A Very Uneven Recovery

The following chart highlights the fact that the “recovery” since the GFC has left many Americans behind. According to Credit Suisse and the U.S. Federal Reserve, the median American household hasn’t come close to recovering their level of net worth achieved as of early 2007. The shortfall has been attributed to lower ownership rates of stocks and lower housing prices for the least-wealthy groups.

Will the benefits from a reduction in corporate tax rates being considered in the Republican tax proposal filter through to the average American? Unfortunately, they are not likely if the proceeds are used to increase dividends and share buybacks given the low ownership of stocks among the median American household, as opposed to reinvestment in plants, equipment, inventory, jobs, and wages.

Remember, more than 40% of the private sector doesn’t have access to an employer-sponsored retirement plan, and it is an unfortunate fact that the average American household does not save when not contributing to their employer’s retirement plan. Furthermore, income inequality has a negative impact on economic growth rates, so it isn’t surprising that the U.S. hasn’t generated an annual GDP growth rate >3% since 2005, as incomes between the few haves and the many have-nots have grown to its widest point.

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s