The Most Important Chart in American Politics

There is a single chart — three colored lines on a grid — that shapes the political reality of this country

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There is a single chart — three colored lines on a grid — that shapes the political reality of this country. During the 2012 campaign, one of President Obama’s senior strategists called it “the North Star” and started his internal PowerPoint presentations with it. When Republican majority leader Eric Cantor speaks on Tuesday about his vision for the future of the Republican Party, the chart’s central message will bind together his words.

The chart tracks three economic trends in the U.S. over the last two decades, between 1992 and 2009. The first two lines — productivity and per capita gross domestic product — are rising. This is the unmistakable American success story, the one reflected in record corporate profits, growing wealth accumulation and the unmatched efficiency of this country’s economy. The third line tracks median household income, as measured by the U.S. Census. It shows the story of frustration and stagnation that so many Americans long ago accepted as a reality.

Shortly after 2000, the lines diverged. The economy hummed along, but many Americans, the ones politicians typically refer to as the middle class, stopped feeling the benefits. There are many reasons for the change, and some of them are open to economic debate. (The Congressional Research Service issued a paper [PDF] on the divergence in 2006 so that politicians could make sense of it.) Part of the shift can be attributed to increased income inequality owing to globalization and new technology — the wealthy becoming much wealthier, while the rest stayed the same. Part of it can be attributed to increased corporate profits, as new markets opened overseas and new technology lowered costs. Some of it has to do with how the figures are calculated. But the most important political takeaway of the chart is that at the turn of a new century, much of the U.S. stopped feeling the benefits of a growing national economy.

The chart (above) was originally created by NDN and the New Policy Institute, and it helped Democrats change the way they talked about the frustration of the American people. Shortly after the 2010 election, Simon Rosenberg, who runs those left-leaning think tanks, showed the chart to David Axelrod and David Simas, two of Obama’s top political advisers. The point of his presentation was that the emergency of the first two years of the Obama presidency — the Great Recession, brought on by financial collapse — did not explain the economic suffering and resulting anger felt by so many voters. Instead it was a more recent manifestation of a trend that had begun nearly a decade earlier.

“The reason this is happening is because of rising global competition, the defining new economic challenge of our time,” Rosenberg said in a recent interview with TIME. “In the actual experience of the American economy, there has become an enormous gap between the upper one-third and everyone else.”

Simas led the opinion-research effort for the 2012 Obama campaign, and he told me after the election that the chart hung in his Chicago office, along with a caption he derived from a focus-group participant: “I’m working harder and falling behind.” (That same line became a fixture of the President’s stump speech.) The Obama campaign built its strategy to attack Mitt Romney by focusing on the flat red line of median household income. Romney struggled to focus the country’s attention on the suffering and was never able to escape the Obama campaign’s characterization of him as the candidate who didn’t understand. By the end of the campaign, Romney became the candidate who understood GDP and productivity, a corporate turnaround artist out of touch with reality. As polls showed, Obama was the one who better understood the struggles of the middle class.

This is why Cantor’s speech on Tuesday is worth watching. It will be a full-throated effort to reclaim the median-household-income line for the Republican Party. He will mention the stagnation. He will describe Republican solutions aimed at addressing decade-old frustrations: new federal help for paying for school, tax code simplification and a renewed focus on R&D investment. His rhetoric will strongly echo Obama’s campaign stump speech. “Lately it has become all too common in our country to hear parents fear whether their children will indeed have it better than they,” Cantor will say, according to early excerpts of his speech. “Our goal: to ensure every American has a fair shot at earning their success and achieving their dreams.”

For much of the 2012 campaign, Republicans contented themselves with a message focused on decreased federal spending and debt, two policies that addressed the aftermath of the Great Recession but offered no solutions to the economic struggles that had begun a decade earlier. With Cantor’s speech, there is the beginnings of a shift. Like Obama after the 2010 election, Republicans are now directly addressing the fears and frustrations that have been at the heart of each federal election since 2006, a feeling of the country in decline as manifested by stagnant take-home pay. If the 2012 election has any lasting import, it is that fiscally conservative austerity politics alone will not win the day. It must be paired with a broader message. The most important chart in American politics can no longer be ignored.

206 comments
MichaelCammer
MichaelCammer

How about displaying the chart big enough so it can actually be read?

MichaelCammer
MichaelCammer

@BrentHarrelsonI know plenty of highly educated and hyper-responsible people who can't get or keep jobs or who have to take pay cuts to get jobs.  The fact is that education, even tech strong educations, are not leading to good jobs.

BrentHarrelson
BrentHarrelson

There seem to be a lot of posts here about how the stagnating wages are all the fault of corporate America. I would disagree. In 1980 Alvin Toffler published a book called The Third Wave. It described how advanced economies are moving away from manufacturing and into the information age. It also listed the requirements for countries to excel in this "Third Wave" - chief among them...education. 

If the US would spend the money on education that we throw at the military, and expect the same world-class results, then wages would rise. Turn America into a nation of researchers, developers, scientists, space explores and utilizers, geneticists, doctors, international lawyers and bankers, entrepeneurs, highly skilled high tech manufacturers, teachers, mathematicians, and other highly educated, highly skilled, and high paying professions. Wages would rise, the GDP would rise, jobs would proliferate, new products would be invented, new companies would form, welfare recipients would be reduced, and the crime rate would drop. Quite simply - stupid people cannot build or maintain a strong nation or a strong economy. Expand access to higher education for all Americans and you would never read another article like this again. 

AkselKargårdOlsen
AkselKargårdOlsen

Interesting that the curve has such a kink in 2000 as opposed to a soft tapering off. As I see it there are no easy solutions.

We can either go the protectionist route, stop outsourcing of jobs and--by the same token--dramatically limit our exports and take the substantial costs to our economy that entails, or we can focus on workforce training and industrial policy as have been more common in Asian emerging economies. But this is a generational project and will not change matters dramatically in the short term, yet it must be done.

FactsNotFallacies
FactsNotFallacies

Well global competition aside, there's also the fact that households contain fewer working persons than they once did and more of someone's compensation is in non-salary benefits (medical for instance). Combine that with people taking more time off and the total GDP of the US growing in part because of a higher population (thus each individual's share of income seems smaller by comparison), and it's easy to see why the numbers are pretty skewed. 

JoshBare
JoshBare

It's simple logic:   if global competition were the cause of median income stagnating, then corporations' profits margins should also be compromised.   But guess what?  They're making more money than ever.  So are CEO's and executives.  So really the only people being hurt are the middle class.    That's class warfare by the elite and not because of "global competition."

If the workers are doing all the real work and their pay does not increase, but yet, their executives and CEO's are making 700% more than in 1970, then it goes far beyond "global competition."   If corporations are making more money than ever, but workers pay has stagnated, it does more than suggest the greed-filled elite are keeping it all for themselves.     THINK!!!

jophoenix
jophoenix

Why? Simple " Free Trade Doesn't Work" by Ian Fletcher.

 Plato said that Democracy was unworkable because the multitude is swayed by propaganda. And the leaders must be from the public policy and Economics. We elect our leaders from the law, but none that I can remember came from the Economist side.The heist from Wall Street and the bankers clearlyis testament to this.Our next president must be form the economist side!! I expect that most of our leaders do not realty understand the math and if they did then they clearly have committed treason by allowing the existing tread agreements which have brought about the dismantling of the American!! The republicans are way ahead in the blame department.  America is up side down and our politico leaders are clueless of the palpable anger felt toward them from the public. We are at a boiling point and DC is totally oblivious!! 

PenkDooo
PenkDooo

Sounds like a pretty solid plan to me dude.


www.UGotAnon.tk

eartherich
eartherich

What exactly is the x and y axis for this chart? Also, the link to Congressional Research Paper is down. I'd like to know more about the data.

albertodesignz
albertodesignz

“The reason this is happening is because of rising global competition, the defining new economic challenge of our time,” Rosenberg said in a recent interview with TIME. “In the actual experience of the American economy, there has become an enormous gap between the upper one-third and everyone else.”

BINGO

Too bad it took an election cycle to get this across (some) people's minds. The rest of the media needs to blast this message out loud and clear as well.

oldwhiteguy
oldwhiteguy

Can't argue with your suggestions.  Just know that while those automaker unions were demanding more money, they were up against management that was closing US factories and moving their jobs overseas, while at the same time paying themselves plenty.  AND, probably more importantly, managing with short-term thinking and marketing that was increasingly falling behind their competition.  In other words, the guys running the place were running it into the ground.  Now, was anyone justified in making any demands here?  Obviously, no. Management was also saddled with an out-of-date distribution system that wasn't competitive either. Point is, we all bought the argument that it was the unions fault.  There's more to the story.

carlos
carlos

The solution is education and regulations that foster better investment in the US. Unions care as much about the fees they charge versus the people they help. Plus Unions are out of touch with reality. Give in point the auto industry. Unions kept forcing the company to increase the salary when the comapnies were doing bad themselves. Talk about killing starving the cash cow. Educate the workforce to get better paying job and create regulations that allow business to want to invest in the US.

BillSnow
BillSnow

"Forgive me for noting that conservatives seem to believe that the rich will work harder if we give them more, and the poor will work harder if we give them less." - E.J. Dionne Jr  

metropika
metropika

The Republicans are desperately trying to rebrand the GOP from its image of a bunch of really rich middle aged farts to a new younger demographic? When hell freezes over.

mary.waterton
mary.waterton

What's to understand? STOP EXPORTING JOBS TO CHINA and stop rewarding companies that do.

DarianL.Smith
DarianL.Smith

A profitsharing tax credit incentivizes business to show profit, so they can receive the tax credit.  And 20% of net profits is huge.  It may mean that some workers could double their salary with profitsharing.   Everyone wins.   Business gets a tax break.  Workers get a higher household income. Government is leaned initially, however, as the economy grows more jobs create more revenue sources.  The economy is both stimulated and stabilized simultaneously.

JoshBare
JoshBare

“The reason this is happening is because of rising global competition, the defining new economic challenge of our time,” Rosenberg said in a recent interview with TIME.

File this away under Complete Bull****.   The reason why the median income line has stagnated is because America is a Corporate Oligarchy or Polyarchy.  The elite have control of the government.  Notice how CEO and executive incomes have skyrocketed?  Why doesn't this global competition affect them as well?  (see Corporate Oligarchy)

All federal level politicians know this and they use the two party system to blame one another for our troubles - a smokescreen for what's really happening.  It's Red's fault!  It's Blue's fault!  And all the while things keep getting worse.

Jessica69594801
Jessica69594801

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mandysroyalty
mandysroyalty

@BrentHarrelsonGreat post, but I would also like to add that it is not just access to higher education that is needed, but quality education. Quality at ANY level, actually, whether someone is in the 6th grade or a senior at a top university. We've got to revamp the politically correct, low-bar education our youth are receiving -  across the board.

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bndfjicsqpsaijdbvoiuepsbv

@FactsNotFallacies your analysis of this chart is, for a lack of a better word,  retarded. "non salary benefits", are you freakin kidding me?? a growing proportion of companies don't even pay medical anymore. "people taking more time off", where the hell do you get this information?! people are working longer hours, and many have taken 2 jobs since our economy was collapsed in 2007.  if you bothered to notice, the household income line levels off in 2000, well before the 2007 meltdown, so don't even go to the current level of unemployment causing this. "higher population growing GDP"...DUH!  the fact is, for the middle class working population, those millions of unwashed masses that used to be able to achieve a decent living wage in the US, the game is over.  Income inequality is reaching epic proportions as more and more of the wealth is transferred to a smaller group sitting on top of this mess.  revolution is in out future.  creative destruction, if you will.

JoshBare
JoshBare

@albertodesignz So corporations' profit margins, CEO, and executive pay has suffered because of this propaganda?    Or are they making more money than ever?    Stands to reason global competition is a convenient excuse for waging class warfare.

jophoenix
jophoenix

@oldwhiteguy No we all did not! I'm just a an American who reads. I wondered why we did not change the styling so I looked in to it and we would have to change to wheel base, it would call for investment of cash flow. Clearly the style change was needed, so the answer game in BIGGER no well base investment, SUV use more GAS, win for short term thinking.

Turning manufacturing into a stepping stone for the real business of financial fiefdom. This is what always happens when absolutes are driving the negotiation not creatively.

Unions. Also small minded. State of the Art manufacturing is good not bad the skill set could have been eased in through education and the workers could have been shifted to other task and those who would not corporate would open car washes ...

Wages could have been tied to direct investment loans for new equipment,. by demanding more for less productive ways is never the answer. Wagner did state that the profit driven insurance was destructive to American maturating, the Unions Should have led the charge for a single payer system . Instead they fought it trying to keep this as a benefit, What they should have done is the benefit should be in 401k plans working with tax deduction for things like collage education fond's, home ownership saving there are ideas besides health care. Even short term instant gratification vacations. purchased at discounts,

tchak
tchak

@metropika I don't think it's limited to just a younger demographic.  It's a realization that they demographic that they appeal to is no longer the majority.  They need to change (or at least adjust or soften) their platform in order to win.  Some people just see it as simply getting with the times.  I would tend to agree.

tchak
tchak

@mary.waterton That *might* address some of the unemployment, but definitely not wage growth.  It seems like you're addressing the wrong problem here.

jophoenix
jophoenix

@JoshBare how right you are and the smart folks are watching. And deciding what to do next.  Talent can always leave behine a dieing nation. 

Belisarius86
Belisarius86

@JoshBare 

It isn't bull****, but it obviously isn't the only factor. There were real structural shifts caused by globalization/free trade. I work in a manufacturing environment for a multinational corporation, and here are some of the things I see:

-A factory line worker is easily replaced by someone in China. They have simple jobs and you don't need their feedback so the language barrier isn't as much of a problem. Their wages are driven down.

-A technician is a little more difficult to replace, since they often need to correspond with engineers and others, but they can still be replaced. Their wages are driven down, though slightly less than a line worker.

-An engineer is even more difficult to replace, as they often report to management and give presentations and whatnot where communication is key, but it can still be done. Their wages are slightly driven down.

-A manager is rarely replaced, since good communication up the chain is so important. But they suddenly have a much larger pool of people to manage (albeit often indirectly) due to cheaper international labor. They often become more critical, and their wages go up, sometimes dramatically at the higher levels.


I'm sure there is some level of corruption or old boys' network (which you term oligarchy), just like there has always been and always will be. However, I doubt it has suddenly become that much worse since 1995-96, when the divergence first appeared.

NaveedXVO
NaveedXVO

@JoshBare Nah, Global competition doesn't affect them because they're the ones who own the American multinational companies. They get huge benefits from free trade. Everyone knew that free trade was going to hurt the poor and middle class in the first world in relation to the rich, but the hope was and still is that it will eventually enrich us all. It will be interesting to see what happens when it no longer makes sense to produce goods in China. It's already happening and within the next 5 years Chinese labor costs plus transport costs will be on par with American labor costs. Already some jobs are returning, so there's that to look forward too.

PopeyeThesailor
PopeyeThesailor

@AnthonyCaudill is that what you say when you here a well researched fact you dont like the sound of? you must be a teabagger.

Zalatix
Zalatix

@JoshBare @albertodesignz What part of "foreign outsourcing is about reducing the wages of American workers and cutting American workers out of the global economy" do you not understand? Corporations are waging war on American workers.

oldwhiteguy
oldwhiteguy

@jophoenix @oldwhiteguy You make good observations.  Unfortunately, these called for hard choices and as we have seen, easy choices always go down well, easier both with boards and with union membership.  It's fair to observe that Japan and Germany started from scratch in a lot of industries - and with our help - after the war.  It's a lot harder to change what's already been built and is successful. But my point remains.  Today, unions have taken the blame and lost credibility.  Others (who have moved to the suburbs) would have us believe they're were and are blameless.  Not so fast.

Zalatix
Zalatix

@tchak @metropika Getting with the times and softening their rhetoric won't mean anything. Failed ideas still fail.

Zalatix
Zalatix

@tchak @mary.waterton No she's not. Foreign outsourcing is the CAUSE of wage stagnation. Think about it. What will wages do if you send the jobs overseas and run up unemployment?

JoshBare
JoshBare

"That is not the issue. The issue is that, to a very significant degree, the Congress of the United States of America is controlled by a handful of extraordinarily wealthy people and corporations, Wall Street being at the top of that list. And unless we address that issue, I fear very much for the middle class. I fear very much for our kids, for low income people and for seniors."  - Bernie Sanders

http://www.politicususa.com/bernie-sanders-exposes-dirty-secret-wealthy-people-control-congress.html

Norm Chomsky, professor at MIT talks about this stuff regularly and at length.

jophoenix
jophoenix

@NaveedXVO @JoshBare When the consumer cant but all the stuff where will they sell it . I for one have stoped buying !! No point first I dont need anymore things and most of all I'm mad as hell so it gives me no pleasure to give "them" more...

jophoenix
jophoenix

@oldwhiteguy @jophoenix I think that Unions can and should make a come back. I fact every new graph clearly shows workers better off when they belonged to unions! Now its upp to the modern unions to get back into the race with a modern message and creative thinking , Germany had a strong union look it up very interesting how they have stayed up to date.

tchak
tchak

@Zalatix @tchak @metropika I've seen this chart.  Look, I'm a Dem also, but I'm realistic.  Do you really think that the economy is so simple that with a different president, all these things can change?  How about the possibility that America elects based on the times, and the fact that there are so many macroeconomic events that are out of the President's control?  Did Clinton cause the dotcom bubble and burst?  Did Bush encourage people to speculate on housing and later cause that market to crash?  Such a statement is so ignorant.  I'm embarrassed that we are in the same party.

tchak
tchak

@Zalatix @tchak @metropika When Republicans shift from their extreme ideologies, who is actually losing here?  Failed ideas is simply a matter of opinion.  Nobody knows what actually works and what doesn't.  There is no manual on how to deal with crises like this.  And please don't tell me that Democrats have not been trying to revive failed ideologies either.  Both parties are guilty of this.

jophoenix
jophoenix

@tchak @Zalatix @mary.waterton Manufacturing is low wage?? Tell that to Germany, or someone at making air plans it depends on what and how you are making it. Modern manufacturing has been computer with man driven for a decade at lesr.

Free Trade Does'nt Work" by Ian Fletcher Read it and learn. Our government and Corporate American have through bad policy  made war on the people and it is up to us the voters to change this. We can made America the best and greatest manurfacting best in the world. This is a fact. We have the power to read and think !!  and learn the correct argements to move the discussion foward and not be stope dead in the water this book is a guide. But you have to read it.

Oh I have read Jerrmy Rifkin's the third industral revolution, fun and some nice thoughts if we are born with a million dollars each and kill off 7 billion people, I like the book  thats all.


Zalatix
Zalatix

@tchak @Zalatix @mary.waterton There are not, and never will be, enough knowledge-based jobs to cover the number of unemployed Americans we have today. If your solution is to train every person in knowledge based industry work you will get a minority of people who get jobs, and most will just have more debt.

India is already undercutting us with knowledge-based labor. Biotech research, anyone?

And manufacturing was not a low-paying field until the corporations arbitrarily said it was. A manufacturing job used to support a whole family.

tchak
tchak

@Zalatix @tchak @mary.waterton Please read this for reference: http://www.economist.com/blogs/freeexchange/2010/08/manufacturing

Our society has been making the transition from being an industrialized-based society to that which is knowledge-based.  We can't get stuck with the idea that manufacturing will save us. In fact, I would argue that focusing on manufacturing can potentially exasperate wage stagnation.  Manufacturing is a low wage-growth career.  I get that the populist view is that we need to make everything in America, but that just simply cannot be the solution.