Chatter about the shrinking middle class and rising poverty is more than just a bunch of crazy talk.
According to the latest Census data, one in two Americans are poor or low-income.
Reports the Associated Press:
"The latest census data depict a middle class that's shrinking as unemployment stays high and the government's safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.
'Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too 'rich' to qualify,' said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.
'The reality is that prospects for the poor and the near poor are dismal,; he said. 'If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years.'"
In related news, six members of the Walton family (the original owners of Wal-Mart) have more wealth than the bottom 30 percent of Americans.
Bloomberg did a bang-up job with today's report on the bank bailout.
The first four paragraphs are enough to make your blood boil. Here they are:
"The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."
Click here to read the whole thing.
Apparently the top one percent of earners more than doubled their share of the nation's income over the past three decades.
According to the New York Times, "...from 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the 1 percent of the population with the highest income. For others in the top 20 percent of the population, average real after-tax household income grew by 65 percent.
By contrast, the budget office said, for the poorest fifth of the population, average real after-tax household income rose 18 percent.
And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40 percent."
So I don't get it - what exactly are the Wall Street protesters angry about? I'm so confused by their incoherent message!
Over on The Reality-Based Community, Michael O'Hare ponders why political candidates are more likely to boast about growing up in a small town than a big city, and attempts to understand the virtues of growing up in a place where almost everyone knows your name.
O'Hare quotes from a piece by Sara Bishop, in which she describes her small town childhood in Bishop, Calif., and the thriving small businesses that were once the lifeblood of the community. She writes, "In my mind’s eye, I can walk up and down Main Street of my hometown as it was 30 years ago and easily name 50 thriving small businesses, each of which was supporting at least one middle-class family, often two or three (and I can usually name the families, too, because one of them was mine). On the profits they made from these businesses, these families were able to own nice middle-class houses, send their kids to college, take vacations, buy new cars, and generally live the American Dream as we understood it then.
Several things happened to put an end to that. First, K-mart moved into town, and in short order shut down several of the sporting goods stores, at least one book store, one family-owned pharmacy, two hardware stores (one of which had been in business since 1888), the local dairy, and a couple of dozen other core businesses. The result was a significant loss of middle-class, independent jobs, which were only partly replaced by the deeply inferior $6.50/hour jobs offered at the new store."
From Business Insider, of all places, comes this handy collection of charts attempting to explain what the Wall Street protestors are so angry about.
Click here to check out the charts.
Occasionally I hear people, mainly media pundits, express bafflement about the Wall Street protesters. "What do they want?" these people keep asking. "What is their message?"
Well, perhaps this article provides a clue as to what might be possessing scores of people to go out and protest Wall Street, and adopt the slogan "We Are the 99 Percent." According to Census data, incomes kept falling after the recession ended, declining more in the two years since the recession ended then they did during the recession itself. That's pretty remarkable. That means that there are a lot of people who were essentially doing better during the recession than they are now, during what is technically a recovery.
Explains the Times:
"Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent.
The finding helps explain why Americans’ attitudes toward the economy, the country’s direction and its political leaders have continued to sour even as the economy has been growing. Unhappiness and anger have come to dominate the political scene, including the early stages of the 2012 presidential campaign.
President Obama recently called the economic situation 'an emergency,' and over the weekend he assailed Congressional Republicans for opposing his jobs bill, which includes tax cuts that would raise take-home pay. Republicans blame Mr. Obama for the slump, saying he has issued a blizzard of regulations and promised future tax increases that have hurt business and consumer confidence.
Those arguments may be heard repeatedly this week, as the Senate begins debating the jobs bill. The full bill — a mix of tax cuts, public works, unemployment benefits and other items, costing $447 billion — is unlikely to pass, but individual parts seem to have a significant chance.
The full 9.8 percent drop in income from the start of the recession to this June — the most recent month in the study — appears to be the largest in several decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote the report with John F. Coder, called the decline 'a significant reduction in the American standard of living.'"
So the next time someone acts all confused about the protesters and why they're upset, I suggest waving this article in their face.
Last week I posted a short item about a study claiming that one in every 25 business leaders could be psychopathic.
Now I learn of a Swiss study that claims share traders behave more recklessly and are more manipulative than psychopaths.
Again, this is not the sort of thing that surprises me at all.
The Atlantic Monthly latest issue features an excellent cover story by Don Peck on whether the middle class can be saved, as well as a roundtable discussion on that topic. My theory, just from reading stuff, is that the recession and painfully slow recovery have exacerbated trends that already existed, such as wage stagnation and widening economic inquality.
One of the greats things about Peck's article is that it examines why economic inequality matters; I recently sort of dated someone who did not understand why this was an issue and his inability to understand this was something I just could not get over. (Although, in his defense, it's seldom explained.) "Why should Bill Gates care how much money I make?" this guy wanted to know, and I immediately suggested that the example of Gates was a poor one, as Gates has actually developed a pretty strong interest in philanthropy. I also suggested that a robust middle class is one of America's great strengths, and that the decline of the middle class weakens the entire country, because it means fewer and fewer people are able to meet basic expenses without going into debt or relying on government assistance. I don't want to live in a country where the majority of people are doing worse than their parents, and I don't see why I should have to.
Here's an excerpt from Peck's piece:
Over on his blog Bank Talk, my friend Adam Rust explains why the housing market is going to continue to struggle.
The piece is a bit wonkish, but what Adam seems to be saying is that whether you decide to buy a house or rent is determined by economics, and that when people don't have a lot of money, they opt to rent instead of buy. This seems fairly obvious, but since economists throughout the land failed to foresee the collapse of the housing market, and remain somewhat baffled by the lackluster pace of the recovery, I think it bears mentioning.
Of course, I am not particularly bothered by low housing prices, or being a renter, as I wrote in a column titled "In Praise of Renting" earlier this year at the DG.
I'm not an economist, nor do I play one on TV, but I wasn't at all surprised by recent reports, such as this one, suggesting that Groupon, the wildly popular deal-of-the-day website, is bleeding hundreds of millions of dollars. I had never heard of Groupon when the site filed paperwork to go public back in June, and I was shocked to learn that the company was valued at $30 billion. I don't know, that figure just didn't sound right to me, maybe because I don't know a single person who actually uses Groupon.
Of course, there are a lot of websites that nobody I know uses, such as LinkedIn, the business/social networking site that saw its shares rise by as much as 171 percent on the company's first day of public trade on the New York Stock Exchange. The Groupon news, coming so soon after the LinkedIn news, made me suspect that we were about to experience another tech boom, and so I feel somewhat vindicated by the more sober reports about Groupon's finances.
I also found a June essay by David Sirota arguing that social media sites such as Groupon and LinkedIn are creating a new tech bubble fairly persuasive. Here's an excerpt:
"We all remember the infamous tech boom and then bust of the late 1990s. As long as a stock had an 'e' pre-fix and a '.com' suffix, it was considered a triple-A rated investment by financial advisers -- something you couldn't afford not to bet your IRA and your kids' college education fund on. Then came the revelation that -- whoops! -- a lot of these stocks represented companies in website-name only, not actual revenue-producing businesses, and down went the market... and a lot of portfolios with it.
Despite the losses, this cycle of investing in companies whose value was a matter of pure speculation and hype nonetheless pressed on, subsequently creating the Enron debacle and, later, the Wall Street collapse. Only at that point, after more than a decade of financial rape and speculative pillaging, did we finally seem ready to reject an economy built on Bubblenomics. As bailouts drained the treasury, our righteous anger could have been summed up by that famous Bushism: 'Fool me once, shame on you, fool me [twice]... can't get fooled again.'
And yet, somehow, here we are again, watching the speculative class now using the hype around social media technology to try to reinflate the ol' dot-com bubble that started the whole debacle. To know it's a bubble is to look at the difference between what speculators are doing and what advertisers are saying."
If the recession and the recent swings of the stock market have taught me anything, it's that hardly anybody knows what they're talking about. Just remember: Many of our so-called experts were shocked by the collapse of the housing market, and then shocked by the severity of the recession. Now they're surprised that growth is really slow, and that unemployment is high.
Again, I am not an economist. Or a trader. And maybe I'm wrong about Groupon and LinkedIn. But until there's more evidence that these companies really are as valuable as people say they are, I'm happy to be a naysayer.