looking over the Census data series, Horwitz observes that, “Life for the average American is better today than 35 years ago, life for poor Americans is much better than it was 35 years ago, and poor Americans today largely live better than the average American did 35 years ago.” You won’t read that sentiment in many places these days. Indeed, while TV and newspaper reporters are quick to jump on every study Census issues about poverty in America, the survey of economic well being produced barely a ripple in the press. Perhaps we have gotten so used to progress and prosperity that they have become the new normal.

Yes, times are tough if you have lost your job or are suffering through a bad mortgage. But for the vast majority of Americans who have not, buying a little bit less this holiday season won’t be much of a deprivation, it seems.

Original Source: http://www.realclearmarkets.com/articles/2009/12/02/america_the_satisfied_and_bountiful_97530.html

 

 
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