What the heck is the matter with Thomas Frank? The new columnist at the Wall Street Journal—and author of the book What's the Matter With Kansas?—wrote a commentary earlier this week, "Our Great Economic U-Turn," that basically said the economic boom of the past quarter century was a "man-made catastrophe." (It's an opinion seemingly shared by Barack Obama if you listen to his speeches.) This chunk pretty well sums up Frank's thesis:
What has overtaken America's working people is not a natural disaster like "globalization," and not even some kind of societal atavism in which countries regress mysteriously to their 19th-century selves. This is a man-made catastrophe, a result that proceeded directly from the deliberate beatdown of organized labor and the wrecking of the liberal state. It is, in other words, a political disaster, with tax cuts, trade agreements, deregulatory measures, and enforcement decisions all finely crafted to benefit one part of society and leave the rest behind.
Where, oh where, to begin? OK, a few quick observations:
1) It was the 1970s, a decade Frank praises because of its strong unions and low income inequality, that was the economic disaster. High inflation, high oil prices, high taxes, a terrible stock market and three (!) nasty recessions averaging 11 months apiece. Ugh. The 1973-75 downturn was the worst since the Great Depression. Even most liberal economists would say taxes were probably too high and regulation too heavy.
2) Frank trots out the discredited factoid that worker wages have been pretty much flat since 1979. If you slightly tweak the government inflation numbers for the past two decades or so—which plenty of liberal and conservative economists advise—you see that real wages and income have gone up by 40 percent rather than slipped. I call this the "myth of stagnant wages." From another vantage point, a recent study by the Federal Reserve Bank of Minneapolis finds that wages for the median worker went up by 20 percent between 1975 and 2005. What's more, critics of the economy tend to ignore benefits when figuring how well or poorly workers are being paid. By that measure, according to the Fed bank, total compensation has gone up by 28 percent. Apparently up is the new flat.
3) If the standard of living of the average American really had not improved for more than three decades, wouldn't there have been a tremendous political backlash by now? Wouldn't the Democratic Party have fully mutated into a full-scale social democratic party—nationalized healthcare, a return to superhigh tax rates—rather than moving right over the past three decades? Would centrist or right-wing candidates have won six of the past seven elections? I think not. But it has long been Frank's thesis that red-state voters are rubes who have been duped into focusing more on social issues than on economics.
4) Here is the true tale of the tape: Since 1982, according to the National Bureau of Economic Research, the economy has suffered two recessions—in 1990-91 and in 2001—for a total of 16 months. By contrast, in the previous 25 years, the economy suffered six economic downturns for a painful total of 67 months. And since August 1982, when it bottomed at 776, the Dow has risen almost 1,700 percent. That ascent reflects an economy that has more than doubled from $5.2 trillion in 1982, adjusted for inflation, to $12 trillion today. Not bad at all.