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"Dear [Washington Post Journalist Jeffrey] Birnbaum:

Yesterday, on PRI's "To the Point" (April 26), the issue of gas prices was raised. You suggested that the Administration, in response to these current high prices, will and should point out how economic growth has been strong, and that this has benefited all Americans. By the way you couched it, it sounded like somewhat of an endorsement.

Growth normally translates into a benefit for most Americans through real wage increases.  Except over the past five years, real wages have fallen.  In fact, over the past two years, over 80% of American workers have seen their inflation adjusted wages fall.

The benefits of our recent economic growth -- and I'm not saying that this is good or bad, just pointing it out -- have been felt at the upper end of the economic/income curve (nicely represented by Retiring Exxon Chair Lee Raymond's approximate 400 million dollar retirement package, or Exxon's record 36 billion dollars in profits last year). 

New Fed Chairman Ben Bernanke, in his Congressional Testimony earlier this year, makes a similar point: 

"What we have is an economy in which, thanks to increased productivity, gross domestic product goes up and a very, very large share -- an excessive share of the increased wealth has gone to a very small number of people who own the capital."

Additionally, fueling that growth is constant deficit spending.  A few democrats, and some liberals, may be loathe to admit this, but that basic Keynesian premise is not an illusion.  Holding everything constant, and increasing net aggregate demand (through increased net government expenditures, be they through tax decreases or spending increases) will spur some growth.
 
Without arguing the short term wisdom of such an approach, over the longer term it is a bit of a ponzi scheme.  In essence, we borrow from the future to fuel a little extra now. It's a foolish approach; certainly over the long term, and when not absolutely necessary over the short run.  First, we borrow from the future (which does affect most Americans). Second, we compete with private capital, slightly driving up the real cost of investment. Third, we have to pay interest on the aggregate federal debt. These payments, which often go unmentioned when we hear politicians and others speak of "mortgaging our children's future," are both enormous, and a flat out waste. Such payments on the federal debt were 352 billion dollars last year alone. (Total interest payments are projected to be 399 billion for the current fiscal year ending in September).  

It is true that some of that total (about 161 billion last year) goes to U.S. government trust funds. But since those funds are projected to run deficits even with the current surpluses, under current policy ALL of those funds are already earmarked, and more. Thus, in reality, the payments to these trust funds is also a real cost -- even though technically economists and accountants do not count it as such because "we could avoid it," if we absolutely had to.  We will be lucky to meet those future obligations without borrowing more, let alone changing policy so radically that those surpluses are not spent. In which case, from a pure economic perspective, it is irrelevant as to whether those interest payments on those treasury bills went to military retirement or social security funds (although this sounds nice), or to Chinese investors.
 
This enormous borrowing, at far greater net cost than benefit, is what has at least to some extent helped produce recent economic growth. Yet, contrary to the assertion that you suggest the administration should maintain, that growth has not necessarily benefited most Americans.
 
There is a tendency to simply assume that "growth" is good.  Everything held constant, it is good.  But what does it really mean? What does or has the growth actually translated into?  What if that growth is, metaphorically speaking; a bunch of people driving to gyms, paying memberships, getting on electric treadmills, driving home, driving to the store, driving back, instead of just walking to the store in the first place and saving a bunch of time and money and all of those "GNP (growth) producing economic activities"?
 
This is not to decry those activities, just to point out that in the abstract, growth has no meaning. Yet it is easy to fall into the trap of assuming that it does.
 
Simply put, for average American families, growth has meaning for two reasons. First, low unemployment (currently low, and this is a benefit, although it has been reasonably low, if not quite as low as currently, for many years now). Second, and more importantly, a rise in real wages. 

The latter measurement is the more important of the two, unless there are huge swings in employment in times of negative growth, because employment changes affect far fewer people. (Abstract arguments can be made with respect to the subjective "security" in a job that may be correlated with higher employment, but evidence indicates that correlation has become loose as the divergence between high and low paying jobs has increased, and it is psychological in any regard.  Higher employment also indicates higher job availability, opportunity and job liquidity for all Americans, which again, only has value for the most part in so far as it contributes to real wage increases, particularly if otherwise correlated with an increasing gap between high and low paying jobs rather than an increasing availability and choice of high paying jobs.  Thus, for these purposes, any arguable wage benefits of increased job "availability" is irrelevant, since we are already considering real wage changes directly)
 
Therefore of the two main benefits, real wages are far more important.  And these have fallen. Thus, the argument that this "growth" has benefited all Americans is not only largely false, this growth, again, has not necessarily even benefited a majority of working Americans.  Yet a majority of working Americans, in the form of reduced services to make up for dollars that have to instead be earmarked to pay interest on the increased federal debt, and in the form of the underlying obligation on that outstanding national debt, are paying for it."
 

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