Bye Bye Misery

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by: Calafia Beach Pundit
Summary

The Misery Index was invented decades ago by Arthur Okum, and it originally consisted of the CPI inflation rate plus the unemployment rate.

Both inflation and unemployment are very low, and that is great news for the average person.

Politicians have just about run out of room to increase rich people's "fair share" of the total tax burden, which I suppose should be added to the list of things to be grateful for these days.

This post is a paean to progress. The average person living in the U.S. has never had it so good, by any number of measures.

Chart #1

The Misery Index was invented decades ago by Arthur Okum, and it originally consisted of the CPI inflation rate plus the unemployment rate. A low reading means that inflation is low and unemployment is low, and that brings a measure of stability to the life of the average working person. I've made a minor modification to that in Chart #1, substituting the rate of inflation according to the Core Personal Consumption Deflator (which also happens to be the Fed's preferred measure of inflation). But no matter how you calculate it today, the Misery index is as low as it has ever been in my lifetime. Both inflation and unemployment are very low, and that is great news for the average person.

Chart #2

Chart #2 is the result of dividing first-time claims for unemployment by the total number of people working. This is akin to the probability that the average worker will find him or herself unemployed in a given month. Currently that probability is less than 0.2%. It's never been so low, by a long shot.

Chart #3

Chart #3 is a picture of the average worker's nirvana: when there are more job openings than there are people looking for work. This, plus the fact that unemployment is very low makes the current environment the best time in many generations to be looking for a job.

Chart #4

When I was 10 years old, over one-quarter of the average person's annual spending went for food and energy, as shown in Chart #4. Today, thanks to drilling advances, modern agriculture and greatly expanded global trade, that figure has come down to just over 10%. Wow.

Chart #5

Despite our materialistic lifestyles and ever-rising consumer debt, the average household's financial burdens today are no higher than they were 40 years ago, as shown in Chart #5.

Chart #6

Chart #6 illustrates the relative behavior of the prices of services, non-durable and durable goods since 1995, which not coincidentally happens to be the year that China started exporting durable goods to the world in earnest. If you consider that services prices are basically driven by wage and salary income, then one hour's worth of labor today buys about three times more durable goods than it did in 1995 (1.84/0.62). I don't know of any measure of material progress in recent years that is more impressive than this. Is there anyone who can't afford a flat-screen TV or a cellphone these days?

Chart #7

But what about the supposedly huge increase in income and wealth disparity? Well, the rich may be getting richer than the poor are getting richer, but they are picking up the lion's share of the $3.3 trillion in taxes collected by our federal government in the past 12 months, as Chart #7 shows. According to the Tax Policy Center (a joint venture of the left-leaning Urban Institute and the Brookings Institution) the top 40% of income earners pay 86% of all federal taxes, while the bottom 40% pay only 14%. If you want to narrow that down to the top 20% and the bottom 20%, the tax disparity is even more dramatic: the rich pay over two-thirds of all federal taxes, while the poor pay less than 1%. Politicians have just about run out of room to increase rich people's "fair share" of the total tax burden, which I suppose should be added to the list of things to be grateful for these days.

Update: For more on how things have improved dramatically over the years, I recommend the Cato-sponsored Human Progress site.

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.