Are You Better Off?

September 29, 1952

The Democratic theme song in the present election is “Don’t Let Them Take It Away.” The implication is that every increase in wealth, income, or production achieved by any American in the last twenty years has been due, not to his own efforts, but to New Deal-Fair Deal paternalism.

This is, of course, nonsense. As Macaulay pointed out in his History of England more than a century ago: “No ordinary misfortune, no ordinary misgovernment, will do so much to make a nation wretched as the constant progress of physical knowledge and the constant effort of every man to better himself will do to make a nation prosperous. It has often been found that profuse expenditure, heavy taxation, absurd commercial restrictions, corrupt tribunals, disastrous wars, seditions, persecutions, conflagrations, inundations, have not been able to destroy capital so fast as the exertions of private citizens have been able to create it.”

Even if it could be proved, in short, that the American people have made great advances in wealth, income, and productivity in the last twenty years, it would not follow that they had done so because of the New Deal and Fair Deal. This may have been merely a continuation of the rate of progress shown throughout our history. And it may have been made in spite of mischievous governmental policies.

But are the American people in fact better off today than they were, say, in 1939? Herbert J. Miller, executive director of the Tax Foundation, has made an impressive analysis to challenge the claim. Some of his results were summarized in last week’s Newsweek, but the question warrants further study.

The first thing Miller had to do with the statistics so glibly cited by Administration apologists was to adjust them to realities. Mere dollar comparisons are utterly misleading. A married man with two children, for instance, whose net income before taxes was $4,000 in 1939, would have to make $9,139 in 1952 to reach equivalent buying power after taxes and inflation. After reducing the inflated figures to a per capita basis and to a dollar of constant purchasing power, Miller comes up with some surprising results:

1—Per capita personal income, after taxes and in 1939 dollars, rose from $536 in 1939 to $760 in 1951, a 42 percent increase. Yet all the increase occurred between 1939 and 1944. There was a decrease, in fact, of 2 percent from 1944 to 1951.

2—While total individual net worth (assets minus debts) was 9.2 percent greater in 1951 than in 1939 (in 1939 dollars), it was 7.4 percent less per capita, 12.5 percent less per family, and 24.7 percent less per worker.

3—Individuals were 54 percent further in debt in 1951 than in 1939 even when debt is expressed in dollars of constant purchasing power.

4—There was a per capita increase in national wealth (excluding military assets) of about 9 percent in 1951 over 1939. But there was a decline of 4 percent in 1951 compared with 1929. (From $3,501 in 1929 to $3,356 in 1951, in 1929 dollars.)

Miller even understates the evil effects of inflation. It “has not been an unmixed blessing to put it mildly.” But inflation always affects different groups differently. And it can in fact be mathematically demonstrated that, given a state of reasonably full employment, at least about half the population must lose more from a further rise in the cost of living than it gains from a further rise in its own prices or income.

Administration spokesmen, when they forget that their theme is “You never had it so good,” inadvertently admit this. Said the Secretary of Labor in a bulletin of his department last December: “Nearly 45 percent of the wage earners of the United States failed to keep pace with the 10.1 percent rise in the cost of living from January 1950 to June 1951.” And it was just last month that the Bureau of Labor Statistics thoughtlessly reported the rising cost of living has forced the average American city family to spend $400 more than its income after personal taxes (see page 73).