In another thread ray (I've lost track of which thread) noted that the median income of Americans had declined between 1999 and 2010.
This article, about Federal Reserve data, indicates that not only did the income decline BUT wealth evaporated...
Which perhaps adds perspective on why the decline in median income has been felt so greatly.

The Great Recession wiped out nearly two decades of Americans’ wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.

http://www.washingtonpost.com/business/economy/fed-americans-wealth-dropped-40-percent/2012/06/11/gJQAlIsCVV_story.html?hpid=z1

The question is, what policies of governmetn contributed to the decline in median income and the evaporation of wealth.
It wasn't high taxes by the federal government, they were cut drastically by Bush ...
It wasn't excessive regulation of the financial industry, since deregulation created much of the housing bubble...
And yet aren't those the embodiment of much of the economic policy of Mitt Romney or at least of his party?

Could it be the continued growth of debt, leading to the lack of hiring in the United States? That causes the statistics to show a lower median income.

Not just an Obama problem, btw. It is an over-spending problem. (But I have already said as much elsewhere)

Ricky:

The question is, what policies of governmetn contributed to the decline in median income and the evaporation of wealth.

Encouraging people to buy houses they couldn't afford and encouraging people to take out loans to pay for universities that may not provide jobs that will enable them to pay back those loans to name a couple.

Promotion of consumer spending, explicit as a policy after 9/11, and relaxation of credit rules that meant borrowing was easier. Tax cuts fed into that narrative, as did encouragement of home ownership as an asset (and using that asset for further borrowing).

Also, a reliance on service sector rather than production, with a commensurate exodus of jobs to foreign countries meant that the early 2000s saw a 'jobless recovery'. This and the increasing reliance on imported fuel meant that a commodities price rise (as happened in 2006-7) was a greater risk.

There is also the 'managerial revolution' which we've discussed elsewhere, the phenomenon of the owners of corporations (shareholders) losing power to the board level and senior management, which seems to be leading tto a concentration of wealth into the top of society. These are the guys who profit from debt in others, which is esssentially what capitalism is all about.

essentially?

Capitalism is essentially about debt. The 'capital' is loaned to the entity that uses it to operate. Whether that loan is of direct cash, with an interest rate, or in return for part ownership, the intent is for the loaners to get more back than they put in. Shares, bonds, outstanding loans - all of these are liabilities on a company's accounts.

So, the holders of debt make money on the debts of others. In an integrated market system in which everyone is borrowing to operate, buying and selling, then it just proliferates the debt and also the effect. Those who make money from selling widgets do so because people are borrowing to buy widgets (which they then will combine with doohickeys to make a product that they the sell at profit to repay the debt).

In capitalism, debt it not a bad thing - on the contrary, it's essential.

bbauska

Could it be the continued growth of debt, leading to the lack of hiring in the United States? That causes the statistics to show a lower median income.

There is no link to the growth of debt and unemployment (lack of hiring). In fact, taking on debt often leads to active hiring as taking on debt for business means that they are often ramping up operations to meet new or expected demand.... Taking on debt by government has often meant the financing of large scale infrastructure projects... again leading directly to hiring.
I'd also ask you to clarify what debt? Consumer debt? Private capital debt? Corporate debt? Or Government debt?
Government debt under Bush was largely due to revenue decreases brought about by lower taxation rates. These lower taxes were suppossed to lead to an improved economy. Since the median income decreased for ten years, any improvement was felt only by a few...
Consumer debt? Consumer debt drives demand, at least until that consumer debt cannot be sustained... Perhaps in this case, demand was diminished by unsustainable consumer debt? If thats the case then the policies that encourage consumers to take on more debt can be faulted. (Some of these are certainly Clinton era....) One thing that allowed debt to explode was the creation and legitimizing of credit default swaps and the collateralization of debt in opaque packages that camoflouged the inherent unworthiness of the debt package....(In everything from the unhealthy mortgages Ray notes, to over valued real estate, to the debt of sovereign nations like Greece) That began in 2003 (approx?) which means it created an enormous balloon that burst in only 5 years...
By the way, I'll concede that govenrment debt was also due to governemnt spending out of control at all levels... But if one looks at the history of Federal deficits spending semed to be in control in 2000, when surpluses were being run. So the significant spending increases measured since 2000 were primarily, in real dollars, in defence...

Note that Romney is currently running (at least on broad strokes) on increased defence spending, decreased taxation, and decreased fnancial industry regulation. Aren't these a replication of Bushes policies?

Quite right, rickyp - companies borrow to set up or to expand, which leads to more, not less employment.

However, companies relocating labour overseas will reduce jobs in the USA. That will cause problems of debt among those laid off, of course. So the relationship goes the other way around.

Similarly, the recession made government debt worse, government debt was not a cause of the recession.

Ray Jay wrote:Encouraging people to buy houses they couldn't afford and encouraging people to take out loans to pay for universities that may not provide jobs that will enable them to pay back those loans to name a couple.

I would encourage you to re-read what you wrote and contemplate what more "investments" might mean for our future. This is a complete aside and not an attempt at a hijack, but I don't understand how you can believe that the man who is in favor of government solving everything is going to rein in spending if reelected. He has repeatedly talked about "investing" more in higher education (subsidizing it) and keeping "responsible homeowners" in their homes (subsidizing). And, that's the tip of the iceberg.

/hijack

Actually, Doctor Fate's intervention highlights a real problem with Ray Jay's examples. Borrowing to invest is not as bad as borrowing to consume. If you borrow to buy a house, you should end up with a a place to live in, which is of value in itself. If you borrow to go to college, you should end up with more knowledge and qualifications, which are assets in not just the labour market, but in life.

Now people may make poor choices / have bad luck in those investments, but they are investments. On the other hand, borrowing to buy a car (which will depreciate in value pretty quickly), to buy non-durable consumer items, or go on holiday... All would seem to be less sound investments of loan interest because what you end up with is likely to be very low value or valueless.

So, I was perturbed mildly that Ray Jay chose as examples of bad reasons for debt two that can actually be pretty sound.

When it comes to mortgages, the main issues are that people over extend due to overconfidence in the future, and of course that the lenders did not hedge on 'subprime' mortgages, they inexplicably doubled down (or rather, trebled, quadrupled etc as the vehicles for parceled mortgage debt mwere sold and resold).

When it comes to education, it worries me that too often people take an approach of decrying study that is not designed to make one more employable in the 'market'. Education for its own sake has a place, being able to complete a degree course regardless of the subject does have value (admittedly my experience is of a rigorous science degree in the UK which may not be the same as the stereotype of a course at a liberal arts college in the USA, and I will say that from exchange students I felt you system was about 2 years behind ours), and I'm one of those socialist types who thinks there should be greater subsidy of higher education as a better educated society benefits us all, not just the immediate recipients.

I meant Government debt. You were talking about Government policies, remember?

Anyway...
http://www.mainstreet.com/article/moneyinvesting/news/gauging-fallout-declining-consumer-confidence-numbers
http://en.wikipedia.org/wiki/File:U.S._Consumer_Confidence_Index.png

Please look at the graph on the second link. It has a downward trend since 1999, but after 9/11 there was a rise until 2007. The trend is down for quite some time. If there is little confidence, people do not buy as much, employers do not hire the people that it takes to produce more, since the demand is low.

I personally have little faith that either Romney or Obama will bring us back from the debt crisis. One will get us there much more quickly, though.

Did government debt hit business confidence anywhere near as much as the credit squeeze in the private sphere? I'm unconvinced, to be honest, bbauska.

fate

I would encourage you to re-read what you wrote and contemplate what more "investments" might mean for our future

Consider the Bush tax cuts an "Investment". After all they created enormous debt, which can be defined as an investment.
How'd that work out?
If median income and median household wealth decreased over ten years...and home ownership is the same... then I'd say that those investments were lousy.

Investing in higher education may be a shell game of sorts, if the education isn't really "higher". By that the value of the education for the student is such that its cost, cannot be paid off in the early years of a subsequent career. But in part thats a result of years of the net migration of better science and engineering students from the Third World to top US schools. At one time these students stayed in the US. Now, a lot, return to their home countries where high tech inudstries are burgeoning thanks to the expansion of high tech and manufacturing that resulted from international corporations relocating companies there.
Now that students don't stay, there's often a dearth of qualified employees in certain skill sets, but a lot of "recreational engineers" looking for work.
If countries compete, then their populations compete. If the populace starts with a basic education that lacks grounding in science and math ... Perhaps there's where an invetment is required?
You and I agree that the best results in education come from the best teachers. And in countries that excell teachers are very well paid professionals. (Finland).
Will Mitt consider helping States increase funding so that they might pursue a policy of rewarding very qualified teachers in order to encourage an improvement in over all performance. Based on his recent comments, i said no.

bbauska

Please look at the graph on the second link. It has a downward trend since 1999, but after 9/11 there was a rise until 2007. The trend is down for quite some time. If there is little confidence, people do not buy as much, employers do not hire the people that it takes to produce more, since the demand is low.

I personally have little faith that either Romney or Obama will bring us back from the debt crisis. One will get us there much more quickly, though

it seems to me that the confidence from 2001 thru 2007 was fueled by the housing balloon, which was largely allowed through the financial sectors finagling, and camoflogueing of the reality of their assets. . (Credit Default Swaps etc).
So this confidence would be false confidence, no? I think there was a great deal of confidence just up to 1929 too...
If there is less confidence now, perhaps its in part through personal experience. And, as you feel, lack of confidence in political and business leadership to address structural problems... Or at least address them so that they benefit working and middle class people. (The bulk of voters)
I have a feeling that eitehr Mitt or Obama would do a decent job of managing the US economy if neither were weighed done by the extreme views of those on the right who are willing to commit themselves to tax pledges and increased military spending... And think there's some kind of magic that will grow the economy and reduce the debt.
There's no magic. But the idea that there can be "investment" that actually spurs economic growth and allows the country to grow out of the deficit/debt problem long term has been proven before. It just takes more time than people seem to understand or accept.

RickyP, I have said before that there need be be across the board cuts at ALL levels. I do not ascribe to the ideas that we should cut just the defense, or just the social programs. I have stated so before. I have even stated that if the tax could be "temporary" (like that would happen, cynicism intended!), I would support it until the debt was completely retired.

That would look like this...
20% cut across the board on ALL budgets
5% VAT for retirement of the debt that will be removed after debt is gone (not deficit, debt)
BBA passed.

With all three items in place the debt would be gone, and the economy would come back. It would be rough until then, I admit. But the problem would be solved once and for all.