The data in the above graph comes from the Federal Reserve, and reflects average -- not median -- trends in household net worth, and thus probably understates the losses a typical family experienced during the great recession and the previous recession. The Fed only releases data on median household net worth every three years, and didn't begin compiling the data regularly until 1984. This data doesn't perfectly reflect the data now being used and abused in U.S. politics, but it comes close and illustrates how severely the last two asset bubbles both inflated and then quickly eradicated household wealth.
"2001 and 2008 were atypical recessions since they were driven by the collapse of asset bubbles," noted Dean Baker, cofounder of the Center for Economic and Policy Research. "Others were driven by the Fed raising interest rates to slow inflation. Since the driving force was asset bubbles in these last two downturns, it is not surprising that we would see a very different pattern in the relationship between wealth and income."
The Congressional Budget Office, which first compiled this data in its August 2010 budget and economic update, explained why the phenomenon is so destructive to the economy.
"Consumer spending has ben restrained in the past few years by the sharp drop in household wealth relative to disposable income -- a drop that was reversed to only a small extent through early 2010," CBO noted. "The loss in wealth is a negative influence on households' spending in part because households that feel poorer tend to spend less and because the loss in housing wealth is restricting households' ability to borrow in order to finance consumption."
Consumers have since paid off debts and seen their access to credit improve in the past two years, and consumption has increased along with it. But we're still below trend, given the pace of consumption before the bubble burst.
It's important to note, too, that the volatility depicted in the graph doesn't illustrate everyone's experience. At the highest end of the wealth and income spectrums, the economic seas have been much calmer. According to Fed data, most families were poorer in 2010 than they were in 2001. But a typical family in the top 10 percent was wealthier in 2010 than it was in 2001.