Bill Clinton: I Know Why American Incomes Are Stagnant

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International Leaders And Luminaries Attend Clinton Global Initiative
John Moore/Getty ImagesFormer President Bill Clinton speaks at the closing session of the Clinton Global Initiative last week.
By Katie Kramer | @Kramer_Katie

For former President Bill Clinton, host of the annual gathering of business and political leaders at the Clinton Global Initiative, the American economy isn't feeling as secure as it should.

Median household income in 2013 was $51,900, according to recent reports from the U.S. Census Bureau, 8 percent lower than before the recession began in 2007. During the Clinton presidency from 1993 to 2001, median family income in the United States rose to $49,000 from $37,000.

"Median income hasn't gone up for three reasons," Clinton said. "One is the labor markets aren't tight enough, and we haven't raised the minimum wage as we should. And the second reason is we haven't changed the job mix enough, to raise the median income and have more poor people working into it. The combination of jobs has to pay, on average, higher wages."

Clinton said he believes the current business climate is also to blame for income stagnation.

"Gross domestic product growth doesn't lead to growth in median incomes because company after company takes more of its profits and spends it on dividends, stock buybacks, management increases ... and less on sharing it with the employees broadly," said Clinton, who is hopeful that corporate America is poised to change that view.

While Clinton said he hopes that corporations refine their moral compass, he also hopes Washington will act when it comes to the debate over whether tax inversions -- the practice of American companies reincorporating in foreign countries to take advantage of lower corporate tax rates -- are right or wrong.

"America has to face the fact that we have not reformed our corporate tax laws when 100 percent of the people, from Democrats, Republicans, Independents, agree we need to," Clinton said. "We have the highest overall corporate tax rates in the world. We need tax reform."

When asked if he knew any politicians expected to participate in the 2016 presidential election and campaign for an effort to reform the tax code, the 42nd president demurred.

9 Numbers That'll Tell You How the Economy's Really Doing
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Bill Clinton: I Know Why American Incomes Are Stagnant
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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