Why is the middle class disappearing? Actual data.

Wow.  I can’t help but re-post this item from University of Arizona professor (Socciology and Political Science) Lane Kenworthy.  It demonstrates why it is that corporations and wealthy individuals are doing well – GDP keeps increasing – but the average family is struggling.  All that GDP growth is going to just a few people:

Slow Income Growth for Middle America

September 3, 2008

The economic challenges and strains facing middle-class Americans are likely to get a good bit of attention between now and election day, at least from the Obama campaign. They include sluggish income growth, heightened financial insecurity, rising health care and college costs, and falling home values. Each of these is important, but the most critical in my view is slow growth of incomes.

The following chart tells the story. It shows inflation-adjusted GDP per capita and median family income from 1947 (the earliest year for which the income data are available) to 2007. To facilitate comparison of the over-time trends, each is indexed to its 1973 level. Since the mid-to-late 1970s, growth of income at the median has been slow — very slow — relative to growth of the economy. The current decade, with no improvement at all in median income, is especially striking.

The dashed line in the next chart shows what median income would have looked like had it risen in sync with per capita GDP. The difference is huge: in 2007, the median family’s income would have been $91,000 instead of $61,000.

Various excuses and rationalizations have been offered: It’s okay because Americans now get more in employer benefits instead of in their paycheck. Family size has shrunk, so slow income growth isn’t a big deal. A lot of those in the bottom half are immigrants, and even with slow income growth they’re better off than they would have been in their native country. None of these is compelling (see here or here).

The disconnect between economic growth and middle-class income growth is due largely to rising inequality. In the past several decades much of the economy’s growth has gone to those at the top of the income distribution.

Faster income growth wouldn’t render other middle-class strains irrelevant. But it would help.

Growing Income Inequality Is Destroying Our Economy and the Middle Class

This morning, Alan Krueger, Chairman of the President’s Council of Economic Advisers (CEA), gave a speech at the Center for American Progress.  We can only hope that his remarks hopefully portend the administration’s actions with respect to future economic policy.  Here is a summary of his most salient points:

  • The difference in income growth between very wealthy and the rest of the population in the U.S. over recent decades is staggering, as illustrated by the following chart:
  • This gap is further underscored by contrasting income growth in post World War II decades with the numbers from 1979 through 2007:
  • The period from 1992 to 2000 was an exception, when strong economic growth and the policies of the Clinton administration led all quintiles to grow together again. All income groups experienced their fastest income growth in years. That there is nothing in these data to indicate that the tax increases in the early 1990s had any adverse effect on income growth. Had incomes grown since 2000 like they did in the 1990s, the median income would be $8900 higher than it is now:
  • The share of all income accruing to the top 1 percent increased by 13.5 percentage points from 1979 to 2007. This is the equivalent of shifting $1.1 trillion of annual income to the top 1 percent of families. Put another way, just the increase in the share of income going to the top 1 percent over this period exceeds the total amount of income that the entire bottom 40 percent of households receives. (emphasis added)
  • The evidence is clear that the economy performed more poorly after last decade’s tax cuts than it did after taxes were increased on top earners in the early 1990s. Across all businesses, job growth was much weaker in the 2000s than in the 1990s. Hence there is little empirical support for the claim that cutting taxes on so-called “job creators” has spurred income growth, business formation or job growth.
  • According to research by Karen Dynan and her coauthors, the top 1 percent of households saves about half of the increases in their wealth, while the population at large had a general savings rate of about 10 percent. This implies that if another $1.1 trillion had been earned by the bottom 99 percent instead of the top 1 percent, annual consumption would be about $440 billion higher. This would have resulted in a 5 percent boost to aggregate consumption over what actually occurred. (emphasis added)
  • A paper by international economists Torsten Persson and Guido Tabellini argued that in a society where income inequality is greater, political decisions are likely to result in policies that lead to less growth. A new IMF paper also finds that more equality in the income distribution is associated with more stable economic growth.
  • If we want an economy that builds the middle class, we can’t continue the type of policies that have exacerbated the rise in inequality and threatened economic mobility for the last thirty years. This means that we must adequately regulate excess risk-taking and corrupt practices in financial markets. It also means that we can’t continue tax policies that don’t generate faster economic growth or jobs, but rather increase inequality. Instead of going backwards, we should adhere to principles like the Buffett Rule, which states that those making more than $1 million should not pay a lower share of their income in taxes than middle class families. We should also end unnecessary tax cuts for the wealthy, and return the estate tax to what it was in 2009.  (emphasis added)
  • The evidence suggests that a growing middle class is good for the economy, and that a more fair distribution of income would hasten economic growth. Businesses would benefit from restoring more fairness to the economy by having more middle class customers, more stable markets, and improved employee morale and productivity.

“Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft where we are hard, and cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand. They think, deep in their hearts, that they are better than we are because we had to discover the compensations and refuges of life for ourselves. Even when they enter deep into our world or sink below us, they still think that they are better than we are. They are different.”

F. Scott Fitzgerald, The Rich Boy

Kudos to Ezra Klein of the Washington Post for his original posts and the others cited above for their work.  Also to Scott Fitzgerald for nailing down what rich people are really like long before I was born.

The Family Budget and the Federal Budget

I got one of those serial right-wing emails today from one of my low-information-voter acquaintances.  It went like this:

This rather brilliantly cuts thru all the political doublespeak we get. It puts it into a much better perspective.

  • U.S. Tax revenue: $2,170,000,000,000
  • Fed budget: $3,820,000,000,000
  • New debt: $ 1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

  • Annual family income: $21,700
  • Money the family spent: $38,200
  • New debt on the credit card: $16,500
  • Outstanding balance on the credit card: $142,710
  • Total budget cuts: $385

Got It ?????

The intent, clearly, is to lead the average American Idol fan to the conclusion that our deficit is caused by congressional reluctance to adequately trim “fat” from the budget.  I was incensed, of course, but quickly realized that the REAL problem could be brought to light simply by extending this analogy.  So I replied like this:

So, the family has a budget of $38,200 (after taxes, let’s assume) and debt of $142,000.   You can find a breakdown of 2011 federal spending HERE and a model of how the average American family spends its money HERE.  Matching the family expenses along the same lines as the government, the family will spend its annual budget roughly like this:
Housing & food (roughly 49% of household spending):                                     $18,700
These roughly equate to Medicare, Medicaid, Social Security & interest on the debt, which compromise 49% of federal spending and all, like housing & food, are basically unavoidable.
Healthcare, insurance & pensions (roughly 31% of household budgets)          $11,900
These roughly equate to federal discretionary and non-entitlement mandatory spending, which make up 31% of federal budget.  It’s basic O&M, cutting it is doable, but seriously short-sighted and unwise.
Clothing, entertainment and everything else (20% of household budgets)       $7,600
Roughly equates to Defense, 20% of federal budget.  There is some room for cutting, but even cutting it ALL won’t fix the problem and would be kind of like walking around naked and with no shoes.
So, the family takes in $21,700 and spends $38,200 annually.  What are you going to cut from that family budget so you can cover its needs AND pay down that debt, Einstein?  Answer: You’re not.  You can’t.  It simply costs too much to properly house, feed and provide for the family to solve the problem simply by cutting spending.  You’re going to have to get some of the people in that house who are not pulling their weight to contribute to the family income.  It’s the same problem we have as a country.
Okay, you say, let’s cut Medicaid.  After all, that’s just welfare for people who can’t afford to pay for their own medical expenses, right?  Fine.  If this hypothetical family was apportioned by age the same as the U.S. population, there would be two adults aged 30-54, two children aged 15-23, one child under 14 and one adult over 65.  Most Medicaid goes to poor children, nursing home care and people on life support.  Cutting it would be like deciding not to spend money on the youngest kid’s insulin treatments, unplugging the life support of one of the adults or throwing grandma out into the street.  Pick one.

The 1% and its apologists are fond of making this a choice between freeloaders and hard working people.  It’s not.  It’s a choice between really RICH people and the rest of us.  It’s a choice between greed and need.  Pick a side.  But be careful.  Someday you might be the one who needs insulin treatments, nursing home care, life support or be the grandma or grandpa who kicks kicked to the curb.  Your choice.

A Dark Day

Today, December 16, 2011, is a dark day in the history of the United States.  This morning the Senate passed on a vote of 86-13 (including yeas by both senators from the State of Washington and an earlier affirmative by our local congressman) a measure that codifies in U.S. law authorization for the President of the United States to order any person, including citizens of the U.S. and legal aliens, deemed by the president to be guilty of associating with certain terrorists groups, be arrested and held indefinitely without due process of law.  This is a heinous violation of one of the most cherished freedoms in Western civilization: the prohibition against imprisonment on the whim of a monarch or executive without some third party assent that actual legal transgression has occurred.  This is a tradition predating even the U.S. constitution, having been first codified at least as early as the Magna Carta in 1215.

For most of U.S history., you have been guaranteed a considerable number of rights when arrested.  If the authorities took you into custody, they had to tell you precisely why you were being arrested.  Within a short period of time, typically 24 hours, they had to appear with you before a magistrate and demonstrate to his or her satisfaction that there was ample evidence that you were probably guilty of a crime.  Even if the judge agreed, you also had the right to be free from jail pending trial, if necessary, by posting a bond appropriate to the magnitude of the crime for which you were accused.  This could only be denied if the judge determined you were a danger to the public or a significant flight risk.  All of these things could be appealed, and in any case you were entitled to legal representation.

If the president signs this bill, as I expect he will, this will no longer be true if one man – the President of the United States – decides you should be indefinitely detained.  All that is necessary is that he declare that you are in some way a supporter of an organization that, in his view, somehow can be construed as supporting terrorist groups.

Okay, no problem, right?  No one reading this worries that they could remotely considered as being associated with any terrorist organizations, right?  Think again.  If you’ve watched Fox News, listened to talk radio or visited Pamela Geller’s web site lately you know that there have been numerous attempts, however pathetic, to associate Occupy Wall Street with radical Muslims.  This type of innuendo is common in our society.  No matter what part of the political spectrum you occupy, you are susceptible, under vague legal mumbo jumbo such as exists in this law, to being associated with some group that can be interpreted as an “associated group” to terrorist organizations.

It is not hard to imagine a future president Gingrich or Bachmann or Perry or Santorum interpreting this law to apply to virtually anyone.  Think you’re immune?  How about if you’re a member of a militia or a private gun dealer who is perceived as having sold weapons that somehow wound up in the possession of a group perceived as “terrorists?”  Could a President Hillary Clinton or some equally frightful “ultra-liberal” bogeyman conceivably interpret this statute as applicable to your indefinite detention?  Before you dismiss it as “not a concern to you personally,” you had better think – long and hard – about that kind of power in the hands of someone whose judgement you might not trust.  Because it’s the nature of our democracy that, sooner or later, someone matching that description will be in a position to wield that power.  That’s precisely why the founders tried to make all such power subject to those “checks and balances” we all learned about way back in middle school.  And this law deliberately circumvents those measures.

There is admittedly considerable disagreement as to whether the nightmare I’m describing here – that citizens and legal aliens could be indefinitely imprisoned without due process – can actually play out.  The liberal publication, Mother Jones, says it can’t.  The New York Times editorial board and constitutional lawyer, Glenn Greenwald beg to differ (LINK  LINK  LINK).  But this controversy only serves to prove my point.  If anything, recent history is on the side of aggressive presidents having their way with constitutional issues when it comes to matters where they can claim the shield of national security.  At best, it could take many months or even years to judicially overturn even the most egregious abuses of this law.

No one man or woman in a constitutional democracy should ever wield such power as this law potentially bestows.  Not Barack Obama, not George Washington, and certainly not men like George Bush, Dick Cheney, Rick Perry or Newt Gingrich, nor any of the myriad pretenders who, given the fickle nature of the American electorate, might someday accidentally actually get elected.

At this point, we have greased the first step on the slippery slope to hell by planting the seeds of tyranny in the very statutes that govern our democracy.  Let us all hope that we can reverse that slide before the concept that a president can simply order people into jail becomes an accepted norm.

Occcupy Friday Harbor

Consider the following disturbing facts:

  • Current U.S. trade policy creates an advantage for moving American jobs overseas. Labor is cheap, of course, but costs for workplace safety and environmental protection are practically nonexistent in places like China, India and Vietnam. And American companies pay NO income taxes on income earned abroad until it is brought back into the U.S. There is currently an estimated $1 trillion-$2 trillion in such profits waiting patiently offshore for some friendly U.S. administration to grant it a temporary tax holiday.
  • Laws that fueled the subprime crisis are STILL on the books and banks are STILL “too big to fail.” Banks can still provide a combination of depository, securities and insurance services while paying ratings agencies like S&P, Moody’s and Fitch to grant their investment vehicles AAA ratings. Almost nothing has been done about this despite the damage done to the global economy, the financial ruination of millions of families and the undeniable fact that the entire structure positively screams, “CONFLICT OF INTEREST!” Unless this changes, it is not a matter of WHETHER another financial crisis will befall us, but merely a question of when.
  • Unemployment is STILL 9%.  Pundits will tell you, “Go to college.  Unemployment among graduates is only 4%.”  What they DON’T tell you is that, among 18-24 year-old graduates, it’s roughly the same as the general population.  And college tuition rates are skyrocketing.  At Cal, Berkley, they’ve just had a 21% tuition increase and the Board of Regents is considering a plan to increase it as much as 81% more over the next several years. Get a college degree, indeed. Most graduates face a life of virtual indentured servitude to retire their college debt even if they can FIND a job after graduation.
  • Fundamental concepts like a living wage and decent benefits are under attack. A day doesn’t go by that some talking head doesn’t disparage teachers, firemen, police officers, “government employees” or janitors for getting a wage a family can survive on, health insurance, vacation, sick leave and a pension or 401K. When, for God’s sake, did it become fashionable in this country to complain that someone else actually gets a decent wage and reasonable benefits? Why the hell aren’t people asking, instead, “Wait a minute, why doesn’t MY EMPLOYER offer those benefits?”
  • Perhaps worst of all, government is clearly now much more beholding to the people who fund election campaigns than they are to the voters they are supposed to represent. As a result of the Citizens United decision by the Supreme Court, campaigns can amass unlimited amounts of money in SuperPACs and do not have to reveal who it came from. Large corporations, trade & lobbying groups and wealthy individuals (e.g. Verizon, the American Petroleum Institute, the NRA and the Koch brothers) can contribute unlimited amounts of money to SuperPACs, dwarfing the influence of the average person and essentially rendering elected officials as hirelings of the most powerful and wealthy people in the country.

And what is your government doing about these problems? Nothing. They’re STILL enacting the same inane trade policies. They’re doing NOTHING to create jobs. Republicans are insisting upon slashing Social Security, Medicare and Medicaid instead of increasing taxes on the wealthy, for Christ’s sake. And, of course, no one in Congress is the least bit interested in taking the money out of politics.

These things MUST begin to change or we fear greatly for the future of our country and our families. We’re out here trying to bring attention to these and many other related issues.  If you are like most of us, i.e. you have always WORKED for a living (as opposed to letting your money do the working), then you ARE the 99%. This is about YOU, YOUR family, YOUR future.  If you’re not out here with us, you’re resigning yourself to a future that’s simply more of the same.  My questions are: Do you care? And what are you going to do about it?