In case you missed it as most of the media did, the Wall Street Journal (September 17, 2020) published an article by this title. In essence – “Rising economic growth lifted all classes.” The US Census Bureau reported some interesting personal income statistics:
- Median household income in 2019 grew a whopping +6.8%; largest annual increase on record.
- Real (after inflation) median US household income last year rose by $4,379 to $68,709; in dollar amounts, this is nearly 50% more than during the period from 2008 – 2016. Wealthy benefited from a roaring stock market, as they did during most of the Obama years.
- Lower and middle-income folks also shared in growth. Median household incomes increased more among Hispanics (+7.1% gain), Blacks (+7.9%), Asians (+10.6%) and Foreign-born workers (+8.5%) versus Whites (+5.7%) and Native-born (+6.2%). Reason – lower education levels were working.
- Employment of Americans increased 2.2 million, including 1.2 million more employed full-time, year-round.
- Median earnings increased by +7.8% for women compared to +2.5% for men.
- The result: Poverty fell 1.3 percentage points in 2019 to 10.5%, the lowest level since 1959. It declined more for Blacks (2 percentage points), Hispanics (-1.8), Asians (-2.8), single mothers (-2.6), people with disabilities (-3.2), and no high-school diploma (-2.2). The Black (18.8%) and Hispanic (15.7%) poverty rates were the lowest in history.
- As family household incomes increased, the child poverty rate declined to 14.4% in 2019 from 16.2% in 2018 and 18% in 2016. This decline last year was nearly twice as much as during 2008 – 2016.
- Income inequality also declined in 2019, as the bottom quintile’s share of income grew +2.4%. Incomes grew across the distribution quintiles with lower earners rising into the middle class and some even joining the ranks of the affluent.
- The share of households earning less than $15,000 declined to 9.1% last year (from 10.4% in 2016 and 11.2% in 2010). At the same time, those with income between $75,000 and $200,000 increased to 36.1% from 34.4% in 2016 and 32.8% in 2010. The percentage earning more than $200,000 grew to 10.3% from 8% in 2016 and 5.9% in 2010.
These gains were not magical. All Americans gained economic ground. Policy changes mattered. When previous Administrations obsessed their policy actions with income redistribution and regulation, such actions actually retarded business investment and economic growth; employment was stymied. Income transfers should be temporary offsets, and not substitutes for jobs. In 2015 when government tightened disability payment criteria, and in 2017 when tax reform was legislated, these changes unleashed economic growth. The above stats provide honest factual truth that government policies are critical. Policies that promote economic growth provide a winning financial opportunity for all; while tax increases diminish personal and economic opportunity for all. This isn’t new or political; this is taught in economics 101 – taxes and regulations reduce economic productivity, all-else equal.
Your life savings, for most people is their retirement (IRAs, 401k, 403B or 457) savings accounts. At 9/30/2020, the S&P500 grew +69.3% since the presidential election 4 years ago, 11/8/2016. Over 100 million Americans own 401K retirement accounts, with additional numbers owning other retirement savings. Understand the implications of your November 2020 vote – policy proposals that increase taxes or impose new restrictions/red-tape on business formation are likely to decrease the value of your life savings – perhaps at a time when you are also beginning to draw from them.