Read part II here.

Trump’s a man of big ideas and small words.  He keeps it simple.  He tells it like it is.  So when he says that America’s economy can’t take four more years of gross mismanagement, he means it.

But is he right?

Yes.  Despite what Clinton and her media machine claims, America is hemorrhaging wealth, industry, and jobs at a blistering pace, and it’s only getting worse.

Here are the facts.

1. The economy is a slug.

America’s economic growth is the slowest it’s been since the Great Depression; all we need are a few tumbleweeds to set the mood and Herbert Hoover would be right at home.

We know this by measuring changes in America’s gross domestic product (GDP), which is simply the monetary value of all the output (everything from cans of  tuna to the latest blockbuster movie) made within the country during the fiscal year.  A bigger GDP means a bigger economy, and the faster it grows, the better.

But there’s more to it than that.  GDP growth can be misleading, because it doesn’t account for population changes.  For example, if the population grows by 1%, then the GDP needs to grow by 1% just to break even.  Real economic growth occurs when GDP increases relative to the population.

Here’s where things get interesting.  When we account for population growth (which has been rising since the Immigration and Nationality Act of 1965 opened the borders), we find that the economy has been slowing since the 60’s, and it shows no sign of improving.  In fact, since 2010’s “recovery” from the Great Recession, GDP growth per person has averaged 0.15%.  Wrap your head around that for a second.  Can you imagine getting a 0.15% raise every year?  That’s America.

Now prepare to have your mind blown.  The economy grew twice as fast (0.34% per person) during the Great Depression (1929-39).  Yes, it’s that bad.  Believe it.

gdp-growth

2. The rich are getting richer, the rest aren’t.

Income inequality has been growing since 1974, and it’s currently as bad as it was during the 1920s.  Now, unless you’re the Great Gatsby himself and have money to burn, this smells like trouble.

Inequality is encapsulated in a number called the Gini Coefficient (GC): “0” is perfect equality, where everyone earns the same income, while “1” is perfect inequality, where one individual earns everything (leaving none for anyone else.  All you need to know is that a higher GC means more inequality.

Don’t get me wrong, inequality is not necessarily bad, but too much (or too little) is.  Too much inequality, leads to corruption, crime, and political instability (think Brazil or Russia), too little inequality leads to onerous and odious governments (think USSR or Sweden).  Both extremes are bad—a healthy balance must be struck.

Historically, most Western democracies have had GCs somewhere between 0.25 and 0.45, and only very rarely has this range been violated.

gini-coefficient

America long obeyed this rule.  From 1950 to 1974 the GC dropped from 0.421 to a low of 0.394—America was becoming more equal as the economy grew at record pace.  But something changed.  For the last four decades the GC has increased relentlessly, smashing through the “stability range” in the mid-1990s.

America now tops the charts among Western democracies, with an income GC of 0.48.  But don’t worry, we’re in good company with the likes of Russia, Mexico, and China.

Hola political instability.

3. We work more for less.

Median wages have been going down since their peak in 1973.

In 1973 the median hourly wage was $4.14, while in 2014 it was $20.73.  Looks good right?  Wrong.  Although it went up in nominal terms (the number got bigger), in real terms (what you can buy with it), it went down.

If we convert 1973’s median hourly wage into 2014 dollars, it works out to $22.07— which is 6.4% higher than 2014’s median wage ($20.73).  That may not sound like a lot, but it is; over a year it’s almost three grand.  That’s huge.

consumption

That being said, not all wages went down.  Since 1974 most of the economic gains have gone to the top 20% of earners, which is why inequality has been increasing.  If today’s income was dispersed like it was in 1973, then the average middle class household would earn a whopping $90,943 per year, as opposed to $74,434—an eye-popping difference of $16,509 per household.

You could buy a new car every year with that kind of money.

4. The middle class is going extinct.

When wage stagnation meets the real world, the consequences are ugly.

Between 1901 and 1985 the portion of their income that the mean American household spent on wants, as opposed to needs (food, clothing, shelter), increased from 20.2% to 48.6%.  In other words, people could spend more money on things that made them happy, on things they like.  Living standards improved.

Since then it’s stagnated, which is nothing to brag about.  But it’s worse than that.  If we look at median household spending (which is less skewed by rising inequality), we find that spending on wants has actually been declining since the 80s.  In fact, it’s now down at 36.7%—a level not seen since the 60s.

A Word to the Wise

Trump is right.

America’s economy is dying.  While the GDP grows slower and slower, inequality grows faster and faster, and more and more Americans are seeing their quality of life decay.  It’s a national emergency, and something must be done.

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Posted by Spencer P Morrison

JD candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics. Author of "America Betrayed" and Editor-In-Chief of the National Economics Editorial. Say hi on Twitter @SPMorrison_

2 Comments

  1. […] RITUAL”. If you want readers to truly understand how bad the economy is and what our soon-to-be-President Trump can offer, you can’t just post an article with an honest headline and a well-crafted image like we did. […]

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  2. […] these things and projected what would likely happen. You can read about the future of the economy here, Trump’s attitude as President here, the border wall here. A few other things are spread around […]

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