So THAT’S Why We Both Have to Work!

31 07 2009

Anyone who reads this blog will notice I’m always upset about something. I have done you readers a disservice by picking out things on the margin to fulminate about, and never getting to the heart of the matter.

That heart is the steady decline of the working middle class in the USA since 1980, and the concomitant continuous march of more and more of the country’s wealth up the class ladder to the wealthiest Americans.

I haven’t written about the heart of the matter because it was extremely difficult to pull together all the data that substantiated these changes — data that I had heard about in bits and pieces over the years.

Now, happily, I’ve found a site that poops these facts out, as drawn from census and othe data through 2005:

It’s a wonderfully clear site, with charts and graphs to clarify the straightforward discussion, so please take a look.

In case you don’t, here’s perhaps the most cogent data set in that site:

Note the steady rise of the incomes of ordinary working people from 1947 through 1979, and the leveling out since. In case you ever wondered where the Ozzie and Harriet world of the 1950s and ’60s, when one worker could support a family, has gone, this graph contains your answer.

The usual accoutrements of middle class life — many of them functional necessities, like more than one car per family — have multiplied, while the average earnings of those aspiring to that life  have stayed the same. Since all Americans tend to believe that they are at least middle class, or soon will be, this disparity has resulted in desperate efforts by many families to either earn more money (working two or more jobs per family), or, failing that,  access and spend first their savings and then any credit they can get.

And where has all the money that used to regularly increase the incomes of working people gone? I’m sure you can guess:


By the Numbers

Income | Wealth | Executive Compensation | Wages | Data Banks | Download PDF Version


The top one percent of households received 21.8 percent of all pre-tax income in 2005, more than double what that figure was in the 1970s. (The top one percent’s share of total income bottomed out at 8.9 percent in 1976.) This is the greatest concentration of income since 1928, when 23.9 percent of all income went to the richest one percent. (Piketty and Saez)

The above figures include capital gains, which are strongly affected by the ups and downs of the financial markets. Excluding capital gains, the richest one percent claimed 17.4 percent of all pre-tax income in 2005, more than double what that figure was in the 1970s. (It bottomed out at 7.8 percent in 1973.) This is the greatest concentration of income since 1936, when the richest one percent received 17.6 percent of total income. (Piketty and Saez)

Between 1979 and 2005, the top five percent of American families saw their real incomes increase 81 percent. Over the same period, the lowest-income fifth saw their real incomes decline 1 percent. (Census Bureau)

In 1979, the average income of the top 5 percent of families was 11.4 times as large as the average income of the bottom 20 percent. In 2005, the ratio was 20.9 times. (EPI, State of Working America 2006-07, Figure 1J)

All of the income gains in 2005 went to the top 10 percent of households, while the bottom 90 percent of households saw income declines. (EPI Snapshot, March 28, 2007)

Unprecedented levels of capital income are fueling inequality in the current business cycle. In the third quarter of 2006, the share of corporate income going to capital (profits and interest) hit an all-time high of 23 percent, with the remaining 77 percent going to employee compensation. Since capital income disproportionately goes to the top of the income scale, this shift towards capital income increases the income gap. (EPI Snapshot, Jan. 17, 2007)

Source: Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913-1998,” Quarterly Journal of Economics, 118(1), 2003. Updated to 2005 at
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Source: U.S. Census Bureau, Historical Income Tables, Table F-3.
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Source: Analysis of U.S. Census Bureau data in Economic Policy Institute, The State of Working America 1994-95 (M.E. Sharpe: 1994) p. 37.
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Source: Congressional Budget Office, Historical Effective Federal Tax Rates: 1979 to 2004, Table 1C, December 2006.
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In 1962, the wealth of the richest one percent of U.S. households was roughly 125 times greater than that of the typical household. By 2004, it was 190 times (EPI, State of Working America 2006-07, Figure 5B).

The richest one percent of U.S. households now owns 34.3 percent of the nation’s private wealth, more than the combined wealth of the bottom 90 percent. The top one percent also owns 36.9 percent of all corporate stock. (EPI, State of Working America 2006-07, Table 5.1 and Figure 5F).

The total inflation-adjusted net worth of the Forbes 400 rose from $470 billion in 1995 to $1.25 Trillion in 2006. (Arthur Kennickel, Federal Reserve Board, Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004 (pdf) and Forbes Magazine.)

The U.S. Personal Savings Rate declined from 11.2 percent in 1982 to NEGATIVE 1.1 percent in 2006. (Bureau of Economic Analysis, National Income and Product Accounts, Table 2.1)

Source: Economic Policy Institute, State of Working America 2006-07, Table 5.1, citing Wolff (2006).
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Source: Economic Policy Institute, State of Working America 2006-07, Figure 5F, citing Wolff (2006).
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Source: 1989-2004: Arthur B. Kennickell, “Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004,” Federal Reserve Board, Jan. 30, 2006, Table 1. 2005-06:
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Source: 1922-53: Edward N. Wolff, Top Heavy (New Press: 1996). 1962-2004: Economic Policy Institute, State of Working America 2006-07, Table 5.3, citing Wolff (2006).
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Source: Economic Policy Institute, State of Working America 2006-07, Figure 5b, citing Wolff (2006).
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Source: White: Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore, “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances,” Federal Reserve Bulletin, vol. 92 (February 2006), Table 3. African American and Hispanic: Arthur B. Kennickell, “Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004,” Survey of Consumer Finances Working Paper, January 30, 2006.
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Executive Compensation

American CEOs earned 411 times as much as average workers in 2005, up from 107 times in 1990. (United for a Fair Economy, Executive Excess 2006, based on Business Week and the Wall Street Journal).

Top executives in the U.S. now make about twice the pay of their counterparts in France, Germany and the U.K., and about four times that of Japanese and Korean corporate chieftains. (Lucian Bebchuk, testimony before the House Financial Services Committee, Mar 8, 2007.)

Source: Business Week and Wall Street Journal annual Executive Compensation surveys. Adjusted for inflation using CPI-U, Consumer Price Index, All Urban Consumers.
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Source: United for a Fair Economy, Executive Excess 2005, based on annual CEO pay studies conducted by Business Week (1990-2004) and the Wall Street Journal (2005).
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Wages v. Savings

Between 1949 and 1979, the inflation-adjusted average hourly wage for production workers rose 75 percent, from $9.00 to $15.78. Since 1979, the average production-worker wage has risen only 2 percent, from $15.78 to $16.11. (EPI, State of Working America 2006-07, Table 3.3)

Between 1979 and 2004, American workers raised their productivity 64 percent, while their median hourly compensation rose only 12 percent. (Economic Policy Institute, Datazone: PDF, XLS)

In 2006, households in the bottom 20 percent received $23 due to the Bush tax cuts. Households in the middle 20 percent received $448. Families in the top 1 percent received $39,020. And households in the top 0.1 percent received $200,523. (Urban-Brookings Tax Policy Center, Table T06-0034)

Source: Economic Policy Institute, The State of Working America 2006-07, table 3.4. For source data, see “Hourly Wage Decile Cutoffs for All Workers, 1973-2005 (2005 dollars)” on this page.
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Source: Economic Policy Institute, The State of Working America 2006-07, table 3.3. For source data, see “Hourly and weekly earnings of production and nonsupervisory workers, 1947-2005 (2005 dollars)” on this page.

Source: Bureau of Economic Analysis, National Income and Product Accounts, Table 2.1, Personal Income and Its Disposition.
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26 07 2009


24 07 2009


Here’s a link to a nice short article about the current state of health care in the USA, and what real reform of it might look like:

I cannot imagine how such reform will ever come about. As one of my bosses used to say, the income equivalent of  “not in my back yard!” is the rice bowl expression that appears at the head of this entry. I assume the expression comes from some Asian country.

Here are the just a few of the groups that can be counted on to mobilize their vast assets to block any filching from their rice bowls over the next decade:

Health Care Reform

This is A Big One:

doctors, drug makers, pharmacies, medical equipment builders, for-profit hospitals, and, above all, insurance companies.

Legalizing Marijuana Use…

(and maybe relaxing some penalties for USE of other drugs)

the Drug Enforcement Administration and all its contractors, supporters, and employees and all their families — along with a great many police departments that love the money that flows into them from seizing and selling the possessions of drug dealers.

Cutting Back on the $$$ We Give Our Military!!! *

This is The Biggest Rice Bowl of All:

We don’t have the mighty Soviet Union to kick around any more, so do we really still need ALL that military stuff? What about all those nuclear submarines? Do terrorists have submarines?

But think of all the military contractors, and all of their investors, managers, suppliers, and employees! Military contractors are known to spread the construction of their multi-multi-billion dollar projects around to most of the states in the Union in order to create supporters of each project in each Congressperson’s district.

Add all the military careerists, present and pensioned, and you might as well give up on this one before starting.**

Limiting Unwise Speculation by Big Banks:

The fattest cats of them all. Watch them spend and spend and spend some more to stop any such limitations over the next few years.


And So On…

The USA is in a set of multiple binds because of the combination of the universal human rice-bowl protection instinct and the fact that in this country a politician must raise many millions of dollars to win a federal office. As reform after reform is suggested, folks who would be adversely affected by each prooposal rise up in turn and spend millions on lobbyists and direct gifts to Congresspersons to stop it.

Oh well, it was a nice semi-democratic Republic for a hundred years or so.


*The Department of Defense budget approximately = the arms spending of all the other countries in the world combined, and about one half of all US discretionary spending.
**But take a look at this amazing development:
Is it just the exception that proves the rule?


22 07 2009

The fact that anyone would even THINK that this was a good idea, in a nation with a vast unruly underclass and a history of assassination of political leaders and gun rampages against the general populace, suggests that this strange country I live in is not.


19 07 2009

There’s some funny stuff there!


15 07 2009

(Or at Least Waiting in the Wings)


Recently I’ve been laughing at Sarah Palin. Then I read this Frank Rich column:


Then I read this comment to the Frank Rich column:

July 12th, 2009
9:01 am
“Frank,The fans of Palin aren’t feral racists.They’re the people “left behind” by the Democratic Party for well over a decade, going back to Clinton’s signing of NAFTA.

Earlier than that, they’re the people whose brothers couldn’t get college deferments out of Vietnam, and who, after that debacle, quite reasonably needed a more optimistic leader than they got some years later in Jimmy Carter.

(Let’s leave aside what our last Democratic President Clinton did to the overall middle class, or what’s left of it, with his repeal of Glass-Steagall, and his signing of the Commodities Futures Modernization Act, which was just icing on the cake.)

We on the coasts and in the cities long ago abandoned those lower to middle class white rural voters. Then we mocked them and their values, because we were shocked they weren’t Gandhi-esque.

And for years, Instead of addressing their economic concerns (manufacturing jobs, jobs, jobs being outsourced!), we came at them with gay marriage and abortion that had almost no relevance to their lives. It’s like sticking your finger in a stranger’s eye, and then pretending you’re shocked that they don’t want to buy you coffee! Doh!

Let’s please stop insulting Palin (who isn’t worth the ink!) and instead find a way to reach out to these lost Democrats.”

I don’t thing the Democratic Party will reach out to Palinites. Right now it has nothing to offer them.
Both parties have made deals with their devils over the last 30 years, and the Democrats are hamstrung by theirs.
In the late 1960s President Nixon (a Republican) created the “Southern strategy”.  The idea was that the party of the rich would reach out to poor and lower middle class Whites (traditionally mostly Democrats), who had been incensed by the support of President Lyndon Johnson for the movement for Black civil rights. The new Republican strategy worked great, and Nixon got elected! And then a few years later, during the Reagan  administration,  the militant fudamentalists joined up. The Republicans were riding high.
So high, in fact, that they had managed to greatly weaken unions, the traditional funding base of the Democratic party, by 1992, when Bill Clinton came along. So in the early 1990s  he began to move his party toward the center, and, most crucially, toward access to funding by wealthy individuals and PACs.
Decisions like those mentioned in the above comment by Eva then followed. The Democrats were free to act against the interests of the social class that had always been their party’s base because the Republicans had stolen much of that base away.
As a result, the working class, and particularly unions, have now been so weakened that lots of working class folks are constantly furious, and the unions of the working class can’t hope to be major players on the political stage again.
So as long as it takes multi-millions of dollars to run for office, Democrats will have to keep the owning class happy. They will do things like give billions of dollars to big banks; and the “Blue Dog” Democrats will impede creation of universal health care, etc.
Democrats can’t create any New Deal-type programs to make the workers’ lives better. And they can’t trade on the widespread resentment either. The Republicans have that strategy sowed up.
So Palin, or someone like her, in the White House is an absurd and frightening bad dream that just might come true.
Update: For analysis of how the “Blue Dog” democrats harmed the Democratic party last time it was in power see:


13 07 2009


(A Followup to “So Much Eloquence”)

I always enjoy comparing US arrangements on various money matters with the parallel arrangements in other countries. So many surprises! This is supposed to be the greatest country in the world, isn’t it? And a land of opportunity to boot?

Here is some material from comments to a newspaper column on student loans.


Student Loans Here

Student loans are made to students by banks at a rate to be determined later, by consulting prevailing interest rates  as of  about six months after the student graduates (which is when the student’s payback period begins) and adding a premium to that. The bank receives a government guarantee of the loan when the bank makes it, so the bank runs no risk in making the loan. Nevertheless, interest rates are not commensurate with the complete absence of risk on the part of the lender.

Student loans are not dischargable in bankruptcy. And whatever loan rate you got at the outset of your payback period, you’re stuck with it. A special law passed a few years ago prohibits the debtor from refinancing at any time later in his or her life when prevailing interest rates go down.

Oh yes, each school chooses which lender will be allowed to offer student loans through the school, offering great opportunities for the banks to bribe school administrators for access to a captive clientele of students.


In Australia

“In Australia, all student loans are granted through the Federal Government, with no interest, except for increases in inflation. Paying university/college fees upfront makes you eligible to a discount of 20%. There is simply no rational purpose for “private” student loan operators.”

— Obiter, Melbourne, Australia


In Great Britain

“I have experience of a government student loan scheme; when it came time to choose colleges I had the option to stay in the UK and go to college as a ‘UK resident’. And I am so, so glad that I chose to do that and didn’t go and get sucked into student loans in the US.

The UK does have a much lower fee structure – about like state colleges. They have some grants for low income students. They have assessed parental contributions. But most students will pay for most of their college by using a government loan.

The interest rate on the loan is subsidized – it’s kept at 1% above the current inflation rate. So right now, students here are repaying less than 2% interest. Interest isn’t charged until you leave college. And because the government organises it, they can take the repayments by garnishing your salary, like a payroll tax. Oh, and did I say that if you take a low-income job (below £15,000, or about $26,000), they don’t take any repayments out? Same goes for being unemployed.

The net result is that while you may have a pretty big student loan, repaying it is never a nightmare. You only repay when you’re earning an above-average salary. The repayments are automatic unless you’re self-employed, and if you are, they get calculated when you pay your end-of-year taxes. The interest rates aren’t punitive. If I leave the country, they’ll work out a repayment plan with me.

I had freedom of choice – and I chose the government loan system.”

— Pip, London