In the face of this:

The nation’s median household income grew modestly in 2006, the Census Bureau reported yesterday, even as the percentage of people without health insurance hit a high.

Experts said the rise in income was mainly a reflection of an increase in the number of family members entering the workplace or working longer hours. Average wages for men and women actually declined for the third consecutive year.

As Kevin Drum points out, this means income inequality is up.

Recent news also showed that real wages have not risen since 2000:

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.

As Ritholtz comments in the link above, the real picture is actually worse because the CPI doesn’t include energy prices, even though they’ve trended higher.

So, keeping in mind those data points, and accepting that the U.S. consumer is the key to our economic strength, why is everyone focused on the Fed and whether they will cut rates or otherwise bail out the hedge funds and banks? In other words, is the supply side the only knob we have? No discussion about bailing out people who signed up for mortgages that they couldn’t afford, sometimes without full disclosure from the brokers and mortgage lenders about teaser rates and rate increases.

I’m not saying that these borrowers are blameless, just that they probably are about as responsible as the banks for creating this situation. Aside from Dodd’s plan, there’s nothing being discussed about the mortgage situation. All supply side, all the time. Not sure it makes sense.