I, too, remember the American economy was up in many ways between 2002 and, I guess, 2006. Maybe even 2007. And because the economy was up, I'm sure you are right that tax revenue was up during those years.
I remember, too, that the New York Times regularly pointed out during those years that while the American economy was growing, the United States sunk deeper and deeper in debt. The NYT also repeatedly said that if another country had mismanaged its economy so badly, it would have been mercilessly punished by the rest of the world, and it would have sunk into a bad recession. But, according to NYT, the rest of the world - not least China, the prime creditor of the United States - was so dependent on a well-functioning U.S. economy that it refrained from calling in the U.S. debt. I remember that NYT often pointed out that only the United States, because of its unique position in the world economy as the issuer of the world currency, the dollar, was allowed to get away with what no other nation would be allowed to do.
It is at least possible that the position of the dollar will be challenged in the future. It could be that other currencies, such as the yuan or the euro, could become currencies that can be used in most parts of the world, so that it will no longer be necessary for anyone who wants to buy something from abroad to have dollars to be able to pay for it. It could be that the importance of the dollar might be decreasing. If that happens, it will become more difficult for the United States to put itself in serious debt and not suffer the normal consequences of it.
You are right that a 4% growth of an economy as big as the one of the United States is staggering by European standards.
Freezing spending to the rate of inflation for just one year would come close to eliminating the deficit
But the inflation is up because of the falling dollar, and freezing spending to the rate of a growing inflation does not sound like an easy thing to me. Particularly not as long as the United States keeps having to meet the costs of more than 150,000 troops in Iraq.
Ah, that finicky median family income, which by the way is up. Median family income was right around $50,000 in 2000. It is now around $58,000 and it's gone up each of the last 7 years.
But here is where you have to take inflation into account. I don't doubt for a moment that the median American family makes more dollars now that it did in 1999 or 2000. But if the value of the dollar has fallen since 1999 - and it really has - the "real" income of the median family could still be lower today than it was in 1999.
If indeed the median income in the United States is down, while the average income is up, that can only mean that the rich are getting richer while the majority of the Americans are getting poorer. Let me try to explain what I mean.
Imagine nine people. One of them makes $9.000.000 annually. The others make, respectively, $1000, $700, $300, $100, $80, $60, $30 and $10 annually. (I know, totally unrealistic figures. Bear with me. This is a thought experiment.)
The total income of these nine people will be $9.000.000 + $1000 + $700 + $300 + $100 + $80 + $60 + $30 + $10, which is $9.000.2310. The average income of these nine people will be $9.000.2310 divided by nine, which is appoximately $1.000.0257. In other words, the average income of these nine persons will be a little more than one million dollars! Not bad!
But the median income of these nine people is the income of the "middle guy". You line them all up from the richest to the poorest. In this case, where you have nine people, the median guy is the one at fifth place. This person has four people ahead of him, who make more money than he does, and he has four people behind him, who make less money than he does. So how much does "number five" make, then?
In this case, "number five" makes $100. That is not a lot at all. So while the average income in this thought experiment was a little more than $1.000.000, the median income was $100.
If indeed the median income is down in America, then the robust growth of the American economy has not benefitted the majority of Americans at all. (Okay, there is a possibility that a largish chunk of the population was absolutely dirt poor before, and they have gotten a raise, at the same time as the richest Americans have gotten a raise. Then a majority of the American people have benefitted, even if the median American hasn't. But I have not heard of such an inflation-adjusted raise for such a large number of the poorest Americans.)
Ann
