Friday, May 14, 2004

Where's The Trickle?

Christian Weller from the Center for American Progress has just released an economic report that is less than sanguine. It is summarized as follows:

"This is an “upside down” economy, whereby profits are soaring to record heights, while personal income grew at the slowest rate in any recovery. The lack of income growth threatens the sustainability of the recovery. So far, households have compensated for the lack of income growth by borrowing more. This cannot continue endlessly. Unless consumption is financed out of income, economic growth is likely to slow. Historical precedent supports the notion that stronger income growth means stronger economic growth. When income growth was stronger in a recovery, households increased their debt less, governments borrowed less, and the trade balance improved more. In sharp contrast, this recovery has seen comparatively low economic growth rates, record household debt, deteriorating government finances, and record trade deficit levels. Because the distribution of national income gains was upside down, this recovery is debt driven and hence less sustainable than otherwise would be the case."

The full report can be viewed here.

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