I’m sure most folks in America are feeling a bit mystified–on the one hand, they are being told the economy is doing just fine, with the Gross Domestic Product rising at a rate of 4.8 percent in the first quarter. Certainly, the Bush Administration and the talking heads in the mainstream media are trying to push the line that everyone should be feeling great and optimistic.

Then, there’s the reality of the family checkbook: gas prices north of $3 a gallon, disappearing health insurance, pensions evaporating, stagnant wages relative to inflation, consumer debt at record levels, bills paid for out of inflated home equity prices…

It’s been a personal quest of mine for a number of years to shine a light on the misuse of the GDP to describe the real-life economic conditions facing regular people. So, I’ll say again and everytime this comes up–the GDP only tells us the level of economic activity in the country i.e., in other words, how much stuff is being made (actual things you can hold in your hands or point to or just services). It tells us very little about the DISTRIBUTION of the income and wealth that comes out of the making of stuff.

And as the Economic Policy Institute points out:

Wage growth has been decelerating since 2000, and it has leveled off in recent months at around 2.5%, well below the historical average for this series (and below the inflation rate since 2004). Compensation has slowed as well since 2004, largely due to flat wage growth in tandem with declining benefit costs. For the last three quarters, compensation has lagged inflation as well.

If wages are not rising fast enough, where do the economic genuises think that consumers are going to get money to continue buying things once the inevitable decline in housing prices begins and takes aways one of the last sources of cash for deeply indebted but wage-deficient Americans?

The EPI paper has a broader discussion of the GDP and economic landscape, which is worth reading.