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The Economic
Playground
by Benjamin Friedman
Photography by Brian Ulrich
Everyone now knows that America’s economy is slowing down.
The collapse of subprime mortgage lending has already resulted
in the worst turmoil in the financial markets since the nation’s
savings and loan industry imploded at the end of the 1980s.
The President and both parties’ leaders in Congress are moving
forward rapidly with tax rebates and other economic supports.
Policymakers at the Federal Reserve System are making
dramatic cuts in interest rates that reflect urgency at best and
perhaps even a whiff of panic. And business is either perched
on the edge of, or maybe already in the midst of, what would
be the first recession since 2001.
What has received far less attention is that for most Americans
the economy has been slow for quite a while. In 2006 the
median American family – that is, the family right at the
middle of the country’s income distribution – earned $58,400.
(Information isn’t yet available for 2007.) Back at the beginning
of this decade, the median household earned $59,400 in 2006
prices. Only people at the very top have seen any improvement.
Even families in the top fifth of the income scale have, on
average, seen their incomes decline after allowing for higher
prices.
The problem is not that the economy has failed to grow.
During the same six years when most families’ incomes failed
even to keep up with rising prices, total production in the
United States increased at 2.4 percent per annum on average –
hardly a poor performance for a mature post-industrial
economy like ours, especially since there was a recession along
the way. Instead, the problem is that the resulting gains have
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