Tag: GDP

Of Money and Madness

~ Karen Petrou ~ Leave a comment

By Karen Petrou

  • In 1975, the rewards of national economic growth were evenly distributed regardless of income.  By 2018, most Americans lost their fair share based on per capita GDP.
  • The cost of lost income due to increased inequality to the bottom 90% over this period amounts to $2.5 trillion compared to what it would have been if GDP had remained as equitably distributed as it was before 1975.
  • Looked at another way, the majority of U.S. workers never shared in the economic growth from 1975 to 2018.
  • It may seem that racial disparities in U.S. income improved over this period, but this wasn’t the result of a society become more fair, if not also economically more equal.  In fact, racial disparity dropped not because Black male workers with below-median income held their own, but because white men did worse than before.  The same phenomenon erases what appears to be a drop in the gender gap for working women who did a bit better – largely due to more working hours – than men.
  • Fed policy premised on aggregates and averages as well as the benefits of GDP growth without regard to distributional realities is not only doomed to fail, but sure to continue to exacerbate inequality.
Continue reading “Of Money and Madness” →

In Search of Optimal, Equal Monetary Policy

~ Karen Petrou ~ 2 Comments

By Karen Petrou

The Fed is listening.  In a recent blog post, we analyzed a brand-new database which Fed staff have constructed to capture distributional wealth effects across the U.S. economy.  Now, we turn to a brand new paper from the president and staff of the Federal Reserve Bank of St. Louis that not only recognizes the distributional impact of monetary policy – a Fed first – but tries to do something about it.  The paper proposes an “optimal” monetary policy based on a complex model with several uncertain assumptions, no conclusion about whether it would work in concert with a still-huge Fed portfolio, and nothing more than a theoretical hypothesis.  Still, it’s a start. Continue reading “In Search of Optimal, Equal Monetary Policy” →

Gross Domestic Product and U.S. Inequality

~ Karen Petrou ~ 3 Comments

By Karen Petrou

On January 22, Rep. Carolyn Maloney (D-NY) and 18 senior House Democrats reintroduced legislation (now H.R. 707) requiring federal statisticians to provide an equality-focused insight into the gross domestic product (GDP) number all too often considered the arbiter of American prosperity.  Senate Minority Leader Schumer (D-NY) and Sen. Martin Heinrich (D-NM) introduced the same bill last year and are sure to do it again and, then to join Maloney in pressing for action.  This time, it will come quickly in the House and may well pass the Senate in this Congress.  Would it make an equality difference?  No, but at least we’d know more clearly how much trouble we’re in.
 Continue reading “Gross Domestic Product and U.S. Inequality” →

Disquiet on the Home Front

~ Karen Petrou ~ 2 Comments

By Karen Shaw Petrou and Basil N. Petrou

On June 20, FRB Chairman Powell said, “Nine years into an expansion that has sometimes proceeded slowly, the U.S. economy is performing very well.”  Although Mr. Powell noted low labor participation, puzzling inflation, and problematic wage growth, he said that all will come right as long as the Fed stays the course.  No mention was made of unprecedented U.S. income and wealth inequality or of a housing market serving mostly the oldest, wealthiest, and most coastal among us.  Too bad – inequality and the impediments to effective monetary-policy transmission it erects are among the most important reasons that the nine years Mr. Powell cites have seen the slowest recovery in decades in concert with new threats to financial stability. Continue reading “Disquiet on the Home Front” →