Issue 235 of SOCIALIST REVIEW Published November 1999 Copyright © Socialist Review

Americans are living in an 'era of unprecedented prosperity,' President Clinton boasted earlier this year. 'Finally, the rising tide of our economy is lifting all boats.' On 1 October, the US Census Bureau released its annual statistics, which echoed Clinton's rosy assessment. According to the Census Bureau, in 1998 US households recorded their highest real median incomes ever ($38,900), while poverty dropped to its lowest point in 20 years (12-7 percent). 'Americans of all races, income levels and areas are wealthier than ever before,' gushed Newsweek magazine.

Prosperity is apparently on offer not only to those who are making a killing on their overvalued internet stocks, but even to the poorest workers now reaping the benefits of the economic revival emanating from Wall Street. Having thrown 5 million recipients off welfare, Clinton now claims credit for their inclusion in this economic miracle sweeping the nation: 'Now you see signs of the transformation everywhere. Mothers collecting their mail with a little more pride because they know they'll see a bank statement, not a welfare cheque; children going to school with their heads held a little higher.'

Presidential candidates are competing ruthlessly over who can mention the word 'prosperity' most often in stump speeches. Republican George W Bush used it 15 times during his announcement speech alone. Bush speaks of 'prosperity with a purpose', warning, 'We must be prosperous to keep the peace.' Not to be outdone, Democrat Al Gore promises, 'I want to keep our prosperity going, and I know how to do it.' The other Democratic candidate, Bill Bradley, has called for 'a deeper prosperity... a prosperity that makes us feel rich inside as well as out.' Even the obligatory lip service paid to problems of poverty reflects the politicians' entrepreneurial mood. Clinton's summer poverty tour was 'not about charity', as Housing and Urban Development Secretary Andrew Cuomo was quick to point out. 'It's about investment. There's money to be made.'

The truth is, however, that prosperity is further out of reach for the mass of the US population than at any time since the Great Depression of the 1930s. The Census Bureau report barely hides this truth. Wages have barely risen over the last two years, after falling steadily for two straight decades. Real weekly earnings are lower today than they were in the 1970s. If median household income has risen, this is because US workers are spending more time working--averaging about a month more time working each year than two decades ago. Nor does the census report acknowledge the fact that a million more workers have lost their health coverage each year during the 1990s while even insured workers have been forced to pay drastically higher shares of their health costs. Last year the number of people without health coverage rose to 45 million, 16.3 percent of the population. Likewise the census statistics ignore the fact that, with the majority of mothers with small children in the labour force, childcare costs have rocketed over the last two decades. In many states the average cost of day care for a four year old is more than that of state college tuition.

Perhaps most strikingly, the census does not take into account the astronomical rise in personal debt--not to pay for luxuries but necessities. The US savings rate (the percentage of personal income which is not spent each year) dropped to less than zero in October 1998, and has stayed there since--for the first time since the Great Depression. The typical household is, in other words, spending more than it earns. And repayment of debt now totals 17 percent of consumer income. For this reason, bankruptcy filings have doubled since 1990.

Moreover, the Census Bureau doesn't actually measure prosperity. For reasons it does not explain, it has a 'reportable upper limit' of $1 million--so the massive incomes of millionaires and billionaires which far exceed $1 million go unreported. This greatly distorts the bureau's measure of wealth inequality in the US. A far more accurate but less publicised study, called The Widening Income Gulf was released by the Congressional Budget Office several weeks before the Census Bureau's report. It showed that wealth in the US today is more concentrated at the top than at any time since the Great Depression. If only financial wealth is considered, the richest 0.5 percent of the population (about 450,000 households) now owns 42 percent of US financial wealth.

The personal wealth of Microsoft chairman Bill Gates alone, at $85 billion, is greater than the combined holdings Of 40 percent of the US population. Forbes magazine's annual report on the 400 richest Americans, released in September, notes that their combined net worth reached $1 trillion--a figure greater than the gross domestic product of China. In 1999 three of the richest Americans--Gates, Paul Allen and Warren Buffet--have a combined wealth of $156 billion, greater than the combined gross national products of the poorest 43 nations on earth.

For the working class, this has meant that recession conditions persist within the boom economy. Layoffs totalled nearly 700,000 in 1998. Child poverty remains at 21 percent--the highest in the industrialised world. In Los Angeles, the richest city in the US, one in three children live in poverty. Last spring the United Way of Los Angeles released its Tale of Two Cities report, which concluded, 'Economic conditions for children have not been so precarious since the Great Depression.' Food banks report that their recipients are increasing at a steady rate of 10 percent per year. According to the New York City Coalition Against Hunger, 58,000 people were turned away from soup kitchens in a single month last winter. As for former welfare recipients' share of the economic miracle, a National Governors' Association survey estimates that about half of those who have been cut off government assistance have no jobs, while the rest are typically toiling away at low wage jobs without health coverage. A study of the poor by the National Catholic Social Justice Lobby showed that 24 percent of those surveyed said they couldn't provide enough food for their children, 46 percent said they were eating less, and 36 percent said they had to forego needed medical care.

Far from basking in the glow of prosperity, US workers are continuing to suffer falling living standards. This is just a glimpse of the misery that the next recession will bring.