A rising tide that lifts only yachts

EZRA KLEIN is a writing fellow for the American Prospect. He also writes a blog at

LAST WEEK WAS a good one for economists, as the normally dour practitioners of the dismal science got to use decidedly non-dismal, even exhilarating, words such as “surging” and “momentum” to describe the new quarterly growth numbers.

And they had cause for such enthusiasm. From January through March, the economy shot forward, growing by 4.8% -- the largest increase in nearly three years and a stunningly rapid recovery after the previous quarter’s Katrina-dampened 1.7%.

Economists, though, aren’t the only ones excited. Floundering amid chaos in Iraq and corruption in Congress, Republicans are grasping at the good economic news of the last few years, seeing in it hints of electoral salvation.


Incoming White House Chief of Staff Josh Bolten has promised “more happy talk about the economy” as part of his five-point plan for righting the president’s poll numbers. And President Bush himself has been bragging that “thanks to tax relief, and spending restraint, and pro-growth economic policies, this economy is strong, businesses are booming and the people in this country are working.”

Strangely, though, the public doesn’t seem to be listening. Americans are more than twice as likely to give pollsters a negative assessment of the economy as a positive one -- 64% disapprove of Bush’s handling of the economy. It’s strange. The macroeconomic numbers are decidedly robust, but the public remains determinedly glum.

If you dig a bit deeper than the base growth statistics, though, the picture clarifies considerably. Our economy has grown so starkly unequal that the statistician’s view now says surprisingly little about the average American’s experience. Last quarter may have seen 4.8% growth, but hidden in those numbers was a depressing factoid: Wages had only grown 0.7% -- slower than housing, health or gasoline costs.

That’s been the story of the last few years, a rising tide that lifts only yachts. It used to be that economic growth ensured wide benefits across society. But the last four years of economic expansion have been historic for the steadily increasing poverty rate -- a depressing sign that inequality has so split the poor from the rich that the two hardly inhabit the same economy.

And it’s not just the poor who’ve suffered. Research released last week by Tom Hertz of American University raised the troubling notion that inequality and economic insecurity have advanced so rapidly that the economic expansion of 2003 and 2004 was, in a variety of important ways, no better for the median American than the recession of 1990-91.

Take mobility. You often hear how our society is losing its permeability, how gumption and hard work no longer reliably propel you up the social ladder. What’s not been mentioned is that, for everyone but the wealthy, it’s become a whole lot easier to slide down.


From 1990 to 1991, 13% of households saw their income decline by $20,000 or more in real terms. In 2003-04, it was 16.6%. And the difference didn’t come in steep falls for the rich; rather, the top income quintile saw a reduction in negative income mobility.

As for good ol’ upward mobility, the median household was no more likely to move up the economic ladder during the 2003-04 expansion than it was during the 1990-91 recession. Think about that for a second -- the average household’s income was just as likely to increase during the last severe recession as the latest expansion. For most, the good times now are little better than the bad.

Meanwhile, health costs have increased almost 75% since 2000. And, according to a just-released study by the Commonwealth Fund, lack of insurance has become a decidedly working-class problem, with nearly 70% of the 49 million uninsured hailing from a family with at least one full-time worker.

Add in gasoline that’s merrily creeping right past the $3.50-a-gallon mark, and a scorchingly hot housing market, and it’s no wonder Gallup’s “worry index” -- a poll tracking public fears on seven economic issues -- has recorded its highest-ever reading, marking us as the most economically anxious public since its inception six years ago.

The economy, despite what some economists and politicians think, isn’t an abstraction, it’s an experience. And the average American isn’t experiencing 4.8% growth; he’s experiencing increased income insecurity, wages lagging behind prices and deteriorating health benefits. Strong as the growth might be, a strong economy isn’t much good if it’s using those biceps to pummel the working class.