Find out the truth about the reality of economic situation in the USA

Find out the truth about the reality of economic situation in the USA.

The indicators of GDP and unemployment confirm the view that the times are good. They say the American economic policy is healthy, and the status quo is working. But there is a different picture. Looking at the homeless people gathered by the Federal Reserve building in Washington. Or when you visit, for example, York, Pennsylvania, where wages have stalled, and the factories have closed.

In fact, most Americans actually are poorer now than they were before.

Driving along Constitution Avenue past the Federal Reserve building in the nation's capital, you can't miss the crowd of homeless people.

The contrast between the place where U.S. monetary policy is conducted and the place where those who don't have a cent gather shows economic reality for many people in America.

The Fed is concerned about the overheating of the economy. All the usual figures tell us that the economy is on the increase. Earlier this month, it was announced that the economy added nearly 214000 jobs in June, with monthly unemployment was 4 %. GDP growth in the second quarter is projected at 3.8 %. The Fed of St. Louis shows, the S&P 500 is up about 280% since 2009. [https://www.stlouisfed.org]

All these measures support the idea that times are good. They tell us that our economic policy is healthy and the status quo is working. They tell us that most Americans should be better than in past generations.

But another picture arises looking at the homeless people at the building of the Fed. Or when you visit, for example, York, Pennsylvania, where wages have stalled and factories have closed. Philip Kalikman is a Yale economist put forward his version of what is actually happening in America.  He found that there was a growing imbalance between the haves and the have-nots.

Total aggregate national income rose slightly. However, the growth of real wages in most cases remained at the same level. More than 50% of income gains from 2009 to 2015 accounted to the wealthiest 1% of Americans, according to Emmanuel Saez from the University of California at Berkeley. The New York Times [https://www.nytimes.com] reported in 2016 that the average American family is still barely more than in the 1990s.

According to the St. Louis Fed. Educational, the cost of basic necessities has increased dramatically since 2000. Educational expenses increased by 132.8%, housing of 59.5%, healthcare 53.4%, and the food 51.6%. During the same period, the average wage of full-time workers increased by only 4.8%. 

Consumer and student loan debt are replacing mortgage debt for many. According to the New York Fed [https://www.newyorkfed.org], young people are so limited in cash and crippled by debt that they form households later. While delaying investment in homes and neglecting other productive investments in their future.

A weakened social protection system has a profound impact. In 2009, families with poor credit were faced with disruptive events such as medical problems or job loss, every 87 days. By 2016, they had experienced such an event every 30 days, according to a book by University of Pennsylvania Professor Lisa Servon. 

At the same time, families on net are working much harder. Mostly because more families have two earners instead of one, according to UC Hastings College of the Law professor Joan Williams. [http://www.uchastings.edu]

So if measures like GDP and unemployment are true, why are large parts of the middle- and low-income groups struggling?

The problem lies is the numbers.  The general measures used to explain the health of our economy, from a macroeconomic point of view, paint a misleading picture. The problem is based on the difference between the aggregate and the individual. If Bill Gates, whose net worth is north of $ 90 billion, moved to the struggling Detroit area, we would measure the average wealth in his new ZIP code as being phenomenally higher in the year when he moved than the previous year. But income for many - in Detroit, annual per capita income is just over $15 500 - hasn't changed.

This situation is characterized by uneven distribution. The more uneven the distribution, the falser the totals and averages. No matter how happy or secure Bill Gates feels, his moving to Detroit won't increase the average level of security of his ZIP code or well-being.

This effect of distribution masks important events in the economic security of Americans. GDP and unemployment percentages as measures of our health are at the heart of the problem. In fact, most Americans actually are poorer now than they were before.

There are a number of policy changes that are necessary to change the economic situation for middle-and lower-income people. First, there is a need to increase infrastructure spending. This will bring double benefits from job creation and improving the highways, bridges and tunnels. Second, education should be provided. Including skills training and a focus on STEM, which do not burden families with debt and which lead to actual well-paid work. Third, it is necessary to support the competitiveness of the business. In particular, by financing the Export-Import Bank of the United States. Its funding cuts have allowed good jobs to bleed abroad.

This brings us back to the job numbers last month. And GDP. And the stock market. They clearly tell us that the economy is strong. However, we need real facts that help our policymarket understand how our society is developing in this economy. We need the Fed and other governmental bodies to use the new measures. These measures should lead to the fact that the economic reality faced by our country. Because if policymakers don't see the problem, how will they know what to fix?

Rubrick: