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Will pocketbooks pick the president?

Big edge for Obama if the economy – statistically sour – motivates voters, say modelers.

(Page 2 of 2)

But to Robert Greenstein, the news is "disquieting." The executive director of the Center on Budget and Policy Priorities, a Washington think tank keen on boosting the welfare of lower-income people, notes that the poverty rate was lower in 2001 (11.7 percent) – the start of the last recession – than in 2007. Further, never before in the United States has poverty been higher at the end of a multi-year economic expansion (2001-07) than at its beginning. The number (although not the percentage) of Americans living in poverty in 2007 increased from 2006 by 816,000 to 37.3 million. With the economic slump of today, poverty is probably higher now, Mr. Greenstein holds.

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As for health insurance, all of the improvement in coverage last year was achieved through government health insurance programs, principally Medicare and Medicaid, Greenstein notes. Private health insurance continued to "erode."

•Every two years, the left-of-center Economic Policy Institute (EPI) in Washington reviews "The State of Working America" just before Labor Day. The new report finds that although Americans were working harder and smarter, with their productivity resurging in the 2001-07 period by a rapid 2.5 percent annually, all the benefits in income have gone to the well-to-do.

For the first time since the Census Bureau began to keep track in the mid-1940s, real incomes of middle-class families are lower at the end of this business cycle than they were when it started. "Prosperity is eluding working families," the report states.

"It turns out that it is the top 1 percent [of households] – and even the top one-thousandth (or 0.1 percent) that are scooping up the income," the report charges. That top 0.1 percent of families saw their incomes quintupling from 1989 to an average of $30.5 million in 2006.

Moreover, the report notes, there was a 1.1 percentage point decline in the labor force in the 2000-2007 business cycle. That translates to about 1.4 million people who weren't working or actively job hunting. Those out of work for six months or longer rose from 12.1 percent of the unemployed in the 1990s to 19.4 percent in the 2000s.

The EPI report maintains the old saying "the rich get richer" is coming true. Income inequality is higher in the US for any year except 1928. Some $400 billion of pretax income flowed from the bottom 95 percent of earners to the top 5 percent in the last few years, reflecting in part the Bush tax cuts. That's a loss of $3,660 per household in the bottom 95 percent, EPI calculates.

But another old saying, that Americans can work hard and pull ourselves up by our bootstraps does not describe most people's experience. Some income mobility exists. But increasingly that's not the case. For example, about 60 percent of families that start in the bottom fifth of family income are still there a decade later. And 52 percent of families that start in the top fifth finish there at the end of the decade.

Whether such numbers will have any impact on the November election remains to be seen. Greenstein's wish is that the new president and Congress set a national goal of halving poverty over the next decade. Former British Prime Minister Tony Blair did manage to reduce poverty considerably in his decade in office.