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Dispatch from Er Uh Cliffie ...

. Goin' out on a limb, dare, forcing the Republicans to say "conspiracy theory" again in public. That's the worst thing they can do, there, Normie, since every thinking person in this country knows that there really WAS a conspiracy and the Republicans really DID steal this election, as well as the one in 2000.

Social Security and the Income Gap

So you saw the Washington Post's story two days ago revealing that Bush's plan for Social Secuirity will just about halve benefits available to retirees 20 years from today? If I wasn't a postal worker I'd be really worried--or maybe not. See, the way Bush plans to do this is to stop increasing SS payouts according to wage increases--which is how it's been done since 1977--and instead use the overall rate of inflation.

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Historically, American wages have increased faster than inflation generally. That's why this is seen as a cut.

The Dems have gone nuts. My inbox at City Paper has got something like 60 emails over the past two days, from people screaming about this. The Republicans claim it'll save money and since the SS program is "in crisis," this is the fairest way.

The Dems say--factually--that SS isn't really in crisis and now Bush is about to destroy it in order to hew to a ridiculous idealogical fantasy and hand over a bunch of money to Wall Street managers. This is true and obvious, but they're bashing Bush now for a cut that might be no such thing, because neither side in the debate wants to acknowledge the central, mean fact of life in working America that's remained in effect since the Carter Administration.

Put plainly, wages DIDN'T keep up with inflation.

But wages ALWAYS surpass inflation rates, right Normie?

Actually it's (or it should be) a well-known fact that, for at least the bottom 40 pecent of income-earners, wages have been flat or have fallen over the past 30 years or so.

using census data, published in 2002.

examining income, wages and hours worked--showing that income would have fallen much more if not for increases in working hours. Not surprisingly it's still happening now, according to government figures

.

Boiled down, the real deal is this: Wages on average have increased relative to inflation since the 1970s, but the story is very different for different classes of wage earners. For the highest-earning 20 percent, inflation-adjusted wages have increased dramatically. For the lowest 20 percent, they've gone down quite a bit. The middle three quintiles have been comparably stable, but the poor have gotten poorer while the (relatively) rich have gotten richer.

In hard times incomes fall broadly, when measured against inflation. Between 2000 and the end of 2003, the

about $1,500. In good times the top four quintiles gain--with the best off doing the best and the fourth gaining very little. During booms the poorest quintile stays still, relative to inflation, according to long-term data trends examined by the EPI and others; during recessions the poor lose ground, which they do not make back during good times.

Don't like the EPI because they're too associated with unions? Sorry, bunkie, the data is the data.

, this one by Harvard University examining housing trends: "While home prices and rents have continued to outpace general price inflation, inflation-adjusted incomes of households in the bottom two quintiles have been nearly flat since 1975."

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Don't like Harvard because it's in Massachusetts, which is part of France? Here's a Red State approach (the

): "Over the last five years, the bottom quintile increased by only $40 (0.4%). This is below the inflation rate. Looking at Table 1 and Figure 1, wages in the years 1995 and 1996 actually decreased. On the other hand, the top quintile increased by $5,668 (10.7%) over the last five years (see Table 2 and Figure 2). There was never a decrease in wages in the top quintile over the five-year period." (And this is data from 1993-1998--the alleged "boom years" of the new economy).

So the data is the same in Laramie and Lawrence, KS, from Miami to Maine and San Diego to Seattle. And most economists--though they don't emphasize their feelings on the matter (being firmly ensconced, as a class, in the top two quintiles), believe that this trend will continue well into the future. That's part of the wonder of "globalization." Cheaper goods manufactured overseas by poverty workers keeps inflation low while removing high-paying factory jobs from (formerly) industrialized nations like the U.S.A. That depresses wages at the low end, since all those workers must find new jobs in a job market that isn't creating so many low skilled jobs. Supply and demand, classic.

In fact, this lowering of the standard of living (for at least the poorest 40 percent of Americans) has been deliberate policy since at least 1979. That was the year Presient Carter's new Federal Reserve Chairman, Paul Volker, infamously said: "The standard of living of the average American has to decline...I don't think you can escape that."

Now, no Fed Chairman since Volker's time has repeated this policy prescription explicitly, but Alan Greenspan's cheerleading for outsourcing and his manic effort to keep "inflation" low is well-understood to be a "low wage" policy.

Greenspan (with many others) often claims the U.S. has "the highest standard of living in the world." But this is demonstrably false by almost every measure--and Greenspan knows it, as evidenced by this

. (Sanders calls Greenspan on his "highest standard of living" nonsense; Greenspan backpedals smoothly, saying that "For a major industrial country, we have created the most advanced technologies, the highest standard of living for a country of our size." --As if being a very large country somehow hinders the development and maintenance of a high standard of living?)

The deepening crisis among America's ordinary wage earners could not be plainer. Yet the facts don't stick--and don't even fully register among EPI's lefty economists. I called one up today to ask about falling wages and their likely effect on future SS income for low wage workers. My theory is that, given the long-term trend at the bottom 40 percent of American wage earners, an index to real inflation may actually benefit the lowest earners.

William Spriggs, a senior fellow at EPI and its point-man on the SS debate, says no way.

The reason for that, Spriggs explains, is that most people do not remain stuck in the bottom 20 percent for their entire career. "The bulk of folks over their lifetime at least move up one quintile," he says, "So people at the bottom would still get a cut" in benefits under Bush's plan.

Then too, Social Security has always skewed its benefits upward slightly for the lowest earners. "So the fact that people at the bottom have not tended to have much lifetime gain does not change the reality that you're cutting benefits dramatically by just going to price index," Spriggs says.

Maybe Spriggs is right. (

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) Then again, maybe it's time to broaden the debate over Social Security (and Medicaid and Medicare, which are in much more dire financial straits than SS) to reflect the basic reality of falling wages among a substantial fraction of the American population. Given the trends of the past three decades, the America of 2050 may be a much harsher place than that envisioned by even the most pessimistic of Social Security's would be "reformers."

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