The Real Economy Points Towards Our Nation In Decline…When our nation producing incredible wealth has half the working population working paycheck to paycheck, with some estimates even being as high as near 80%, something is inherently wrong with the system. As the pendulum has swung dramatically in favor of investment capital over the past few decades, labor has suffered the brunt of the decline. So as we evaluate the real economy, although GDP growth has held relatively slow but steady since coming out of the great recession, it’s the disproportional nature of the recovery which has substantially shortchanged the American working middle class. To those who claim this is such a fantastic economy, they’re failing to take into account the negative forces weighing down roughly half the families in America, those same stubborn structural headwinds which have bedeviled the economy throughout this current new century. Monthly jobs reports don’t really tell the story. It’s way past time to finally get proactive with some real remedies for the real economy!
These persistent structural problems won’t be solved on their own. Those on the far-right who barely acknowledge there’s even a problem & basically want to do nothing are just plain wrong, since leaving the situation up to unfettered free markets & giant multinationals will only exacerbate income inequality as the working middle class keeps falling further behind. Those on the far-left who want to spend our way out of every problem are just plain wrong, which would only exacerbate an overly-expansive government & ever-growing deficits. We really can re-engineer an economic system giving workers their fair share of the pie if we’re smart about it, but would only come about by having a national debate with an exchange of many viable ideas, then muster up the determination & courage to actually take action.
The pressures of globalization & automation sure do present challenges, but nothing that can’t be overcome if we set our minds to it. Much as we need action, don’t look for anything to happen soon as we’re mired in gridlock. We currently have a clueless/incompetent president, two major parties locked into stale tribal talking points, & a divided citizenry polarized into their ideological corners. We here at The VORACS always post these economic articles in all our Part 3’s to help inform the American people as to the real economy & what the primary problems are. The first step in fixing our problems is having an informed public with a full understanding where those problems reside. Once we have a general consensus on what problems need fixing, we’re much more likely to pursue & agree around sensible solutions.
Statistics can be Misleading
Trump keeps bragging about this great economy based on low unemployment & decent job growth numbers. But those stats are only a small part of the bigger picture. In getting to the newsfeed articles below from the week on the economy, this first link explains a big difference between the personal economy & economic data skewed by most economic gains going to the very top, as seen in excerpts from newsweek.com/robert-reich-trump-economics-personal-economy-one-percent. The real economy is beset by the long-term trend of living expenses rising faster than wages:
But there’s a whopping difference between Americans thinking the economy is good in general, and thinking it’s good for them personally. The personal economy drives votes, and most Americans think their personal economy is lousy. In a survey by The Washington Postand ABC News published May 7, more than 80 percent of Democrats and 66 percent of independents said “the economic system in this country” mainly works “to benefit those in power,” rather than all Americans. Nearly a third of Republicans agreed. The official economic statistics don’t reflect personal economics—what people tell each other over the kitchen table when they’re trying to pay the bills. Although more Americans are employed, most jobs still pay squat. Adjusted for inflation, recent wage gains are smaller than wage gains in 2015. Workers have lost so much bargaining power that not even the lowest unemployment rate in half a century is doing much to boost wages. Employers continue to sack workers willy-nilly. Two years ago AT&T executives promised that the pending corporate tax cut would allow them to create more jobs. They laid off 23,000 instead.
Consider that almost 80 percent of American workers are living paycheck to paycheck and you get a feel for the havoc so many families are living in. Meanwhile, the costs of education, childcare, housing, and health care are soaring, and Trump hasn’t done a thing to help. If anything, he’s made it worse. Student loan debt is in the stratosphere. Remember the old promise that if you took a public service job your student loan would be forgiven? Betsy DeVos’s Education Department has rejected 98 percent of forgiveness applications. Housing is out of reach for young workers, which is why so many are living with their parents and postponing marriage. Childcare is becoming unaffordable. The average cost of center-based child care for an infant is now $1,230 a month; $800 a month if you park him or her in a family childcare home. Health insurance is a nightmare. Last year alone, 30.4 million Americans went without any coverage — about 1.1 million more than the year before, according to the Centers for Disease Control and Prevention’s National Health Interview Survey. That’s the second year the figure has risen after years of declines due to the Affordable Care Act. The reversal is largely because of Trump’s efforts to undermine the Act. The Trump administration is now asking a court to throw it out entirely. Co-payments and deductibles are out of control. According to a recent Gallup survey, Americans borrowed $88 billion to pay for health care last year, and one out of four people decided not to see a doctor because of cost.
Negative Net Worth
Want more evidence our nation which produces tremendous wealth is very reticent in sharing that wealth, as the working class is being suppressed from earning their fair share of the loot. Check out this amazing stat from excerpts inside businessinsider.com/bottom-half-of-americans-negative-net-worth where the bottom half of income earners have a negative net worth! An increasing share of the prosperity keeps going to the very top. No wonder in the real economy so many Americans are living under such financial duress:
One brutal sentence sums up the dismal state of wealth disparity in the US. “The bottom half of Americans combined have a negative net worth,” Ben Steverman wrote in a recent Bloomberg article. This statement is based on the research of economists Emmanuel Saez and Gabriel Zucman, who study wealth inequality. Zucman is a “wealth detective” who spends hours combing through spreadsheets of tax tables, macroeconomic datasets, and international money flow calculations to find the secret money stashes of the world’s richest people. Saez and Zucman’s research on wealth inequality also found that 20% of American wealth is controlled by the top 0.1% of taxpayers — or about 170,000 families. The top 1% control about 39% of the country’s wealth, and the bottom 90% hold only 26%, despite years of economic growth in the US overall. “The pie has not become bigger” in the US, Zucman told Bloomberg. “It’s just that a bigger slice is going to the top.”
These statistics are perhaps not surprising considering how many Americans are weighed down by substantial student debt. Millennials are saddled with more than $1 trillion of student loan debt, Business Insider’s Callum Burroughs previously reported. And it’s not just millennials who are suffering. More than 3 million Americans aged 60 and older are still paying off their student loans, INSIDER’s Kelly McLaughlin recently reported. Credit card debt is also on the rise. More than 40% of US households carry credit card debt, and the average debt balance is $5,700, according to a 2018 report from ValuePenguin. And about one fifth of Americans don’t have any money saved up, according to a Bankrate survey.
The authors found that while the income of the top 1% of American taxpayers made up 11% of the national income in 1980, it now makes up more than 20% of the country’s income. And the income of the bottom half of Americans, which was 20% of the national income in 1980, has fallen to just 12%. In other words, the country’s rich have geen getting increasingly richer while the middle class and the poor get poorer. While wealth inequality has also been rising in Europe, as Business Insider’s Richard Feloni wrote, “this particular rise of the top 1% paralleling the fall of the bottom 50% is unique to the US.”
$400 for an Emergency
Here’s another survey showing nearly half of Americans couldn’t scrape up $400 for an emergency! This economic reality for working people is unconscionable for such a wealthy nation! The pendulum has swung wildly off its bearings. These articles explain that survey, with excerpts shown below the last link:
Amid what is likely to become the longest period of sustained economic growth on record, a new report shows that millions of middle-class and low-income Americans still aren’t on solid enough ground to weather a sustained downturn. Since the Federal Reserve’s annual report on household well-being began in 2013, the survey (most recently of more than 11,000 Americans) has become a key measure of whether the benefits of the recovery have reached beyond the upper end of the socioeconomic spectrum. Although this year’s report painted a positive picture overall, officials said, it identified underlying fragility and exposed pockets of distress. In line after line, the report lays out the everyday concerns that plague U.S. households.
Almost four in 10 people (39 percent) said they wouldn’t be able to scrape together the cash to meet a $400 emergency expense. Even without any sudden expense, about 17 percent of adults said they would miss a payment on at least one bill during the month surveyed. More than 6 in 10 said losing their job would mean they couldn’t cover three months of expenses, even if they took out loans, sold assets or borrowed from friends and relatives. Only 36 percent said their retirement savings are on track. Almost a quarter of Americans skipped some form of medical care in the past year because they couldn’t afford it. Separately, 1 in 5 faced major, unexpected medical bills. About 4 in 10 of those folks were still carrying debt related to those bills.
The survey covers 2018, when the unemployment rate averaged 3.9 percent, the lowest since 1969, and the economy grew 2.9 percent, matching its post-Great Recession high. Average hourly earnings grew 3 percent, easily the fastest rate since the recession’s end. But those figures are broad national averages — if gains are going disproportionately to the wealthy few, trends among the majority of U.S. workers could be missed. “Another year of economic expansion and the low national unemployment rates did little to narrow the persistent economic disparities by race, education, and geography,” the report’s authors wrote. In particular, measures of economic distress continue to spotlight black workers and, to a lesser extent, Hispanics.
Americans Aren’t Feeling It
Despite Trump’s boasts, this is far from the greatest economy ever, as many millions of Americans keep losing ground. Economic insecurity & stress are running rampant throughout society, with very few voices in power offering cogent thoughts how to fix this rigged system. The U.S. is running behind other developed nations in addressing this condition, which is why the U.S. ranks near the bottom with its widening income inequality gaps. See the first part to this article inside msn.com/en-us/news/opinion/the-economy-is-strong-so-why-do-so-many-americans-still-feel-at-risk:
President Trump is running for re-election on the strength of the economy, and why not? The unemployment rate is lower than it’s been in five decades. The stock market is booming. Overall economic growth has been steady. There’s just one problem: Voters are not particularly enthused about it. Recent polls suggest a substantial majority of Americans feel the economy is working only for “those in power.” A big reason for this disconnect is that many Americans feel insecure. They may be doing well at the moment, but they fear that, however high they are on the economic ladder, a single bad step or bad event could cause them to slip. A booming economy hasn’t quieted these concerns, because insecurity remains a huge and growing problem in ways that voters and candidates instinctively get but the sunny job numbers largely hide. Insecurity is the broad challenge that all 2020 presidential candidates must address — and it helps explain why Democrats are tripping over one another to present bold plans for universal health care, public retirement supplements, guaranteed jobs and a much higher minimum wage.
Even with unemployment at a 50-year low, the job market is failing to reach millions of potential workers. That’s because those who aren’t working or looking for work are left out of the unemployment statistics. And the number of such workers has been growing: When unemployment was last down near 3.5 percent, in 1969, virtually all men ages 25 to 54 were in the work force. Today, the proportion is below 90 percent, the result of a long-term decline in work force participation that has hit men most severely, but has recently affected women, too. Other rich countries haven’t seen this troubling fall, in part because they have policies that help workers find jobs, keep their skills up-to-date and balance work and family. Unfortunately, the United States hasn’t done much on any of these fronts. It once nearly led the world in levels of work force participation; now it’s toward the back of the pack. This reversal has had many bad effects. It’s reduced the incentive to bid up wages, which used to be seen as the inevitable consequence of tight labor markets. It’s also made unemployment less and less useful as a measure of job security.
The basic problem is that most of the jobs offered today don’t provide the guarantees that workers once expected. This transformation is obvious in “gig economy” jobs like driving for Uber. But the gig economy is still pretty small; for most Americans, the problem is that their work has been gig-ified. Corporations used to pool major economic risks within their labor forces. They did so because they could — the pressures of financial markets and global competition were less constraining. And they did so because they thought they had to if labor unions were to remain satisfied. Now those risks are mostly on workers alone. These changes aren’t unique to the United States. Yet they’re uniquely consequential because of how we safeguard economic security. The United States spends more on social benefits than any affluent country besides France once you take into account tax breaks and employer-sponsored benefits.
But there is a big difference: We have a system that is premised on employers providing many of the benefits that governments elsewhere provide directly. In the mid-20th century, American corporations came to be seen as mini-welfare states, providing workers not only with job security and continuous training but also with generous health benefits and a secure retirement income. That world is gone, and it’s not coming back. In short, the implicit social contract that once bound employers, families and government has unraveled, and nothing has taken its place. This unraveling has taken different forms in different areas. In metropolitan America, it’s seen in rising income volatility and the disconnect between wages and the skyrocketing costs of housing, health care and education. In rural and small-town America, the loss of productive employment looms larger. But what I’ve called the “great risk shift” is more or less universal for all Americans.
Real Wages Still Stagnant in the Real Economy
Correcting such an uneven economy won’t be easy, but doing nothing & staying with the status quo is not a viable option. Look at how labor’s share of economic growth keeps shrinking as presented in the entire article from: washingtonpost.com/opinions/why-are-wage-gains-so-weak:
After correcting for inflation, wage gains remain sluggish. In April, average weekly earnings for nonsupervisory workers were up 3 percent from a year earlier, to $785.55. Meanwhile, prices as measured by the consumer price index were up 2 percent. Considering that the economy has been expanding for nearly a full decade — a record if it continues through June — this is perplexing, even allowing that wages are growing faster at the top than in the middle. Theories abound to explain wage behavior. Average workers (it’s said) still recall the ferocity of the 2007-09 recession and are more reluctant to chase higher wages by leaving their present jobs. For similar reasons, employers resist large wage gains. They want to remain competitive in another recession. Both are willing to trade stronger job security for slightly lower pay. Other theories blame sluggish wage growth on changes in the labor market. The decline of unions — a phenomenon that stretches back to the 1960s — has weakened workers’ bargaining power. Globalization has had the same effect, because in many industries production can be moved abroad where wages are lower. China is an obvious example.
Weak productivity gains amplify the effect. In the long run, strong productivity improvements are the source of higher wages and salaries. From 2010 to 2017, annual productivity increases averaged only 0.5 percent, according to the Bureau of Labor Statistics. This compared with a post-World War II average of 2 percent. Slower productivity advances mean smaller increases in labor compensation for most workers. We now have a new theory from the McKinsey Global Institute, the research arm of the McKinsey consulting company. It has long been known that the labor share of national income (GDP, for gross domestic product) has been shrinking. In 1947, the labor share was 65.4 percent of GDP; in 2016, it was 56.7 percent of GDP. These figures combined all forms of labor compensation: wages, salaries, fringe benefits. Meanwhile, the capital share of income — income accruing to shareholders, business owners and other investors — rose roughly from 34.6 percent to 43.3 percent. Worryingly, three quarters of this shift has occurred since 2000. Again, these trends had been known. But McKinsey went a step further. It estimated how much of the slowdown in wages could be attributed to the rise in capital income’s share.
The answer is: about a quarter. That’s the impact of the shift from labor to capital income. The rest of the wage slowdown reflects poor productivity growth (general efficiency) and the tendency of high-income wages and salaries to grow faster than middle-income wages. If the distribution between labor and capital income had remained unchanged since 1998, the average American worker would have a whopping $4,000 in extra annual pay, according to McKinsey’s calculations. Although this is an astonishing conclusion, it doesn’t automatically explain why it happened or how it might be exploited to raise household incomes. One apparent cause of the capital share’s increase is the growth of some well-known companies with phenomenal profits. For example: Facebook reported $22 billion in 2018 after-tax profits; Apple’s total was $60 billion. By a variety of other channels, hefty profits have pushed up capital’s share of national income. Similar trends are apparent in other countries — say, Germany and Spain. It will be tempting to tax some of the surging profits. Whatever this might do, it probably won’t result in higher incomes for most middle-class Americans. The key to raising incomes, as always, is to improve productivity, but as McKinsey recognizes, this is easier said than done.
Americans financially vulnerable in a variety of ways:
The struggles are hampering both the young & the old:
A dollar sure doesn’t stretch very far these days:
Why has our dangerously massive & growing federal debt practically disappeared as a political issue?:
In this era of polarization & gridlock, Congress had better not mess with the full faith & credit of the United States:
With my conservative roots I remain pro-life, but I always feared a conservative high court could present more troubles than it’s worth, as here they might be throwing a wrench into progress aimed at fixing gerrymandering:
Most Americans realize President Trump does not deserve credit for the economy:
A neat ball graph showing lots of false Trumpian claims about jobs:
Infrastructure Week Fiasco:
What is the GOP in DC even doing there?:
At least one party is trying to do something:
Despite the boasts & promises, we’ve seen how the president’s policies clearly favor Wall St. over Main St.:
Guess whose pay is still rising the fastest?:
Let’s empower workers as seen in this opening to washingtonpost.com/opinions/we-need-to-give-us-workers-more-real-power-over-their-futures:
Even in the midst of a historically strong job market, jarring economic transformation is leading presidential candidates to be defined as capitalists or socialists. If the political debate continues in this shorthand, it will miss the principal issue that has animated voters’ views in recent elections: The American Dream is no longer viable — or is at least deeply at risk — for wide swaths of the population. Voters want candidates whose proposals will generate market power for individual workers. The issue is critical given the biggest social and economic challenge facing the world — the dislocation of workers by artificial intelligence and automation. This transformation is exacerbating the crisis of inequality. So far, the answer from politicians of both parties is simply for those individuals to “re-skill.” This is a mistake — and one we’ve made before. In addressing the last major disruption — globalization — policymakers’ attempts at labor-market reform lagged behind rapid economic transformation, thus undercutting workers. Today, expanding access to skills must be part of a broader agenda that results in workers obtaining power in the marketplace; they should share in the wealth their know-how creates and benefit from the data their engagement provides. This is what will bring back income growth and career security and preserve the dignity of work.
Yes, Capitalism Needs Fixed
As I keep warning, we either fix capitalism for the working class or we’re going to lose it:
It’s usually the case Dem policies aren’t actually promoting socialism, the GOP just portrays it as such to use as a political weapon:
The system must be restructured to make it more equitable, producing more shared growth, upward mobility, & better opportunities for would-be entrepreneurs to do start-ups. The American Dream has gotten lost for too many & our entire economic objective should focus on recapturing that dream. Plus we need to renew the expectations succeeding generations can do better than us as described in excerpts from theguardian.com/commentisfree/2019/may/22/capitalism-broken-better-future-can-it-do-that:
The greatest promise of capitalism is that each generation will rise, on the shoulders of the one before, as a result of the natural workings of a market economy. It should be no surprise that the greatest challenges to capitalism come when that promise begins to be questioned. If capitalism loses its lease on the future, it is in trouble. Markets run on psychology. We work to live (see my previous essay in the series on work). But we also work in the reasonable hope that it will allow to us live better in the future, by getting more rewards out of the market as we grow in experience and skill, and by saving and so through what Keynes described as the “magic” of compound interest benefiting from general economic progress. At an individual level, we might say we are saving for a rainy day. But collectively, savings allow for capital accumulation, for investment, which spurs growth. As a result of these processes, we may even look forward in our later years to another modern invention: a “retirement”. Economic progress spans across the generations, too, as parents see their children’s standard of living surpass their own, and then their children in turn. The basic human instinct to see our children flourish has been powerfully channeled through market-led growth. We work not only for ourselves, but for our children. We might invest in their education, so that their enhanced skills will mean a better life. People will invest in a better future if – and it is a very big if – there is a good chance that it will pay off, that the system reliably delivers that better future. Capitalism not only produces a society focused on the future, it requires it. If the promise of a better future starts to fade, a vicious cycle sets in. Why save? Why sacrifice? Why stick at education for longer? If doubt creeps in, people may work less, learn less, save less – and if they do that, growth will indeed slow, fulfilling their own prophecies. The biggest threat to capitalism is not socialism. It is pessimism.
Not only is income growth slower today than a generation ago, for some workers there is also more volatility in terms of wages, in part because of more uncertain schedules, but also because of the risk of losing a job in a sector affected by trade or, more likely, automation and having to take another job at a lower wage. What economists label “income volatility” has increased over time, most worryingly for those right at the bottom of the income ladder, as work by Bradley Hardy and James Ziliak shows. Some volatility is good: an unexpected bonus, or a good year in a side enterprise. But much of it comes in the form of a loss of income. These downward economic shocks are psychologically demanding. Humans are hardwired to have “loss aversion” – in other words to experience much more pain from a loss than pleasure from an equivalent gain. Small wonder that most workers rank “security” as their highest priority. The reliability of a flow of income is as important, to many, as its size. But workers displaced by automation have been treated as effectively disposable by policymakers. Retraining schemes have been almost universally ineffective. Investment has been tepid: for the last few decades, for every dollar spent on Trade Adjustment Assistance, the US has spent $25 on tax breaks for endowment funds at elite colleges. Many scholars now argue for some form of wage insurance to compensate for downward shocks to pay.
Second, the assumption that our children will do better than us is being threatened. Nine in 10 Americans born in 1940 ended up richer than their parents; for those born in the 1980, the number is 50%. This finding, from the Harvard professor Raj Chetty and his colleagues, can certainly be quibbled with: the 50% number does not take into account the shrinking size of households (if it did, it would be 60%); the people born in 1940 largely had parents whose prime working years included the Great Depression, making it easier to surpass them. Still, the fact remains: intergenerational mobility has slowed. This is for two main reasons: economic growth has slowed, and the proceeds of that growth have accrued to a much smaller slice of the population – the people at the top. (See Heather Boushey’s piece in the series). Chetty estimates that about a third of the mobility drop can be explained by slower growth; the rest is the result of rising inequality. This lack of upward economic lift is filtering into general consciousness. Only about one in three US parents think the next generation will be better off; and the gloom is even deeper in many other nations, including the UK. Mood matters. If the future looks less bright in general, it may seem less rational to invest in an education, take the risk of starting up a business, or move to another town in search of a better job. The interaction between facts and feelings is complicated; but it is important to strike a balance between calling out troubling trends and resorting to a general everything-is-going-to-hell-in-a-handcart declinism.
An Urgent Need To Take Back Our Country
Early 2020 polling is encouraging:
America’s Unsung Heroes
Tragically, veterans are taking their own lives at more than double the rate of the civilian population:
Where Have All the Flowers Gone?
This is a classic song of great loss. As workers are being exploited, they are being robbed of the American Dream. Meanwhile, our autocratic American President is seemingly on the verge of robbing us of our democratic freedoms. On this Memorial Day, let’s honor the soldiers who made the ultimate sacrifice in protecting our dreams & freedoms: