Late 2006 has seen a return of growth in average hourly earnings as well as continuation of growth in employment. In spite of public policy, which is driving the economy down an unsustainable fiscal road, growth has been decent. As has been the case for the past quarter century, however, most of the gains have accrued to those with the highest salaries and most property. Still, average income is rising modestly too. How long this can continue, as the housing bubble deflates, is questionable. The global economy did well, with the boom in East Asia continuing unabated while rapid growth in South Asia and the former Socialist economies is taking firmer root. In Africa and Latin America, the news was less good, but at least incomes did not fall for most. The gradual decline of the dollar is better news than the United States should expect; only questionable policies in Europe and Japan may have prevented a rush out of the dollar.

The Best:

• Both employment and median family income rose in 2006 though not as robustly as in the late 1990s. Employment has been growing for 39 consecutive months, while earnings growth finally became positive in the past few months.
• Soaring profits continue to fuel rising stock prices. Of course, the rising share of property income comes at the expense of labor income.
• Economic growth in developing countries continues to exceed that of the 1980s and 1990s, with the World Bank projecting average GDP growth of nearly 6% for the first decade of the new millennium.
• Hostility toward immigrants (focused on illegal immigrants) failed to intensify in the United States, leaving open a door to upward mobility and private development assistance vital to the world’s poor. Protectionist pressures in international trade similarly failed to erupt.
• Those who manage the world’s assets continue to absorb our growing debt. There is no evidence in foreign exchange markets that the wealthy are dumping their dollars.

The Worst:

• International and domestic security spending remain out of control. Even with modest growth in domestic spending (Katrina aside), the fiscal deficit remains a burden that future taxpayers will have to deal with. On the revenue side, all attention continues to be focused on extending and broadening tax cuts, which will only darken the long-run outlook further.
• Income growth in the middle and bottom of the distribution continue to fail to keep up with the average.
• Life expectancy in Africa remains at drastically reduced levels as the HIV-Aids epidemic continues to devastate the continent. The HIV-Aids epidemic in India and China is growing.
• In the United States, no progress has been made toward a comprehensive solution to the health care cost problem that is burdening employers, governments, and families alike.
• Rising anxiety over climate change has not reached into the administration. So far, it has worked mostly to the benefit of corn farmers, with no politician offering a substantive program to reduce greenhouse gasses significantly. The best prospect for conservation remains rising gasoline prices, which fall most heavily on the working poor, whose incomes are growing most slowly.

Bernard Wasow is a Senior Fellow at The Century Foundation.