Shifting public policy to achieve a sustainable economy, a healthy environment and a just society.



DATE: March 22, 2007
CONTACT: 510-444-3041 x316

Global Warming, Income Gap, Urban Sprawl, and Debt
Reduce America's Economic Welfare

New analysis of the Genuine Progress Indicator shows that U.S. economic progress
has been stagnant since the late 1970s

Oakland, Calif.— The U.S. economy has actually stagnated since the late 1970s as income inequality, environmental degradation, and our flailing international position take their toll on real economic progress. This is one of the key findings from a new analysis of the United States Genuine Progress Indicator (GPI) by the Oakland-based policy institute Redefining Progress.

The GPI is an alternative economic accounting system that takes into account the benefits associated with volunteering, higher education, housework, and public infrastructure as well as the costs associated with lost forests, farmland, and wetlands, pollution, disappearing family time, and capital exported abroad. Most economists agree that Gross Domestic Product (GDP) fails as a true measure of real economic progress, and have endorsed alternative accounting systems such as the GPI. Redefining Progress is the only U.S. group to publish regular updates to the U.S. GPI.

According to Dr. John Talberth, lead author of the new GPI analysis, “Time and time again Americans are misled by glowing accounts of how well our economy is doing. Our new analysis looks behind the hype by acknowledging the costs associated with income inequality, global warming pollution, sprawl, lost family time, and our growing mountain of consumer debt. Tragically, per capita GPI has stagnated near $15,000 since the late 1970s while per capita GDP has grown to over $36,000. This means that the average American family has had to work harder and harder just to maintain the standard of living they enjoyed 30 years ago. It’s time for the President, Congress, and government agencies such as the Bureau of Economic Analysis to stop misleading the American public with irrelevant GDP reports and to develop more useful indicators of economic progress more in line with people’s everyday experiences. We are unlikely to see real economic progress until our government learns to measure it.”

The 2006 GPI update makes significant improvements to the methods used to calculate previous GPI reports. Since the late 1990s, when the last methodological changes were made, there has been a wealth of new data and studies that have improved the accuracy and reliability of the GPI’s components, or sub-accounts. These data were incorporated into the 2006 update. In addition, the 2006 update adds new sub-accounts tracking the economic benefits of higher education and the costs associated with carbon emissions and loss of primary forest cover because of the increasing importance of these factors.

“These improvements have made the GPI an even better tool for evaluating real economic progress, and we hope government agencies, public interest organizations, and researchers will work with us to use the GPI as a guide to sustainable economic policy at the federal, state, and local levels,” Talberth continued.

Key findings from the 2006 update:

  • Drought, floods, sea level rise, and severe storms exacerbated by global warming are taking their toll on the U.S. economy. Conservatively, Redefining Progress estimates the costs of our carbon emissions on existing and future generations to be just over $1 trillion per year, about 10% of GDP.
  • Income inequality is at its greatest level since 1950. The income distribution index—which measures income inequality—increased by 20% since 1968, the year the nation’s income was distributed most equitably. When growth is concentrated in the wealthiest income brackets, standard economic theory suggests that overall economic welfare suffers because the social benefits of increases in spending by the wealthy are less than increases in spending by those least well off. So a dollar of economic growth today counts far less than it did when our income distribution was more equitable.
  • Urban sprawl gobbles up prime farmland, increases commute times, exacerbates urban air, water, and noise pollution, and increases accident rates. We estimate the costs of urban sprawl to be over $1.1 trillion each year.
  • Globalization has exported America’s vast manufacturing infrastructure overseas and with it a source of productive investments. As a result, an increasing share of foreign investment in the U.S. today is used to finance consumer debt and government spending for tax breaks and the wars in Iraq and Afghanistan. This puts us in the position of being a net borrower. Net borrowing today is a record $254 billion, a cost overlooked by GDP.
  • The increase in the number of college graduates in the population is increasingly paying off in the form of many non-market benefits such as increases in the stock of knowledge, worker productivity, civic participation, job market efficiency, savings, research and development activities, charitable giving, and health. These benefits amount to roughly $828 billion each year.
  • Volunteerism is on the rise, and represents some of the most valuable work performed in our country. The GPI estimates the value of volunteer work in America to be over $130 billion. On a per capita basis, the value of work performed by churches and synagogues, civic associations, neighborhood groups, and non-profits rose from $202 in 1950 to $447 today, implying that over the past few decades, Americans have become more generous with their time and that this time is of much greater worth.

About Redefining Progress

The nation’s leading policy institute dedicated to smart economics, Redefining Progress develops solutions that help people, protect the environment, and grow the economy. At Redefining Progress, we believe we do not have to choose between a strong economy, a healthy environment and social justice. We make a difference through unbiased research, innovative tools, and smart solutions, and we work with a broad array of partners to shift the economy toward sustainable growth.

For more information on Redefining Progress or the Genuine Progress Indicator, please contact Communications at Redefining Progress, (510) 444-3041 ext. 316.

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