The U.S economy keeps chugging along. The chief measurement of expansion, Gross Domestic Product, or GDP, has been growing at about 2% annually, an admirable clip for the 11th year of an expansion.
But GDP measurements are a blunt instrument for assessing prosperity. It does not measure who is benefiting from economic growth. An analysis by the New York Times shows a disconnect between the creation of wealth and who gets it. Specifically, the top 10% income earners have been getting more of the new wealth and the bottom 90% have been getting less. “Typical” households are poorer now than they were before the financial crisis which started in 2007.
For the 35 years following World War II, the nuances of wealth distribution didn’t matter. The middle class saw their incomes keep pace with GDP and at times exceed it.
Now economists at the Bureau of Economic Analysis (BEA) are working on a new measure of GDP that will take into account where the new wealth is going. The BEA plans to roll out this new measure at the end of 2020. And this month, Senate Minority Leader Charles Schumer introduced legislation that would require gross domestic product (GDP) data to include measures of income distribution.
Though this change is arcane in many ways, it’s important. Once income distribution is out in the light of day, it becomes what the press reports on, what workers react to, and what legislators use to introduce legislation. In a polarized political environment who wouldn’t want to know where the country’s new-found wealth is going? We shall see.