Median Household Income After Taxes Fell 8.8% in 2022
census.gov
census.gov
It seems like, idk, maybe we should do our best to put money in the pockets of the poorest people (regardless of the cost) and create the postwar great society that JFK and LBJ were championing.
This formula assumes all property and services are in abundance, but that is not reality.
If people don't have houses, give them a house.
Social housing isn't exactly a novel concept.
A federal Job Guarantee does have the potential to ease housing pressures by increasing mobility and allowing people access to lower cost housing options that can ease local housing pressures in larger cities.
I think you're not reading the news enough...
> If the housing doesn't exist, we build it.
Where? Cities (and Nimbies) don't allow new housing to be built. Cities like NYC, LA, SF, Seattle are partially or fully surrounded by water. How do we "grow" the land?
Why? Cities cap rent prices, so it doesn't make sense for a builder or investor to spend $1m getting permits and building property to make $1k/mo in rent.
> If the food doesn't exist, we grow it.
This is easy for the USA, but doesn't help for countries like Sri Lanka that physically can't grow their own food.
If you pay a living wage to a zillion people, they have to be assigned some sort of valuable work to do if it's not just a UBI system. The government already pays everyone to do the work the government wants done, so the target of this inflation-funded labor value would be, what, precisely? There's only so much garbage that needs picking up.
In a world where we decided to do this, there is plenty these people could be doing to contribute greatly to society.
We are talking about a firehose of somewhere around five hundred billion dollars a year. Where do you intend to aim it?
Fill pot holes, add and improve drainage canals, build damns and levees, etc.
This is what I mean by a "municipal handout" - this is a firehose of value, and the people you point it at will be enriched. The allocation of that value is not trivial, as everyone who holds USD is paying for the labor via inflation of the money supply.
At best, the public realm meets, but almost never exceeds our, needs. Oftentimes it doesn’t even do that! Sure— if you’re fortunate enough, you can avoid the system altogether (private school, private healthcare, personal assistant to organize your DMV appointment, etc), but that just proves the point: what is there to be proud of?
There’s so much that needs to be done and yet we’re not doing any of it. Instead we’re mostly coasting on the infrastructure (imagine if building highways then took as long as high speed rail today), (what’s left of the) social safety net, and institutions we created in the 50s and 60s.
Why?
I remember in my town the city council suggested that - pay unemployed people to pick up trash.
You know who the biggest opponent was? The union for city workers. It threatened their jobs.
You need to think through all the implications.
That was also apparently one of the reasons that NYC could “never” have containerized trash pickup like literally any other city in the US. Surprise! Despite that, and a million other “intractable issues”, the city has essentially switched to trash containerization pickup overnight, and everyone is better for it.
What do you mean by "corporate or municipal handout"?
> If you pay a living wage to a zillion people
Are there currently a zillion unemployed people?
> they have to be assigned some sort of valuable work to do if it's not just a UBI system
There's not a dearth of valuable work to be done (especially once you divorce "value" from "profitable for the private sector") however in an economic sense the only real requirement to prevent this from being a UBI is the requirement to somehow show up. That is, the JG must be purchasing foregone output, so people shouldn't be able to work full time and then also collect a full time JG wage without doing any extra work. Of course someone can work both a full time job AND also work full time for a JG if they have the desire to work 80 hours. This may not be implemented in the program due to health concerns but economically speaking it's viable. The specific mechanisms by which this is achieved are implementation details.
> The government already pays everyone to do the work the government wants done
Yes this is done through permanent government programs, and the tax base is set up to accomodate this spending.
However there are errors and people end up involuntarily unemployed. A JG eliminates that problem.
> so the target of this inflation-funded labor
What do you mean by "inflation-funded labor"? I think this might be answered on the page under the heading:
Won't "printing money" to create jobs for all unemployed people cause hyper inflation?
> value would be, what, precisely? There's only so much garbage that needs picking up
There are two headings on the page that address this:
If the government creates jobs for all unemployed people won't they just be "bullshit jobs"?
So what types of work would be included?
There’s no free lunch. Inflation was up above 6% and people saw their buying power drop by 8%. That’s about it right there.
Focusing only on pandemic stimulus misses the big picture.
Either way, injecting money into the economy at this scale creates significant inflation. This inflation reduces inflation-adjusted incomes. It doesn’t matter all that much if it’s going to people or businesses, it’s going to cause inflation.
It's only reflecting the relative shift of the country.
You reach your hand down to lift someone up, and shock and horror, you are no longer above them.
You’ve got it backwards. Assets tend to track inflation. Rich people do just fine. Wages do not. Poor people suffer the brunt of it. Inflation increases the inequality.
Which does precious little for the economy, so there's bo economic reasoning for doing this. If you want an economic stimulus, give money to poor people instead.
Inflation didn't even appear in the article, unless I'm blind.
"After tax" just tells us specifically what's being measured.
https://www.census.gov/content/dam/Census/library/publicatio...
Which makes sense, as afaik most pandemic-era stimulus was absolute dollars instead of income-relative.
Consequently, you see a huge % impact there as it was given and then withdrawn.
Folks with no or little economics education have no concept of supply driven inflation, which is exactly what you get when a pandemic cripples global JIT supply chains.
this drop was mostly caused by inflation
"Real median household income fell by 2.3% from $76,330 in 2021 to $74,580 in 2022. Income estimates are expressed in real or 2022 dollars to reflect changes in the cost of living. Between 2021 and 2022, inflation rose 7.8%; this is the largest annual increase in the cost-of-living adjustment since 1981."
The disruptions caused by all those pandemic related restaurant closings drastically altered the Agricultural supply chain economy of scale as farmers were forced to discard all that food/dairy production for lack of any functioning restaurant industry to purchase that production. And the Trucking/Shipping interests in that Agricultural supply chains losing all that business and having layoffs there and some interests going out of business as the result and Independent Truckers finding work in other market goods transportation/shipping if they could at that time.
So just measure the time it will take to reestablish a longer term Agricultural products supply chain economy of scale and that's a good part of the reason that food prices remain higher to this day regardless of the supply of money in the economy!
"Our analysis of the relative importance of supply-side versus demand-side factors finds 60 percent of U.S. inflation over the 2019-21 period was due to the jump in demand for goods while 40 percent owed to supply-side issues that magnified the impact of this higher demand."
I've always found it interesting that econ discourse usually takes such a rigid view for the causes of phenomenon, if this were another quantitative discipline I imagine there'd be a softer position. Anywho, just chiming in to opine that the models for economics folks argue about is likely more nuanced than portrayed.
Except that only a portion of the inflation may have been caused by all that money. Or have you forgotten the geopolitical events that caused a spike in food (grain) prices and especially energy costs?
Let's not forget about supply chain issues:
* https://www.frbsf.org/economic-research/publications/economi...
* https://www.frbsf.org/economic-research/indicators-data/supp...
On the flip side we don't have high unemployed that takes over a decade to slowly go down (like Obama had to deal with post-2008 because the GOP didn't want to spend). Biden was there for the long slog to get people working again.
Yes, inflation was high for ~18 months: would have a not-hot economy be better or worse than that?
IMO most of the wealth generation at that time actually came from being (1) the only country manufacturing at scale post-war that was untouched by war and (2) cheap energy (which has the highest correlation with improving the life of the poor).
There may never again be a Great Society middle class, regardless of economic policy. Most of the discussion I've seen about how to return to the post-war golden age misses how important the post-war aspect was for US success.
The US was the only industrialized country left intact after WWII, making it an export superpower on top of being a military superpower. Confidence in the American economy lead to the Bretton Woods system, enshrining the dollar as the global reserve currency, giving Americans enormous buying power, and leading to the US controlling over two-thirds of the world's gold by the 1950s. Compared to Europe and Japan, the US also had vastly more room to grow its agricultural and mineral production, and thus its economy.
Those unique advantages have dimished. Other countries have caught up in industrialization and the delta between the US and the rest of the world has shrunk. For the middle class to be rich again, the US would have to get comparatively richer relative to the rest of the world market, but the trend is in the opposite direction. Even significantly reducing the wealth gap wouldn't bring back the comparative wealth of the middle class of previous decades.
That's the exact opposite of what LBJ was championing. He stated that his "War on Poverty" was meant to shrink the number of people on welfare, not increase it. Referring to poor people, LBJ said he wanted to "make taxpayers out of them instead of tax-eaters".
The war on poverty was not intended to be a forever war.
This is the average effective tax rate: https://fred.stlouisfed.org/graph/fredgraph.png?g=19545
I mean it's right there in the article, "the expiration of expansions to refundable tax credits had a particularly important impact on SPM poverty."
I'm not sure how the top ranked comments, both of them, get things so wrong.
However you are definitely onto something sophisticated so... can you comment on the substance of the article instead of this kind of arcane thing that couldn't be the biggest factor?
Start with nominal income, YoY. Personal income is before-tax, disposable personal income is after-tax
https://fred.stlouisfed.org/graph/fredgraph.png?g=195kL
Nominal incomes were up 2.3% in 2022, but after tax incomes were down 0.3%. Wage inflation had pushed people into higher tax brackets, and the standard deduction covered a smaller portion. That did not get corrected until Jan 2023, when brackets and deductions all went up over 7%. So the big takeaway is that nominal wage gains in 2022 were all eaten up by higher taxes, and that’s before we layer in inflation.
Now, lets layer in inflation:
https://fred.stlouisfed.org/graph/fredgraph.png?g=195ll
But now let’s add in H1 2023. First, nominal
https://fred.stlouisfed.org/graph/fredgraph.png?g=195mP
With the lowered effective tax rate, we see a much bigger gain in after-tax income, up 8.1% YoY in H1 2023. Now layer in inflation, much reduced from 2022:
https://fred.stlouisfed.org/graph/fredgraph.png?g=195mw
Things look much brighter with less inflation, and brackets/deductions that caught up with inflation
Keep in mind these data are from BEA’s monthly personal income tables. The article is from a separate Census Bureau survey, that tells largely the same story with different numbers
> This dramatic difference can be attributed to key changes in federal tax policy.
Purposefully casting millions of people back into poverty for political purposes is one of those American things I hate.
The data is the data, and the way it's phrased with "kept out" and "lifted out" both to say the same thing which as I understand the data is that each of these groups were either over or under the poverty line as a result of the incentives. Adding extra weight and flower to the movement is a distraction with the intent of persuasion.
It was a temporary Covid program. It was never intended to be permanent, so there were no "political purposes" to ending it.
So again: letting the program lapse put kids back under the poverty line. And it was done to win political points.
"You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before."
-- Rahm Emanuel
Something to consider the next time a politician proposes a "temporary" aid program.
Is there some conspiracy to provide Covid aid?
But it's not Covid aid anymore. It was aid that was begun during Covid, and now that Covid is over, there's pressure from people (see elsewhere in this thread for example) to keep those programs in place.
In 2019 you couldn't have enacted those aid programs, in 2020 they were enacted, purportedly temporarily due to Covid, and now there is pressure to make them permanent.
That's no conspiracy, it's not a conspiracy when you say out loud in public what your strategy is. Politicians use a crisis to enact policies they couldn't otherwise enact. They admit this.
An example on the other end of the political spectrum would be the second US invasion of Iraq, after 9/11. Before 9/11, an invasion of Iraq with the goal of regime change would have been unthinkable. Iraq was completely unrelated to 9/11, but the crisis was used to enact policies that wouldn't have otherwise been possible. Again, this is no conspiracy, Donald Rumsfeld said it out loud, someone's notes of that meeting read "Need to move swiftly – Near term target needs – go massive – sweep it all up. Things related and not."
What I am saying is, keep this in mind the next time there is a crisis.
"Nothing is so permanent as a temporary government program"
-- Milton Friedman
Correct reading is (Median Household Income After Taxes) Fell 8.8% in 2022
This dramatic difference can be attributed to key changes in federal tax policy.
In 2022, several policies enacted by the American Rescue Plan Act (ARPA) expired, including an expansion of the Earned Income Tax Credit (EITC) for filers without children and full refundability of the Child Tax Credit (CTC) and Child and Dependent Care Tax Credit (CDCTC). ARPA also increased the maximum amount of CTC.
In 2020 and 2021, most households also received Economic Impact Payments (EIP) that were no longer issued in 2022.
The rollback of these tax policies had the largest effect on post-tax income among the nation’s lowest-income households.
In 2021, for example, post-tax income at the 10th percentile, meaning at the bottom of the income distribution, was 17.1% higher than the corresponding pretax income estimate, reflecting the substantial boost that lower-income households received that year from the EIP and expanded CTC.
In contrast, the 2022 estimates of pretax and post-tax income at the 10th percentile were not significantly different (Figure 1).
The horizontal bar chart is a vertical distribution based on income bracket, not based on aggregate count. The numbers are % change, not a % of total (which would be just under 25%).
Where is the 25%+ you are referring to?
- different things inflate at different rates (housing faster than laptops)
- corporations pushing pricing for profits
- stimulus checks
- PPP loan fraud that never had to be paid back
- supply chain choke points limiting the supply of stuff
- people borrowing aggressively (high credit card and student loans) at low interest rates
- student loan forgiveness
- government deficit spending accelerating
- probably some more I can't think of at the moment
Basically, it's complicated.
I really don’t think we ever broadly talked about what should have happened to the economy in that situation.