No Surprise at All

Policymaker like U.S. Treasury Secretary Timothy Geithner must find it awfully frustrating that no matter how upbeat they are about economic prospects, the man in the street just isn't buying it.

"Don't they know how attuned we are to what is happening on the ground?" Mr. Geithner (and his ilk) must be asking.

I guess that's the difference between those who are used to living in a bubble and thinking about the way things should be -- who depend on polls, the corporate-owned media, ivory tower economists, and inner-circle sycophants for their view of reality -- and those who must deal with the challenges of a broken and dysfunctional economy on a regular basis.

Regardless, given their consistently downbeat views about where things stand, it's not surprising, as Real Time Economics reports in "Americans Are Increasingly Insecure," that the folks on Main Street are much less relaxed about their future than the experts in Washington seem to be:

The Rockefeller Foundation has released a new “Economic Security Index” that measures the effect of income loss and rising medical costs on Americans. The verdict: The recession has made Americans a lot less secure, but security was slipping long before the recent recession.

The Economic Security Index, which was developed by Yale political scientist Jacob Hacker, measures inflation-adjusted income that’s available after medical costs. It captures Americans who have had a year-over-year fall of 25% or more in income after medical costs but don’t have enough savings to offset the plunge.

“Security is really about loss,” says Mr. Hacker. “We wanted to try to come up with a measure that measures security against a large economic loss.”

The results: The ESI was at 12.2% in 1985 and has grown steadily ever since (with year-to-year fluctuations that track the economy). In 2007, the ESI was at 13.7% and is projected to hit 20.4% for 2009.

The index is generated from a blend of various government surveys but is largely based on the Census Bureau’s Survey of Income and Program Participation, which is the rare government survey to track the same people over several years.

There are myriad reasons why economic security has become increasingly wobbly, but Mr. Hacker points to three main culprits. One is that men’s earnings have become a lot more unstable since the 1970s, and since many men are still breadwinners that has led to more erratic household income. Government transfer benefits have also become a lot more unstable. And while there are more dual-income families the extra income is not enough to offset growing insecurity.

“This may reflect the fact that income gains for the middle class have been relatively muted over the period studied so that families are working harder for only modestly more income while facing large price increases for health care,” the report says.

The rising uncertainty is yet another dose of cold water for an economy still on the mend. Mr. Hacker says that it takes somewhere between 6 and 8 years for people to recovery from an income loss of 25% or greater, a shock that can crimp consumer spending and lead greater income inequality even after the economy recovers.

“The jury is out on why” security has become so unstable, says Mr. Hacker. “But there’s enough here to know we have a problem.”

Comments

[Rob]

Mr. Geitner has ridden to work in a chaufaured limosine for the past 8 years. His home is worth over $1,000,000. He will retire with a federal pension of around $100,000. And free medical insurance, for life.m,knnnnjhygu
Is it any wonder he doesn't get it??

[roger]

One ingredient people like Timothy Geithner are
completely void off ,is Empathy,his kind know
exactly the score,and frankly I think they don't
give a damn about our opinion of them.
Down true history the very rich have had nothing
but contemp for the working class,given a few exception.

[Max in Seattle]

People who lack empathy are technically called psycopaths. This does NOT mean they are killers, or unlawfull. They merely lack the emotion to connect with people. They watch behavior, and mimic it, sometimes practicing in the mirrow how to laugh, or show simpathy.
Most successful playboys fit this group. It is estimated 10-15 percent of the population fits this pattern.
Think about all the bosses that you have had, or some of the business dealings where people take advantage of the "weak".
See what it means??

[RegularJoe]

I think they're actually called "sociopaths."

[roger]

Empathy, which literally translates as in feeling, is the capability to share another being's emotions and feelings.
source: Wikipedia

[Blurtman]

The chipmunks must run faster in the wheel for smaller and smaller food pellets.

[Linda C]

Geitner believes in the "wealth creators" and the paper economy. As long as the wealth creators are creating wealth for themselves in an economy that produces nothing then some of that must trickle down to the consumer. Geitner also believes in what Krugman calls the Confidence Fairy. As long as banks can hide their toxic assets then confidence must also trickle down to the consumer. If the Consumer does not believe in the Confidence Fairy then that is the consumer's fault since it is all make believe on paper. Geitner has blamed China for our entire economic collapse and I will not doubt he will blame the consumer next for our next to nothing recovery.

[emily]

This is great article and will pass it on. There are many people asleep out there, dont you think.

I subscribe to the FFT newsletter at http://www.forecastfortomorrow.com that guy is calling for a bigger event to come in the next few months. If you look back he has been spot on with things over many years, and someone that should be listened too!