The State of the USA is… Unclear

Jon Gertner wrote a great article about the history of GDP and other social welfare indicators on the New York Times.  The occasion for the article was a new “challenge to the G.D.P. …known as State of the USA” which was bringing an eponymous website online at the time (2010).  Their mission is to “assess the nation’s progress… at all levels, with the best quality measures and data on the most important issues facing the country.”  Six years later, you probably have not heard about the State of the USA replacing GDP as the primary social indicator.

Although the State of the USA received assistance from prominent organizations like the National Academy of Sciences, the Hewlett, MacArthur and Rockefeller foundations, plus $70 million in federal government support, their “key national indicators” system has done nothing to rival GDP.  Instead, they tried to gather a collection of existing data rather than creating anything new, but even that effort is pathetic compared to what the Federal Reserve Economic Database (FRED) already does.  The home page currently displays links to data about job growth and the portrayal of smoking in movies, but there is nothing there that gives any hint of challenging GDP.

We need a statistic that is as clear as GDP before we can replace GDP.  GDP is the total annual income of a group.  That is a simple concept to understand.  When the total income goes down from one year to the next, that is a recession and the government responds by lowering interest rates, cutting taxes, and extending unemployment benefits.  When discussing whether tax cuts for the rich are desirable or not (as Pikketty & Saez examined), the issue centers around whether or not GDP grows faster when the top tax rate changes.  But why should the rest of us care if the growth of high incomes causes aggregate income (GDP) to rise if incomes for the rest of us are not growing?  As I posted earlier, this has been the case in the ‘recovery’ from the 2008 recession until median income finally started growing in 2013.  The recession officially ended in 2009 because the income of the wealthy increased enough to outweigh the drop in median income and that dynamic continued for four years without improvement for the majority of American households.