Sunday, October 27, 2013

40 Years of Economic Submission

"...for better, for worse, for richer, for poorer, in sickness and in health."

For the past 40 years the middle-class, working-class, low-wage earners and the poor have been subjected to the most obscene domestic abuse of all, being forced into economic submission and treated as second-class citizens in what can only be called one of the worst marriages of all time.

Our political leaders (via the top one percent) has made a vow to further enrich the wealthiest at the expense of the poorest. There persists the constant threats (by both Democrats and Republicans) to cut food stamps, Social Security and Medicaid (and all other social programs) as the rest of us struggle with stagnant or declining wages (or unemployment) while the rich get richer --- too rich, and too fast.

We've been hearing a lot about the debt and deficits—ever since the Democrats were in control of the government. But government spending is down and we have less federal workers than since 1966. And government spending is down faster than since WWII. Government spending and "waste, fraud and abuse" hasn't been our biggest problem (we could actually use MORE government, excluding defense). The U.S. population has grown by over 100 million since the 1970s --- but not enough tax has peen paid by the top income earners for the past 40 years --- when their tax rates should be DOUBLE than what they are today. 

Forbes’s list of the world’s billionaires has added more than 200 names since 2012 and is now at 1,426. The United States leads the list with 442 billionaires. (They send their kids to expense private schools.)

Meanwhile, according to First Focus, there were 1.16 million homeless students enrolled in U.S. preschools and K-12 schools in the 2011-2012 school year --- the highest number on record, and a 10 percent increase over the previous school year.

And report from the National Poverty Center estimated that the number of households living on $2 or less in income per person, per day (in a given month) has increased from about 636,000 in 1996 to about 1.46 million households as of 2011 --- a percentage growth of 130 percent.

A recent report by the Center on Budget and Policy Priorities found that cash assistance benefits (welfare, or TANF) for the nation's poorest families fell again in purchasing power in 2013 --- and are now at least 20 percent below their 1996 levels in 37 states.

The number of Americans now enrolled in the Supplemental Nutrition Assistance Program (SNAP or food stamps) is near record highs, and yet both houses of Congress have passed bills to cut funding to the program. Others cuts to SNAP are already happening beginning next month.

Unemployment, and especially long-term unemployment, (and especially for older workers), is still sky high. Another 1,324,967 Americans will lose unemployment benefits at the end of the year.

The media generally reports the U-3 unemployment rate, but it's the U-6 rate that is capturing a smaller and smaller share of the total number of missing workers as the weak recovery drags on. Since mid-2010, another measure called the “Alt U-6” shows much less improvement than the official U-6. In other words, much of the improvement in the official U-6 in this recovery, and essentially all of the improvement in the official U-6 so far this year, is due to people dropping out of, or not entering, the labor force because job opportunities are so weak. The official U-6 rate is 13.6% but the Alt U-6 rate is 15.2%. According to the Economic Policy Institute, estimated 5 million are not even counted in any measure of the unemployment rate.

A recently released a study finds that a staggering 5.8 million young people nationwide — one in seven of those ages 16 to 24 — are disconnected, meaning not employed or in school --- “adrift at society’s margins.”

And the poverty rate is at record highs (15%) --- as wages are stagnant (or declining) --- as are household incomes. According to the latest data from the Social Security Administration, 50% of all wage earners in the U.S. took home $26,965.43 or LESS while the current federal poverty threshold for a family of four is $23,550. (Wage data from the SSA will be updated around October 31, 2013)

According to a Pew Research Center report, during the first two years of the nation's "economic recovery", the mean net worth of households in the upper 7 percent of the wealth distribution rose by an estimated 28 percent, while the mean net worth of households in the lower 93 percent dropped by 4 percent.

Last month the Census Bureau reported that median household income* fell for the fifth straight year in 2012 to $51,017 -- and after being adjusted for inflation, was the lowest annual income since 1995.

* Median household income is the total combined income of all people living in one household -- with median meaning, half of all households in the U.S. earned less and the other half earned more. Using median is a more representative measurement for describing incomes rather than using averages.

The typical American family's income has fallen every year since 2007, the year the Great Recession began, for a cumulative decline of 8.3 percent. Median income is also down 9 percent from its record high of $56,080 -- set two recessions ago in 1999.

While median income has fallen, the incomes of top earners have continued to rise, making income inequality worse. In a press release last month, Sentier Research spokesman Gordon Green summarized the data:

Since December 2011 we have been in a period of income stagnation without any clear trend of direction. Real median annual household income has essentially remained at the same level over this time period, despite significant reductions in the official unemployment rate, the average duration of unemployment, and a broad measure of employment hardship. The failure of an improved labor market to translate into higher levels of household income raises troubling questions about the types of jobs created over the past year and a half, the level of pay that they generate, and the effect on household income levels from people who have dropped out of the labor force altogether.

Robert Reich: "Meanwhile, 95 percent of the economic gains since the recovery began in 2009 have gone to the top 1 percent. The real median household income continues to drop, and the number of Americans in poverty continues to rise."

The first chart below is an overlay of the nominal values and real values chained in August 2013 dollars. The red line illustrates the history of nominal median household, and The blue line shows the real (inflation-adjusted value). The blue line in the chart paints the "real" grim picture.

Real Median Household Income 2013

The next chart below is a way to show the nominal and real household income -- the percent change over time.

Real Median Household Income 2013 (2)

The stunning reality illustrated here is that the real median household income series spent most of the first nine years of the 21st century struggling slightly below its purchasing power at the turn of the century. Real incomes hit an interim peak at a fractional 0.7% in early 2008, far below the nominal illusionary peak of 27.2% six months later -- and now at a new interim high of 28.0%. In contrast, the real recovery from the trough has been depressingly slight.

As the excellent data from Sentier Research makes clear, the mainstream U.S. household was struggling before the Great Recession. At this point, real household incomes are in worse shape than they were four years ago when the recession ended.

Real Median Household Income 2013 (3)

The Republicans want to tax these people more — those with declining median wages and median household incomes — saying, "They should put more skin in the game" (and that they should NOT be able to get healthcare or food stamps.) This is Mitt Romney's 47% — the bottom half of the income scale. Meanwhile, the GOP feels that those at the very the top — the top 0.01%, or the job creators — should pay less in taxes.

Which bring us to this article by Paul Craig Roberts, "As Ye Sow, So Shall Ye Reap" (excerpts):

Washington served as cheerleader, as did most economists and libertarians, while US corporations, greedy for short-term profits and executive bonuses, offshored US industry and manufacturing, calling it free trade. The only market that America dominates is the market for financial fraud.

When industrial, manufacturing, and tradeable professional service jobs are offshored, they take US GDP and tax base with them. The foreign country gets the benefit of the relocated economic activity. Due to the revenues lost from jobs offshoring, there is a large gap between federal revenues and federal expenditures.

Policymakers, economists, and corporation executives are in denial about the adverse effects of offshoring, which they still, despite all the evidence, maintain is good for the economy. So nothing will be done about offshoring. Republicans will blame the budget deficit on welfare and entitlements, and if those are cut consumer spending will decline further, widening the budget deficit. Inflation will rise as incomes fall, and social cohesion will break down.

Now you know why Homeland Security purchased 1.6 billion rounds of ammunition, enough ammunition to fight the Iraq war for 12 years, has its own para-military force and 2,700 tanks. If you think the “terrorist threat” in America warrants a domestic armed force of this size, you are out of your mind. This force has been assembled to deal with starving and homeless people in the streets of America. [When the going get tough, the poor get shafted.]

September 17, 2013 New York Times: Median household income was $51,017 in 2012. 

September 17, 2013 CNN - Median household income fell to $51,017

Billionaire's Row and Welfare Lines 

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