Are We Better Off Now Than We Were Thirty Years Ago?

Writing in the Business section, David Leonhardt tackles the question that Times columnist Paul Krugman recently uncorked - have middle class living standards actually risen over the last twenty five years, or have they stagnated?

His answer - yes.

...progress is easy to take for granted. Clearing a driveway without a shovel, buying an affordable cross-country plane ticket and — on a totally different scale — watching a very premature baby survive are all accepted parts of life today. They’re also fairly recent developments.

Polls show that Americans, in fact, understand this. By wide margins, they say they live better than their parents. “Looking backward,” the Pew Research Center reported last week, “Americans were more inclined to say they had made progress than were the publics of any country surveyed in Europe or the Middle East and most of the countries surveyed in Asia, Latin America and Africa.”

Part of the explanation is technological progress; another part involves problems with measuring inflation.  IF, as many economists believe, the CPI overstates actual inflation, then over long time periods the difference can add up:

By overstating inflation, the official numbers understate the country’s wealth, since every meaningful calculation of income subtracts inflation. The Census Bureau, for instance, says that the median-earning man who works full time — the one in the dead middle of the earnings ladder — made slightly less last year than in 1977. It is one of the main numbers cited by those who say life isn’t much better now than 30 years ago.

But Mr. Gordon’s adjustments show that men actually got a 27 percent raise in this period and women 65 percent. The gains are not as big as those of the 1950’s and 60’s, but they do sound far more realistic than the official numbers. Think about it: we live longer than people did in the 1970’s, we’re healthier while alive, we graduate from college in much greater numbers, we’re surrounded by new gadgets and we live in bigger houses. Is it really plausible, as some Democrats claim, that the middle class has made only marginal progress?

Personally, I am all in favor of seeing a wealthy economist like Paul Krugman appearing in public and ranting to the middle class that their lot has not improved.  These performances make him appear to be an out-of-touch Ivory Tower academic without actually changing any minds; we can only hope that John Kerry, to pick a name at random, will amplify the effect by joining in.

MORE:  Some recent analysis from Paul Krugman on this very topic:

Since 1973, however, the picture has been mixed. Real median household income — the income of the household in the middle of the income distribution, adjusted for inflation — rose a modest 16 percent between 1973 and 2005. But even this small rise didn’t reflect clear gains across the board. The typical full-time male worker saw his wages, adjusted for inflation, actually fall; the typical household’s real income was up only because women’s wages rose (although by far less than everyone’s wages rose during the postwar boom) and because more women were working.

The debate over the state of the middle class, for the most part, is about whether these numbers understate or overstate the true progress achieved by typical families. The optimists point to technological advances that, they argue, don’t get reflected in official estimates of the standard of living. In 1973, you couldn’t chat on a cellphone, watch a video or surf the Internet; many medical conditions that are now easily managed with drugs were untreatable; and so on.

The pessimists point to ways in which life has deteriorated, things that also aren’t counted by the official statistics. Traffic has gotten far worse, and commutes have gotten longer. The economic riskiness of life has increased: year-to-year fluctuations in family income have grown much larger. The rat race has intensified, as families, no longer confident in the quality of public education, stretch to buy houses in good school districts — and often go bankrupt when misfortune strikes in the form of a layoff for either spouse or high medical bills.

Does the good outweigh the bad? Never mind. As I said, the ambiguity is the message.

...

Yet in spite of all this technological progress, which has allowed the average American worker to produce much more, we’re not sure whether there was any rise in the typical worker’s pay. Only those at the upper end of the income distribution saw clear gains — gains that were enormous for the lucky few at the very top.

That’s why the debate over whether the middle class is a bit better off or a bit worse off now than a generation ago misses the point. What we should be debating is why technological and economic progress has done so little for most Americans, and what changes in government policies would spread the benefits of progress more widely. An effort to shore up middle-class health insurance, paid for by a rollback of recent tax cuts for the wealthiest Americans — something like the plan proposed by John Kerry two years ago, but more ambitious — would be a good place to start.

Just to note - in his discussion of optimists and pessimists and technological progress, Krugman never noted th edebate about specific technical issues with the use of the CPI to calculate real incomes (and the attendant underestimate of increases in real income).  Since his acolytes insist that Krugman would never let his political views impact his economic analysis, I am at a loss to explain it.

However (and it seems unfair to rely on the unforgiving memory of the internet), Krugman was on the other side of these very same debates when Clinton was President:

...in December a blue-ribbon panel of economists headed by Michael Boskin of Stanford declared that the Consumer Price Index had been systematically overstating inflation, probably by more than 1 percent per year for the last two decades, mainly by failing to take account of changes in the patterns of consumption and improvements in product quality.

Even the bureau's technical adjustment was controversial, because it seemed to deflate business boasts about a "productivity revolution" in recent years. The Boskin report, however, ignited a firestorm of criticism. Partly this was because of the link between the C.P.I. and Social Security payments, which meant that any downward revision in the index would strike directly at retirees. Many of the Boskin report's harshest critics, however, were outraged because it repudiated a view of the economy on which they had staked their reputations and built their careers. For if inflation has been exaggerated, then the growth in real wages has been understated - and so the whole story about how companies are not sharing productivity gains with their workers evaporates.

To be fair, there are not many professional economists among those who are wailing and rending their garments. On the contrary, most economists who study the relationship between productivity and wages are relieved at the more or less official admission that some of the published numbers may have been way off, because they already knew there had to be something wrong. When you tried to put the data together into a consistent story about what has been happening to America, you discovered that the supposed facts just didn't fit together.

...

There are still many details to settle. The Boskin report, in particular, is not an official document - it will be quite a while before the Government actually issues a revised C.P.I., and the eventual revision may be smaller than Boskin and his colleagues propose. Still, the general outline of the resolution is pretty clear. When all the revisions are taken into account, productivity growth will probably look somewhat higher than it did before, because some of the revisions being proposed to the way we measure consumer prices will also affect the way we calculate growth. But the rate of growth of real wages will look much higher - and so it will now be roughly in line with productivity and wages with data that show a roughly unchanged distribution of income between capital and labor. In other words, the whole story about workers not sharing in productivity gains will turn out to have been based on a statistical illusion.

It is important not to go overboard on this point. There are real problems in America, and our previous concerns were by no means pure hypochondria. For one thing, it remains true that the rate of economic progress over the past 25 years has been much slower than it was in the previous 25. Even if Boskin's numbers are right, the income of the median family - which officially has experience virtually no gain since 1973 - has risen by only about 35 percent over the past 25 years, compared with 100 percent over the previous 25. Furthermore, it is quite likely that if we "Boskinized" the old data - that is, if we tried to adjust the C.P.I. for the 50's and 60's to take account of changing consumption patterns and rising product quality - we would find that official numbers understated the rate of progress just as much if not more than they did in recent decades. (Many observers would argue that the qualitative changes in the way ordinary people lived were far greater between 1945 and 1970 than between 1970 and the present.) The popular impression that the first postwar generation experienced an immense improvement in living standards, while the second did not, is still correct; the American dream may not be dead, but it is certainly not what it was.

Someone could sell tickets to these Krugman v. Krugman debates.

YES, BUT:  Brad DeLong presents a cogent summary of alternative viewpoints.  Here he quotes Jared Bernstein:

But... this middle-class debate... I fear it’s a distraction.... [R]ight now, those of us who seek a different set of policy responses to the big challenges we face... would be better off talking much more about that agenda, and not arguing over whether the middle class is better off relative to 30 years ago.

And here is the Prof himself:

Think about it. If there is 20% of CPI bias in the past 30 years, then median male real earnings have risen by 30% instead of the 10% in official statistics. But real national income per capita has risen by 125% rather than by 90%. A country that is so phenomenally more productive than the country of the mid-1970s should be able to do a much better job at providing an economic environment in which all Americans can have greatly improved income security, education for their children, and leisure time, as well as a much greater share in the rises in real material standards of living of which the rich have grabbed the lion's--no, much more than the lion's, the tyrannosaurus's--share.

Their are two related debates here - how do we optimize the growth of the economic pie, and how do we slice it in accordance with some concept of efficiency, equity and justice?  An alternative to the view expressed by Brad DeLong is that low taxes and flexible labor markets (to pick two factors) contribute to both the growth and the slicing of the pie, so that folks who want a re-slicing need to address the implications of that trade-off.  Europe springs to mind as providing examples of countries with less income inequality, higher taxes, more protected labor markets, and no ability whatsoever to create jobs and absorb immigrants.  It may well be that the policies they have chosen to guide the slicing of the pie also impede its growth.

METAPHOR MANGLER NEEDED:  I am not a baker, but yes, my impression is that pies can boil over but rarely "grow".  Whatever.

Comments

[Other Tom]

The world's richest man 25 years ago, I think, was probably J. Paul Getty. Whoever it was, all the money he had couldn't buy him a cell phone, a DVD, an I-pod or a knee replacement--and I could go on endlessly. On the other hand, he would not have had to put up with Paul Krugman.

[Tim K]

Gregg Easterbrook wrote a fascinating book on this subject, The Progress Paradox: How Life Gets Better While People Feel Worse. The first chapter demonstrates the remarkable degree to which standards of living have improved over the last century, and continue to improve all the time. The rest of the book is devoted to exploring why so many people have the feeling that things are getting worse and worse.

[Elliot Essman]

No question: wealth will find its level. Wealth was one issue many generations back when when it was marshalled by but a few; now that it affects so many other players it takes on a difference in kind.

[Slartibartfast]

Twenty-five years ago I was a college student and had no money. So, yes, I'm better off.

OTOH all I had to do was work my ass off all summer, and I got to drink beer, eat pizza, and hang out with friends pretty much the rest of the year (ok, so I had to also study once in a while), so it's arguable whether I'm "really" better off. But I think this is not really the point.

[Slartibartfast]

Oh, and 25 years ago I had to type stuff like this on a dumb text-only terminal that hooked into a computer that I had to share with, at any given time, a few dozen other people. A computer with all the blazing speed of a 50 MHz 486, on a good day.

But we had Adventure, so there's an upside.

[J]

"IF, as many economists believe, the CPI overstates actual inflation,"

How many? 2? 3?

The CPI is politically run to understate inflation to 1. keep down rates on indesed bonds, 2. politics, ruling party and bureaucratic.

One must live in la la land to think the CPI overestimates inflation. To keep calcs down they've removed real estate and oil prices!

[The Unbeliever]

Twenty-five years ago, I would have had to spend time writing out a letter to the editor and paying the cost of a stamp if I wanted to call Paul Krugman an idiot publicly, and I had to wait a few days for it to reach the papers. Now, I can call him an idiot for free instantaneously, with nearly unlimited room to list the reasons why!

If that's not progress, I don't know what is.

[Gary Maxwell]

Unbeliever Maybe you have made an argument for the status quo. Krugman is an idiot and 25 years ago Krugman still would have been an idiot. Nothing has changed!

[Rick Ballard]

J,

The CPI includes fuel costs under the transportation component as well under the index for household fuels. It's true that the use of owner's equivalent rent rather than some approximation of real estate sales information is used but I don't know anyone who buys a new house every month.

I'm curious as to the source of your contention concerning understatement because the BLS has included those components for a very long time.

[Neo]

Funny how this is over 25 years, with at 1981 start point.

In 1981, with the Carter inspired inflation (17%) and unemployment rate (going to 12%) still going higher, Reagan let Fed Chairman Paul Voker continue his program of slamming the brakes of the economy.

If you start in 1981, virtually anything is better. If you use instead 1983 to early 1984, it is even better yet.

[clarice]

I'm with unbeliever. OTOH 25 years ago I wore a size 2 .

[Wilson's a liar]

I was surprised to see this in the NYT today, though it was buried in the Business section.

Krugman's right in one sense. The middle class in New York City is worse off, thanks to rent control, ridiculously high taxes, and deteriorating public schools. None of which have anything to do with national economic policy, and everything to do with meddlesome liberal local policies.

[Thomas Williams]

- Nearly 10% of all African American men ages 25 to 29 are in prison. The U.S has one of the highest incarceration rates in the world. Over 2 million people are currently behind bars in the U.S..
- Have you seen the state of public schools in Baltimore, D.C., Cleveland, Philadelphia, New York or even inner-city Lincoln, Nebraska?
- The U.S. infant mortality rate ranks down there with Croatia and Cuba.
- Each month Americans roll an average of $10,000 in credit card debt at 17% interest.
- The U.S. National Debt is over $8 trillion dollars.
- 40 million Americans have no health insurance whatsoever.

[dick]

Clarice,

According to an article I read last week if you buy from the right dress sales clerk you can still wear a size 2. The article was mentioning that a size 8 from one company was the same as a size 2 from another. They were catering to women who did not want to admit that they were a little bigger than they used to be.

OTOH, based on the letter you wrote re Fitz and Plame, any size you are is just wonderful and so are you.

[Jane]

25 years ago I was half way thru an MBA and had decided to go to law school. Since that time I have obtained said law degree and paid off all those student loans - which might have been my biggest accomplishment ever - the loans not the degree. I was also working as a maid and a bartender. Thank God that era is over. As I recall said student loans were at the very low rate of 9%, and no refinancing options at a lower rate were available.

Paul Krugman is an idiot.

[dick]

Thomas,

What were the numbers from 25 years ago? As I recall the education was similarly terrible but was not emphasized, the African Americans were still in prison and validly so from the crime rates they put up, I question your numbers on credit card debt since most of the people I know are using debit cards rather than credit cards these days, the US debt as a proportion of the national economy is lower than it has been in years including the Clinton years, and what are the statistics for health insurance at that time - probably about the same.

Of course 25 years ago the shift from the unionized and highly taxed blue states of the North had not happened yet or was just starting. It took the concerted efforts of a Dukakis admin in Mass and a few other initiatives by the LLL dems to run the cost of doing business up so high that the smaller companies moved out and the new businesses moving in went down there instead of into the North. I still remember when Dukakis and his legislature passed a law that was so coercive to small companies that the whole of northern New England went into a recession with lost jobs all over the place and foreclosures becoming the norm. That started the loss of jobs and population in those states and it is still going on today. That is something that you cannot blame on the federal government.

[Old Dad]

Thomas Williams:

You can thank William Jefferson Clinton for the high incarceration rates of African Americans. That cracker hired 100,000 new policepeople! Or maybe it was Rudy. Shucks, it's bipartisan, maybe. Americans prefer that criminals be incarcerated.
The French prefer that they become Secretary General of the UN.

And the public schools are not so great. Truly and in all sincerity I mean that. Yet despite the NEA this country and economy keep churning out remarkable growth, new technolgies, increases in productivity. Just think what we could do if Johnny could read!

And the dying premies are tragic, and our credit habits suck, and young people don't see the sense in spending a Ben Franklin a month on health insurance--they're going to live forever, remember?

And the trade deficit. Oh My God, the trade deficit! But what about the emigrant deficit. My goodness, the world is dying to follow their immigrants and trade goods into this hell hole, but very few of us have the good sense to leave.

Maybe you and Mr. Krugman can explain.

[Neo]

The poverty rate is about the same as 1981, but of course since there are more Americans, there are more Americans in poverty.

Of course, the US has one of the best "poverty" standard of living in the world.

But after 40 years of the "War on Poverty," there still is no exit strategy. This is LBJ's real "quagmire."

If you check the poverty rates, you will see that the rate is down from 40 years ago, to almost half.

[Patrick R. Sullivan]

'Krugman is an idiot and 25 years ago Krugman still would have been an idiot.'

Actually no. He was working for Martin Feldstein in the Reagan CEA.

He only started hemorraghing IQ points with the election of George W. Bush.

[maryrose]

25 years ago I was finishing my Masters in Education with a degree in Guidance and Counseling and working 3 part-time jobs to afford graduate school. I re-used tea-bags and drank dollar beer. I came out owing no loans and got my first counseling job that summer. I then bought my first car and moved out of my parent's house a year later. You did seem to get more bang for your buck back then. Since having children I have gone from spending hundreds a month to thousands because of college costs
etc. Our house and cars are paid for and we can vacation a couple of times a year. The only difference now is to be middle class both parents have to work.

[Other Tom]

"The CPI is politically run to understate inflation to 1. keep down rates on indesed bonds, 2. politics, ruling party and bureaucratic."

Eh? As I recall, 25 years ago most Americans could read and write English. This mangled passage suggests a bit of slippage, at least in some quarters.

Also, recall that 25 years ago we had just kicked Jimmy Carter resoundingly out of office in a humiliating fashion that has scarred him emotionally for life. Hard to get better than that.

[clarice]

Thanks, Dick...

[Jeff]

Look around at the number of people driving "land zeppelin" class RVs and 5th Wheels down the road during the summer.

I'm pretty much convinced that the current "retirement class" has it the best it's ever been. It's gonna be hard to keep up with them.

[clarice]

Jeff, we certainly are not "the greatest generation" but we lived thru Jimmy Carter and lived to tell about it. We deserve a decent retirement. Yeah, it might be at your expense, but don't blame me. I was for Social Security reform.

[Soylent Red]

25 years ago? I can barely remember 25 years ago. By that standard they must have been better for me...

Krugman is an ass, and therefore a typical economist. Make the numbers fit the assumption...

CPI is perhaps useful in a wonkish way, and any delta over time in CPI might be somewhat interesting, but it is only one measurement of "wealth" or standard of living.

Take, for example, the huge increase in home ownership and investment. Seems to me these might be important things to look at.

Over and above technology and health improvements, look at consumption as well. Not just how much we're consuming and how much it costs, but what we are consuming and why. Last time I looked, the middle class was buying a lot more than they really need, so much so that it has contributed to reduced savings and increased use of credit cards.

If you believe the "Freakonomics" principle that economics is fundamentally a study of motivation, and since Krugman is an economist (a studier of motivation), perhaps he'd like to drive through my neighborhood sometime and take a look at all the middle class people who are somehow motivated not just to get by, but to live in what would be considered extravagance in 1981.

So, are things better? I don't think anyone can really say for sure across the entire "middle class", but better is a relative thing. We certainly have more stuff these days, and I would suggest that to most people owning your own home, complete with a couple of jet skis and a 63-inch TV trumps CPI data.

If those poor jerks only new how miserable they were.

Which speaks to the real purpose of Krugman's writings. Whether or not the numbers back it up, it is important that people feel worse about things.

[clarice]

Just before 15,000 old people died in the Paris "heat wave" didn't he praise the French way of life?

[lrC]

>The U.S. infant mortality rate ranks down there with Croatia and Cuba.

The US measures infant mortality differently from most countries. In fact, there are many discrepancies between nations as to what qualifies as a life birth (and hence might qualify as an infant death). Infants born in the US who die within a few hours of death are recorded as infant deaths. Most other nations record them as stillbirths or some other category, so they underreport their infant mortality rates. This includes most developed nations.

Also, because the overall standard of health care is so high in the US, more borderline viable foetuses survive to term, or at least to be birthed earlier than term. This further increases the measured US mortality rate relative to that of nations in which the foetus would never have survived as long.

[Paul L.]

- The U.S. infant mortality rate ranks down there with Croatia and Cuba.
Thomas,

Infant Mortality: The statistical scam continues
"while there is a standard for reporting infant mortality statistics throughout the world, it appears only the US follows it."
That and the US tries to save babies that the other countries write off as still births.

But hey Cuba has a free health or so Castro and his acolytes say.

[Gary Maxwell]

Dick you are recalling what once referred to glowing and with pride by Democrats as the "Massachusetts Miracle". For some unknow reason the wheels just came off. I blame Rove.

Of course, the US has one of the best "poverty" standard of living in the world.

You are making one of my favorite points. The US is one of the few places on Earth where "poor" people are more likely to be overweight than the general public. Comes from eating too much while sitting watching the big screen color TV. Seriously.

[Rick Ballard]

"It's gonna be hard to keep up with them."

Jeff,

Take a look at this fact sheet. The fact that there is $14 trillion in private hands (not counting a dime of SS) dedicated to the golden years would indicate that the best is yet to come.

It would be hard to come up with another aspect of economics that bodes as well for the future as a fourteen fold increase in the amount of retirement savings over 25 years. The fact that the number is exclusive of SS assets means that every dime the old fogies don't spend flows down to the next generation - for good or ill.

[triticale]

J suggests that inflation of real estate prices means I'm worse off. Dude, that, and the Gingrich-era "tax cuts for the rich" that let me keep that money is one of the biggest reasons I'm better off.

As for trade deficits, the one I'm running with the grocery stores doesn't bother me at all.

[richard mcenroe]

But can our wealth, our health, our property, our access to limitless information, our unprecedented access to education, our freedom to travel as never before in human history possibly mean while George W. Bush is President? I swoon, I lament, I fall at the feet of my Yurpeen betters...

[Henry Woodbury]

For a big, tangential, historical view I recommend Hugh Thomas' Brief History of the World. A running theme through the book is the difficulty in analyzing whether any time was the best or worst of times. How can you tell when the commentators in any time always complain.

[Sue]

25 years ago the Yankees hadn't figured out that Texas doesn't have an state income tax. Once it became known, Texans started talking with funny accents.

[Tom Maguire]

How can you tell when the commentators in any time always complain.

That explains a lot - Krugman has adopted his ton eto assure his spot in history.

[Sue]

Not to sound racist or anything, but 25 years ago we didn't have the population we have today. And by that I mean illegal immigrants that can't speak the language and live in poverty by US standards. But continue to flood across the border because our poverty is their rich man.

[Sue]

ton eto assure

For a minute there I thought that was a Latin phrase or some foreign language. Took a context reading to figure out it was a typo. ::grin::

[Ari Tai]

Seems we continue to ignore the benefits of regulation. Regulation is a forced purchasing choice for a consumer, they are "buying" the results of the regulation in terms of increased costs born by these companies and reflected in the price (or in the case of zoning, various forms of rent seeking).

Mr. Clinton (and the unseemly collaboration between courts and agencies to increase agency reach and budgets by writing new law in court supervised "settlements") left us with double the costs in regulation at the end of his last term, some only levied recently (arsenic, ...).

Clearly these "benefits" need to be added back as wage offsets for the poor and middle class wage. It'll be another five years before growth offsets these "giveaways."

[M. Simon]

If you want to incarcerate a lot of lower class (economic and otherwise) people initiate a prohibition regime.

It worked in the 1920s it is working now.

BTW even poor people are better off in America. Used cars are cheap. New computers that would have been considered radar sets (frequency wise) in 1943 are affordable.

We have a world wide teletexts system that is available to the poorest for free at your local library. Thrown in with that is one of the most extensive libraries in the world with a card cataloge that is relatively easy to search.

We live in a age of magic. And every year it gets better.

[Soylent Red]

Comes from eating too much while sitting watching the big screen color TV. Seriously.

It's partly that.

But I have a good friend who is a food scientist who suggests that it has to do with the food choices available to the poor, and the food choices they tend to make within their price range. Since he's about as far from being a health food Nazi as a person can get, I trust his opinion.

One of his big crusades is against processed food. Hamburger Helper for example. Extremely high carbohydrate and sodium content in the box, coupled with low end 70/30 or 80/20 hamburger. The end product is something that wouldn't be so bad once in a week, but that you wouldn't want to make a steady diet of. But that's what poor people can afford, so that's what they eat.

From experience, every time I go grocery shopping I am amazed at how much more it costs to eat healthy.

The other side of my buddy's gripe is that poor people are disproportionately likely to eat fast food and consume soft drinks. Fast food is well known for being fattening if a regular part of a diet. It's also quicker and easier to prepare. You don't have to know anything about cooking to whip up a box dinner.

The poor (and I think it goes without saying, less educated) don't equate processed food with fast food. It seems like a cheap home cooked meal and therefore nutritionally superior to a double Quarter Pounder and fries. Until you read the box, which many don't do, or wouldn't know how to do if they were so inclined.

What, I guess, many poor people also don't know that soda, and even diet soda, contains a lot of high fructose corn syrup as a sweetener.

I don't remember the actual numbers, but high fructose syrup is much more fattening than cane sugar. Something to do with the way we metabolize sugars. The growing prevalence of Type II diabetes among the poor has been directly linked (by way of obesity) to soda consumption. It's also been linked to hyperactivity and even depression.

So if you believe my buddy the food scientist's rants, poor people in the U.S. could be made more healthy and less obese by getting them to change their diets, whether or not we get them off their butts.

Not trying to advocate a nanny state or anything, but among all of the stupid things they are teaching kids these days, maybe we could find a little time to squeeze in the time honored food pyramid?

[clarice]

Actually, if you shop at farmer's markets and big box stores you can eat . food are remarkably low cost. Most poor people do not have easy access to those sources and shop at small neighborhood markets which are stocked with highly processed foods and snack items. It also takes time and effort even on a larger budget to cook nutritious meals,and one problem common to the poor in America is the inability to plan .

[clarice]

***eat nutritious food aT remarkably low cost**

[rosignol]

You did seem to get more bang for your buck back then.

Inflation will do that... I found an old mail-order catalog from the mid-80s a while back, and the things in it were insanely cheap by today's standards (with the notable exception of the computers- what cost $2000 back then will cost you $5 now- to get rid of it).

Of course, back in 1981, people didn't make nearly as much as they do now. Especially when you take the years of 'stagflation' immediately prior into account.

[clarice]

On some things, competition and internet purchasing have made things cheaper than they used to be. In DC there used to be just a few big retailers and 2 major grocery chains and there was no convenient way to purchase elsewhere. Household appliances, home linens, in fact, anything prodcued substantially overseas seem to me to be extremely competitively priced.

Children's clothing and toys BTW are a fraction of what they cost in Europe where household income is far less.

[Soylent Red]

Clarice:

I don't think that the inability to plan is specific to the poor, at least not when it comes to food. Cooking is a colossal pain sometimes, particularly when pressed for time.

However, you are probably more right than you know on more levels than food.

Poor people, and a lot of not poor people, are notorious for really bad decision making. Some even suggest that poor people are poor because they think like poor people.

So whether it's financial, nutritional or what-have-you – planning seems to be the common denominator.

My theory on that, to gravitate slightly back toward topic, is that education used to teach people to be more in control of their own lives. For instance, it was compulsory when I was in high school that you take a personal finance class. Now, I'm amazed at how many 17-28 year olds I meet who can't balance their checkbooks. They're not being taught that stuff any more.

So maybe things are overall better today, but we have a much higher idiot-factor than in 1981, contributing to a wide variety of problems. Worse than that, it seems to be growing exponentially.

[Soylent Red]

Should check the board before posting...

Household appliances, home linens, in fact, anything prodcued substantially overseas seem to me to be extremely competitively priced.

The Economist, a notably pro-globalization publication, did an issue last year reporting on the overall state of the global economy.

It would seem that all of our competitive pricing here is keeping a lot of Third Worlders in rice and beans.

So when Dems want to screw WalMart, they are not only screwing the American poor, but all those noble brown people worldwide living off our disposable income.

One more way to call them out for the hypocrites they all are.

[clarice]

We used to have personal finance classes, girls learned cooking and sewing, boys learned shop...all valuable skills. I understand cookbook writers have to now explain even the simplest techniques because readers no longer know them.

[Daddy]

25 years ago I wore polyester shirts, American beer stunk, and you couldn't find a vente latte' with a double shot if your life depended on it. Gad, we was barbarians. About the only thing I miss is that 25 years ago Karen Carpenter was still scarfin' down cheeseburgers...man, what a voice. For those of you pining for the good ol' days that snapshot of Liz Taylor in a bathing suit on Drudge ought to snap you back to reality. But seriously, you've got to admire her guts. Sitting helplessly in a cage being attacked by a school of bloodthirsty sharks in a feeding frenzy. Bet now she knows exactly how poor Scooter Libby's felt these past 3 years. That's right, you heard me correct, polyester. Uggh.

[Shivv]

Krugman's invocation of "traffic being worse" reminds me of a conversation I once had with a county legislator in Westchester County, New York (I was "volunteering" and going door to door with him, as if being asked by your boss to do something can ever be called volunteering).

He and I were walking along a busy street, talking about the area he represented. He was telling me how 10-15 years ago, that street wasn't nearly as crowded as it is today, yet the population in his district has barely increased (and the district has stayed more or less the same). The point he made is that families back then usually only owned one car, no matter how many people were in the family. Now, most families have at least two cars, in addition to cars that their kids have. He himself has 4 cars in his driveway for 3 people (he, his wife, and their college-age son).

I guess what I'm trying to say is that more traffic is actually an indication of how much better off we really are. We can now afford to own multiple cars and drive them all over town. Many teenagers don't have to ask their parents to borrow the car for a big date. They simply hop in the one mom and dad bought for them (or helped them buy). Sitting in traffic sucks, plain and simple. But that traffic is a side-effect of our success, not an indication of a drop in quality of life

[clarice]

25 years ago, buying fresh herbs , good cheese , decent tomatoes, and berries in winter was alsmost impossible. Now they are everywhere. And except for 7-11 all the grocery stores carry marscapone. Oh, and I get better bread in my neighborhood than you can now find in most places in France.And wine--there is more good, reasonably priced wine, available everywhere.

[Fritz]

While it is belaboring the obvious, Mr. Krugman appears to be morally dishonest and will attempt to twist any and everything to fit his agenda. As pointed out in the article, a debate between Mr. Krugman now, and the former Mr. Krugman would be fascinating. He truly belongs where he works since they are the only ones who would keep him around. He seems to fit perfectly with the rest of the New York Times, or is it that they fit perfectly with him? Anyhow, for an intellectual challenge try changing Mr. Krugman’s story to what he would have written had John Kerry or Al Gore been elected and happened to have the same economic numbers as at the present time. Actually that is easy because all you have to do is use some of his former columns and change the dates.
On a broader note, most of the reporters now reporting on the economy are doing so in an unfair way. When they are forced to report good numbers, they make certain to include a big “but,” whereas under Mr. Clinton, whom they apparently loved, only occasionally did they have the big “but.” Even when Mr. Greenspan made his remarks about irrational exuberance, they did not present it in such a negative manner. Think of all the reports you’ve seen on the evils of the housing boom or its slowing, and then think of the coverage of the irrational exuberance remarks. So Mr. Krugman is only one of many who have seen fit to present the economy in an unfair manner.
As for inflation. The CPI must overstate it if what I see is indicative. People now have more cars, own more homes, eat out more often, and the list goes on and on. That money has to come from somewhere. Since there isn’t an increase in household debt which would cover all of it, then one is left to conclude that the studies saying the CPI overstates inflation would appear to be correct, and the only question is by how much.

[Fritz]

Opps, I should have specified to use his columns out of the nineties. I can only state that it is late and I should go to bed.

[A3K]

"The only difference now is to be middle class both parents have to work."

I'd like to drive a stake through the heart of that misimpression.

My father-in-law, a dyed in the wool Dem and an NEA member, once told me that to live decently in the Chicago suburbs, both parents had to work. At the time, he was referring to my wife's sister and her husband. Her husband was making just under 200K at the time. My wife and I combined were making less than half that, at the time.

Yet somehow we were able to eke out a decent lifestyle on our meager earnings.

Since then, we've had two kids, bought a house and dropped down to one income. And we have more money than ever.

It doesn't take two incomes. It takes self-restraint and the economic IQ to be a decent consumer of financial information and products.

BTW, we've bought three new cars along the way as well.

The two income myth is pernicious.

[Pofarmer]

Well, as my handle suggests what I actually do, let me interject this.

Find a farmer, find a grower, and buy direct. You will have to plan, yes, but I can sell you half a beef(and do) for the price of a few dinners out in that fancy restaurant. It doesn't cost one more dime to eat well, and is actually cheaper than buying all the premade stuff, it just takes planning.

[TexasToast]

When I agreed to buy health insurance as part of my divorce obligations in 1997, I was paying about $400 a quarter for insurance with a $5000 deductable for an adult ane two children. This is the first year the insurance company has had to pay a dime, and the premiums are now $1800 a quarter.

You folks with employer paid health care don't know what you have. Last week, the insurance company kindly imformed me that they would investigate any claims made on behalf of my college age son as he may not be covered if he quits school or some other silly thing like that. They are more than happy to take the premium - they just may not pay.

I can plan all day and still I have to write that check.

And so it goes.

[Pofarmer]

TT

So what's the answer?

Seriously. My wife works as a charge nurse at a local hospital and we have this conversation often. I think there are too many hands making waaaaayyyyyy too much money.

But I don't see in any way how federalizing the program will reduce costs.

[Wilson's a Liar]

A3k - well said. I grew up in relative affluence in a largely middle- to lower-class town. My dad was a doctor and my mom did not have to work. But we rarely ate out, we had one TV in the house, we drove our family cars until they wore out, we went to public schools, I wore hand-me-down clothes. I never had a birthday party, nor did any of my siblings. I bought my first car by cashing in all the savings bonds my grandparents had bought me on my birthday. We might take one vacation a year, but some years we didn't even do that.

Most "middle class" families today have lifestyles more lavish than this. Take a look at the jampacked parking lots at any Applebees or Olive Garden or Outback Steakhouse. Watch the administrative personnel at your office with expensive colored hair, acrylic nails, fashionable new shoes and clothes. Go to any Target or Walmart and watch what people are buying. Yes, they may be putting a lot of it on credit cards, but is the government supposed to come in and make them stop?

[Other Tom]

No question about it, TT, if only we had a president Kerry the insurers and providers would be willing to lose money in their jobs in order to help you out. In negotiating your divorce decree, you could have opted to self-insure, meaning that you could have invested $400 per quarter for the past nine years. At a reasonable return you'd now have $25,000 available to meet your family's health needs. If you continued to invest your current $1,800 per quarter, at the same rate you'd have over $150,000 on hand in ten years. At any time, of course, you could have purchased a catastrophic policy to cover major risks, and still have plenty left over. But you made your choice and you paid your money.

Sensible folks with employer-paid health care know exactly what they have: lower pay than they would have if the employer didn't provide the insurance. In return, they get whatever group rates and group policy their employer negotiates on their behalf

For some reason I mis-read this topic initially, and compared today with 25 years ago. Revising my thoughts to 30 years back, I recall that the nation was on the brink of commencing four years under President Malaise. One shudders...

[Wilson's a liar]

TexasToast - I truly do sympathize with you regarding health care. This is the one sector of our economy that has clearly gotten worse. As the child of a doctor, I have a lot of opinions about where we have gone wrong. I'll spare you the magnum opus. I think the only rational solution is to make everyone responsible for their own health insurance, provide a government safety net for the poor, no more Medicare for wealthy elderly, and more low-cost community clinics to keep people well and encourage more healthy lifestyles. More government control will only make it worse.

[TexasToast]

Actually OtherT, I would think that most folks would consider a 5000 deductable as self insuring - I thought of it as such at the time. Today however, not so much. My daughter went to the hospital, I paid the deductable out of my HSA, and the insurance company paid $167 - thats right, $167. Its amazing how well she got when the deductable was used up.

If I were a conspiracy theorist.....

[Pofarmer]

Well, imagine this.

I have a child that's had two bone marrow transplants in the last 3 years. Each time was about $250,000 by the time it was over. We pay about $600 a month in health insurance, PLUS we have the maximum copay, which is $2500 per personan and $6000 per family. By the time you take in a couple other minor issues with other small children, you have $13,000 out of pocket per year for health care. Hopefully, it will be better this year, but it really does stretch the ole budget. I'd like to hear more on this topic, there's not enough serious discussion and way too much rhetoric.

As far as conspiracies, why does an anestesiologist(sp) need $700 to do anestesia for tubes for a child when the procedure takes a total of 15 minutes?

[Pofarmer]

keep people well and encourage more healthy lifestyles.

That was the whole argument for HMO's. Unfortunately, it ain't happenin. HMO's are just another profit machine.

[cathyf]

Eating well and nutritionally is cheaper, cash-wise, than eating out. For example, where I live every coupla months whole boneless pork loin sliced into chops goes on sale at $1.88/lb. I can braise this in milk with garlic & sage and for about $1.50/person make a dinner that'll have your eyes rolling back in your head it is so good. But part of what makes it work is that I have a 20 cu ft freezer in my cellar so I can buy the whole pork loin and freeze the chops and use them over time. And I've got the $20 bucks all at onece to buy the 10-11 lb whole loin. And I have a yard so that I can get the sage out, summer or winter.

Or with chicken. I buy whole chickens when they are on sale and park them in the freezer. Then when chicken breasts go on sale for $1/lb, I buy 15-20 lbs of breasts, bone them, freeze the individual boneless breasts, and put all of the bones from the breasts and make stock. Out comes a whole chicken from the freezer, and it goes into the pot for dinner. After dinner, all the bones from the whole bird and lots of scraps go in there, too. Then it simmers on the stove for 3-4 days, and I have a couple of gallons of necter-of-the-gods chicken stock to go into the freezer, as well as chicken breasts for 8-10 other meals.

Again, though, this only works because I have the freezer to keep the food, and the cashflow to plop down a big wad that will save me a lot later. Oh, and I can work from home so I can keep a pot of stock on the stove for half a week without burning the house down.

So when you say "planning" it's not just that poor people lack the education and skills to debone chicken or flash freeze, it's also about having the cashflow to take advantage of sales and the freezer to store stuff in.

[Soylent Red]

Health care costs have certainly risen, but I don't see that changing until we get to the real causes: liability and non-competitive billing.

Ever wonder why doctors these days seem to do less doctoring, more medicating, and you still end up at home and miserable for long periods of time? It's because by doing all of this and ultimately letting the body heal itself they are mitigating possible risks for lawsuits, which doctors fear more than anything.

Pofarmer singles out anethesiologists, who are specialists. It just so happens that their particular specialty has a much greater chance than the actual surgeon, if botched, to kill you. But taken across the board, all specialists cost more by nature, and medicine is becoming more specialized. GPs and family medicine doctors don't make all that much, comparatively speaking.

Specialization is not all bad since it is a big contributor to our higher standard of health care, but still it tends to push costs up.

So, yeah, docotors charge more now. But that has to do with greater specialization, increased costs for going to medical school, and the need to carry ungodly liability insurance.

Not only that, but doctors charge more because they can get away with it. By letting insurance companies bear the brunt of the costs, you have set up a totally non-competitive environment. You don't price shop doctors the way you do car dealers, partly because doctors won't tell you their rates.

And what's the first question they ask you? It isn't "where does it hurt?", it's "who is your insurer?"

So doctors overbill for a variety of reasons, pass that on to the insurer who then marks it up and passes it along to you. Seems to me that if you made the basic price more competitive to begin with, then demanded strict consumer documentation all down the chain, you'd begin to get people price shopping for both doctors and insurance. Once that happens, prices will fall.

[A3K]

If it were possible, would anyone agree to pay 1981 era insurance premiums in exchange for getting 1981 era healthcare?

That said, we're close but not there on the solution to the medical cost crisis. Once the gubmint decides to fix the rules for flexible spending accounts to make them more like HSAs, and encourage the high deductible policies where the spending accounts are primarily used to pay for the high deductibles, we'll be closer to consumer driven care.

The next step will be to require healthcare providers to be upfront about the rates they charge for procedures. That way a person will be able to actually shop for non-emergency care.

Additionally, untying the insurance plan from the job makes ultimate sense. If an employer wants to provide a plan for employees, great. They should also be able to provide the same employee with an equivalent amount of cash to pay for a policy selected by the employee/insured.

As it is, there's no way a person can plan for the cost of a deductible unless the procedures are planned well ahead of the open-enrollment period.

We had a child in August, and fortunately, that's a life-change event that allows us to re-examine our selections. So we upped the flexible spending account election to the size of the deductible. And that cut my out of pocket cost from the full $3,000, to the after-tax and after-FICA equivalent of $3,000.

So instead of costing me $4,035 worth of my pre-tax income, it only cost $3,000. That's a big change.

If the expense had been anything other than a pregnancy, we'd have been screwed. So Congress needs to fix the rules to allow people to plan.

[cathyf]

That said, we're close but not there on the solution to the medical cost crisis. Once the gubmint decides to fix the rules for flexible spending accounts to make them more like HSAs, and encourage the high deductible policies where the spending accounts are primarily used to pay for the high deductibles, we'll be closer to consumer driven care.

HSAs are nothing like consumer-driven care. When you have an HSA it's still the maddening managed-care system of preferred providers, and the insurance company arbitrarily resetting all the fees to some bizarre complicated something else and sending payment to the doctor months later. The only difference is what account the money comes out of.

[clarice]

cathyf, that is true. I've often thought that setting up buying coops for the poor would be a good idea. Someone could get a van, go once a week to buy in bulk and divide it up for those who participated who don't have the upfront cash to buy in bulk or a means to store it.

[TexasToast]

Cathy is absolutely right - they reset the fees that they pay - and not the ones that you pay. The HSA gives one no "leverage" against the provider or the insurance company - one uses someone other than a preferred provider at one's own risk.

That is not to say it’s a picnic for providers. My ex-wife was a mental health provider - and she had to stop taking insurance as the insurance companies wouldn't pay enough to meet the overhead.

I reviewed several provider contracts - and found several to be internally inconsistent. One company had two plans - on paying $25 an hour and the other paying $95. The contract was for both plans and expressly stated that it could not be amended. After a long correspondence with the company, I was told we could alter the contract ("pencil in the changes") to accept only the $95 clients. So we did.

One guess as to which group of clients she was sent from that company?

[cathyf]

they reset the fees that they pay - and not the ones that you pay.

I'm not sure whether that is generally true. I came very close to setting up an MSA several years ago when my husband's employer's plan was caught in an adverse-selection death-spiral, but the employer figured it out and got out of the problem. So while I researched it heavily, I didn't actually sign up and don't have first-hand experience. But my experience with managed-care plans with smaller deductibles is that if the plan reduces the charge, you pay the lower charge. You pay the full-amount of the lower charge when it is within your deductible, and 20% of the lower charge when you are paying 80-20.

For example, one time I paid $100 for a doctor visit on my way out. The insurance company lowered it to $60 and sent the doctor's office a check for $48. They promptly sent me a refund of $48. A fight ensued, but eventually I got the other $40 from the doctor. Woohoo, managed care.