Friday, June 21, 2019
"An entire generation, which is now becoming one of the largest electorates in America," says Rep. Alexandria Ocasio-Cortez, D-N.Y., whose visibility as a spokesperson for this generation has been boosted by political friend and foe, "came of age and never saw American prosperity."
Of course, AOC misspoke. It's ridiculous to say that someone who grew up in and worked in metropolitan New York City "never saw American prosperity." Those high-rise buildings didn't rise by spontaneous generation. Somebody put up money to build them.
What AOC surely meant to do was make the often advanced argument that Americans born around 1989 who came of age around 2007, the year AOC graduated from Yorktown High School in suburban Westchester County, haven't seen much economic growth.
That's the year the Great Recession hit, when layoffs skyrocketed and job openings plummeted. College graduates faced bleaker prospects than their counterparts a few years before, and jobs for young non-college males seemed to disappear.
Economic growth remained sluggish through Barack Obama's presidency, and the spike in economic growth since Donald Trump took office and his tax cuts passed has been most robust among lower-skill workers, rather than college graduates like AOC. But that suggests America is moving to less economic inequality -- an argument you're not likely to hear from a Democrat.
But perhaps AOC is taking a longer perspective, based on research like a recent Federal Reserve report that, using standard inflation indexes, says her fellow millennials are doing worse than Generation Xers or baby boomers. One common refrain is that blue-collar wages reached a peak way back in 1973 and have never recovered since.
As economist Tyler Cowen points out, the use of inflation indexes intended to measure short-term fluctuations can be misleading when extended to longer, multi-decade periods.
As it happens, 1973 was a year followed by almost a decade of the highest inflation since the years just after World War II. Applying standard inflation indexes over the next several years made "real dollars" earnings seem very low.
The problem is that any inflation index, based on the cost of a market basket of goods, tends to overestimate inflation over time. One reason is because people respond to higher prices of the measured goods by buying something else -- apples rather than oranges, for example.
Government statisticians in the 1970s assumed people refinanced their mortgages every year, thus spiking housing costs. But when interest rates spiked, people stopped buying houses and taking out mortgages.
The other reason that inflation indexes overstate inflation, and therefore, understate wage increases, is that they have great difficulty measuring quality improvements and the value of innovation.
In 1970, I bought one of the first electronic pocket calculators for $110. It would cost maybe $3 today -- or an even less expensive part of the cost of my cellphone. To take a more distant example, what is today's equivalent of the 250,000 pounds Queen Anne gave the Duke of Marlborough to build Blenheim Palace after his victory over France in 1704? The only sensible answer is: a huge amount of money.
These weaknesses are nobody's fault. The federal government's admirable statistical agencies, justifiably proud of their long-earned reputation for integrity and absence of political influence, try to account for product improvements.
But they're reluctant to constantly fiddle with the components of market baskets or product quality for the very good reason that such changes might become -- or might be thought to become -- targets of political manipulation.
Those of us who were alive and kicking in 1973 would not choose to go back to its technological levels or standards of living. We're not ready to give up smartphones or air conditioning or the inexpensive fresh fruits and vegetables on supermarket shelves today, or the pharmaceutical advances that expand our life span by a dozen years.
AOC and most people busy leading their lives tend to take these things for granted. The history they've been taught -- a narrative of American misdeeds and injustices -- overlooks the fact that until around 1800, as Jonah Goldberg shows in his recent book, "Suicide of the West," sustained economic growth basically never happened. Even those willing to go back and live in 1973 conditions would be appalled by what Queen Anne and the Duke of Marlborough took for granted.
So keep things in perspective. The past decade's economy has been far from perfect, but America has seen prosperity, the likes of which our ancestors could never have imagined.
Michael Barone is a senior political analyst for the Washington Examiner, resident fellow at the American Enterprise Institute and longtime co-author of The Almanac of American Politics.
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