The U.S. Economy: The Sum of the Parts May Be Less than the Whole

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The economic recovery has not only been modest, but wildly uneven across the country. Credit: Bureau of Economic Analysis.

The economic recovery has not only been modest, but wildly uneven across the country. Image courtesy of the United States Bureau of Economic Analysis.

The more things change, the more they are the same — Alphonse Karr

We’ve heard it repeated countless times since shortly after the official end of the Great Recession: things are getting better.

Indeed, although “better” is a relative term and causation can certainly be debated, there have been signs of structural, sustained economic improvement within the U.S. economy, including:

  • Positive economic growth during 15 of the past 16 quarters.
  • Unemployment (at least by official government calculations) falling in July to its lowest level in almost five years at 7.4%.
  • The budget deficit shrinking to nearly half the level seen just four years ago.

Despite the seemingly positive signs, the U.S. government is still actively promoting “help for difficult financial times.” Aren’t we out of the woods in that regard? The answer depends largely upon how one defines “we.”

Macroeconomics versus Microeconomics

In a nutshell, macroeconomics represents the big picture (for example, the U.S. economy), whereas microeconomics measures numbers within a much smaller scope (the family budget). The principle isn’t solely related to countries versus individuals, however; industries can either be macroeconomic when compared to their individual companies, or microeconomic in contrast to the entire spectrum of the overall economy. One could argue that an individual state’s economy could be compared similarly as well.

Utilizing the argument that an individual state’s economy can be considered an example of microeconomics as compared to the whole clearly demonstrates just how disparate the economic recovery has been over the past four years.

Energy-producing North Dakota, for example, boomed during 2012, growing by 13.4%.

Connecticut, on the other hand, saw its economy shrink by .1%.

The west and the southeast, perhaps rebounding more strongly after having been hit disproportionately hard by the Great Recession, seemed to lead the way in 2012, with 11 out of the 19 states which grew at least 2.2% during the year coming from the area.

Income Stratification Within the Economy

An economic theory popularized during the Reagan administration entitled “supply-side economics”(colloquially referred to as “trickle-down economics“) espouses stimulating production by lowering taxes, which ultimately benefit the entirety of the population.

This approach has been largely utilized in recent years during Republican presidencies, whereas Democratic administrations have preferred the Keynesian principles of government spending leading the way toward sustainable growth.

Regardless of the theory, one of the more pervasive talking points of any political climate, but particularly that of the past four years, is the oft-cited “rich are getting richer” mantra.

Without question, much of the available data lends support to the concept. According to the State of Working America, median real income has fallen steadily since 2000. From 2009 through 2011, real growth for the top 1% of income earners was 11.2%, versus -4% for the remaining 99%, according to Light of Moyers and Company.

The math isn’t slanted in favor of the top 1% just during the Obama presidency, however, as the disparity has been pronounced for at least the past 20 years. The difference, however, lies within the fact that we not only saw declines among all classes during recessionary periods, income has also remained stagnant for the majority of Americans during this economy — an economic first.

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