Assault on the Middle Class in America

Discussion in 'Politics' started by danshawen, Dec 15, 2014.

  1. danshawen Valued Senior Member

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    The Washington Post today published a telling set of maps associated with the decline of the middle class in America. See:

    http://www.washingtonpost.com/sf/business/2014/12/12/why-americas-middle-class-is-lost/

    In the print edition, the captioning of the maps were actually in years instead of "years ago", and it was very clear when the worst middle class declines were. I don't understand why the captions have all been changed in the internet edition to make the meaning less clear. By far the worst middle class declines were:

    1) Right after the Reagan years
    2) Right after the G.W. Bush years

    There's no question about it.

    Hans Rosling himself could not have depicted this particular trend better.

    And also, why do all our major news outlets and Wall Street seem to be bemoaning the decline of oil prices and the wealth of oil sheiks this holiday season? Does anyone other than W care?
     
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  3. billvon Valued Senior Member

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    Because a lot of US and Canadian oil companies gambled big on shale oil and tar sands, and if the price of oil does not remain high, those business ventures will fail, causing a significant hit in economic outputp
     
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  5. Russ_Watters Not a Trump supporter... Valued Senior Member

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    Most of the story is "human interest" type -- picking a handful of anecdotes that fit the schtick of the story regardless of if they are actually typical/meaningful. In particular, . The thing the story glosses over is that though incomes "peaked" 15 years ago (right as the internet boom was busting), the economy is cyclical and the incomes went down and went back up again until 2007 -- they just didn't quite reach the level of the previous peak. So they make it sound like we've had 15 years of declining wages when in fact we haven't.
     
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  7. Photizo Ambassador/Envoy Valued Senior Member

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  8. iceaura Valued Senior Member

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    We've had almost thirty five years of declining wages, depending on how you calculate inflation.

    You are confusing average household income with median hourly wages - that's why you see a peak during the tech bubble on the stock market, an event that had little to do with hourly wages for middle class Americans.
     
  9. Russ_Watters Not a Trump supporter... Valued Senior Member

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    Actually, that's another flaw in the article, though not a huge one: most of the article talks about income, not wages. So no, I'm not confusing the two: that's what the article was mostly about.

    In either case, I'd love to see a source for your claim. Wage data isn't as easy to find as income data because income is the Census Bureau's preferred measurement. But this suggests you are wrong:

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    Article link:

    While it does show that the median "pay" (I assume that's wage...) in 2010 is less even than in 1999, it actually peaked in 2007, so it represents only 3 years of drops. Further, it also suggests you are wrong about the tech boom, since the first three years of the graph show the end of the tech boom and includes a substantial rise in wages.

    So, do you have a source for your claims?
     
  10. Michael 歌舞伎 Valued Senior Member

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    This article oscillates between using the word 'European' and then making comparisons with Germany. Why not use France, Greece, Italy or Spain?

    I imagine if you compared the USA with Europe and then used California, Texas or New York as your example of 'USA' it'd be a different picture. In other words, cherry picking Germany out is not a representative example of 'Europe'. It's an example of Germans. Why not compare the USA to Japan and call it a comparison of the USA to Asia?
     
  11. joepistole Deacon Blues Valued Senior Member

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    The problem you are getting at is the increasing problem with income inequality in America. And it isn't going to change unless and until congress makes material changes to the tax code which benefit the middle class and begins to enact middle class friendly fiscal and trade policies...something it hasn't done with a few possible exceptions.

    And given the amount of money in our political system and the influence it buys in congress, congress is not likely to make those changes any time soon. The reason the middle class has languished is because the political system doesn't work for them. It works for the big guys, the guys with lots of money. It doesn't work for the middle class. When huge sums of money come into the system and misinform voters, tricking them into shooting themselves in the foot, as has been our tradition, well the middle class doesn't stand a chance.

    There is an economist who has studied and written about this issue. If you are interested, you may want to read his book. His name is Thomas Piketty at the Paris School of Economics. He is spot on.


    Thomas Piketty (French: [tɔˈma pikɛˈti]; born May 7, 1971) is a French economist who works on wealth and income inequality. He is professor (directeur d'études) at the École des hautes études en sciences sociales (EHESS) and professor at the Paris School of Economics.[1] He is the author of the best selling book Capital in the Twenty-First Century (2013),[2] which emphasizes the themes of his work on wealth concentrations and distribution over the past 250 years. The book argues that the rate of capital return in developed countries is persistently greater than the rate of economic growth, and that this will cause wealth inequality to increase in the future. To address this problem, he proposes redistribution through a progressive global tax on wealth.[3][4]

    http://www.hup.harvard.edu/catalog.php?isbn=9780674430006

    http://en.wikipedia.org/wiki/Thomas_Piketty
     
  12. danshawen Valued Senior Member

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    This economist sounds like a veritable Robin Hood. It would also help considerably if folks would just stop voting for Dennis Moore.

    Actually, Dennis Moore (Monty Python's John Cleese) was originally more like Robin Hood, but he kept doing it until eventually all the previously poor were rich, and verse vicea.

    Later he developed some fixation with Lupins, and began redistributing those instead. "Blimey. This redistribution of wealth is more complicated than I thought."

    As far as economics are concerned, we should probably be worrying more about the end game of a world economy that is based mostly on petrochemicals. When those finally go away, how will we grow enough food to support 20 billion hungry folks? Sounds ugly, and I don't think being rich is going to help much.
     
  13. joepistole Deacon Blues Valued Senior Member

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    Actually, he sounds like a pretty astute economist. What Picketty states is that as long as the return on capital exceeds economic growth as it has for decades, the wealthy will continue to become wealthier and the lower classes will continue to have less and less of the economic pie. It is really a fairly straight forward observation. Owners of capital do better than wage earners (i.e. middle class and poor). Picketty goes on to note that societies with extreme income inequality tend to be socially unstable. The Koch brothers of the world are hoping to forestall that point indefinitely through indoctrination and misinformation.
    Dennise Moore is a former Democratic member of the House of Representatives from Kansas. He was a relatively obscure and unremarkable member of congress. So your reference to Moore is a little confusing. Two, I think you are missing the point.
    This isn’t about income redistribution per se. This is about keeping the economy healthy and competitive. As Picketty notes, extreme wealth inequality in the past has led to social instability. And social instability is never good economics, and we have seen evidence of increasing social instability in The United States (e.g. recent riots and protests, The Tea Party, the debt default threats, the inability to pass bank bailouts on the first pass, the inability to pass rational and responsible fiscal policy, etc.).
    Back in the days of my youth, in the early 70s there were those who said the same thing because in a matter of a just few years we were going to run out of petrochemicals. I remember debating the issue in high school. Forty years later we have known petrochemical reserves that will lasts for hundreds of years and we have alternatives to petrochemicals. So the end of petrochemicals isn’t in the cards for at least a century and there are a number of viable energy options (e.g. solar, wind, water, nuclear, improved and more efficient batteries, etc.).

    But to your point, do need to change those we elect to public office if we want to change what they do in congress. One of the most difficult and challenging problems we face is our political system and its susceptibility to corruption. The interests of our elected officials should not be in conflict with those who voted for them and for whom they are supposed to represent as is the case today. And most importantly we need better informed voters. Advertising and entertaining shouldn’t be how we inform voters.
     
  14. iceaura Valued Senior Member

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    30,994
    I quoted you, not the article, confusing median hourly wages with "average" yearly household income. If you recognized the flaws in the article, why did you repeat and amplify them?

    It's calibrated in thousands of dollars, so it's probably not a graph of hourly wages in the US. Your assumption is improbable.

    If you missed the calibration at the top, you might have noticed that taking the nominal scale numbers as median hourly wages would mean that the median hourly wage in the US has been more than $25 for decades - which a reasonable person would know to be too high.

    Here's a guy who has done some of the leg work for you: http://www.economicpopulist.org/content/confusion-over-median-hourly-wages-5527
     
    Last edited: Dec 20, 2014
  15. Seattle Valued Senior Member

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    8,857
    The main problems in the U.S. economy relate to the burden we have placed on our economy with our unbalanced budgets and therefore national debt.

    Politically the main problem (other than spending what we don't have) is that politicians are much more influenced by lobbyists than the average citizen (as was pointed out already).

    The most helpful thing that the "middle class" can do however is respond to a changing environment in part though education.

    Wages may have stagnated if you work in retail but engineers and others with specific needed skills are doing fine.

    The problem isn't to "attack" the "rich". Having capital should be the goal of everyone so passing laws in the name of attack the rich is hurting everyone who has managed to save some money.

    This is not to say that all laws that effect those with money can't be adjusted (thoughtfully) from time to time but politics should be kept out of it and decisions should be made by those who do actually understand economics.

    Otherwise, you simply attack one problem and create a larger one.

    The type of issues that really effect the middle class more are the rules and regulations that encourage companies to create part-time jobs without benefits instead of full time jobs.

    Fixing health care costs that are much higher than anywhere else in the world is another major factor.

    If someone saves a little money as a safeguard (along with unemployment benefits) and doesn't have to worry excessively about either health problems or paying for exorbitant hospital bills then much of the harshness of capitalism is eliminated.

    In that scenario, after an unexpected layoff, one can take any job and at least survive until a more suitable job and be found.

    It's when you save all of your life and one hospital stay without insurance can wipe out everything you have that you have a situation where it doesn't "pay" to save.

    Some scenarios from the past weren't sustainable and that's why things changed. Detroit is the obvious example.
     
    Last edited: Dec 20, 2014
  16. joepistole Deacon Blues Valued Senior Member

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    22,910
    The national debt is highly overrated as an economic problem for the US. Unfortunately, US debt, like most issues these days, has become a political weapon rather than an issue to be rationally addressed. US nominal debt is reported to be about 17 trillion dollars, but that includes debt the government owes to itself. If you subtract of that out, you get about 10 trillion dollars in debt.

    Profligate fiscal spending is never good. But the US debt is very serviceable and really isn’t a significant economic issue. And there are some very good economic reasons for deficit spending (e.g. Recession of 2007-2009) and there are some very poor reasons to run deficits (e.g. unfunded programs like Medicare Part D and botched foreign wars). Fiscal policy is a bit complicated for your average Joe or Jane without any macroeconomic training to understand, but it isn’t like balancing the household budget.
    You are absolutely correct.
    True enough, but still the wealthier are getting wealthier and income inequality is becoming a larger and larger problem. And that problem is independent of the jobs issue. There is only so much job training he middle class can do.

    Tax policies need to be changed. The rich, like Romney, should not be able to get away with zero income tax or tax rates less than what the average middle class or poor folks pay. Since the Reagan administration tax rates for America’s wealthiest have been subsidized with increasing payroll taxes on the middle class.
    True enough, but overall wage growth has not kept pace with economic growth and that is a problem for the middle class and the long term health of the overall economy.
    True enough again, however a suggestion or a recommendation rooted in sound economic science that the wealthy should pay more for the benefits they receive from our government or that their political power has become burdensome and counterproductive isn’t an attack. It is merely an observation rooted in evidence.

    And the discussion isn’t about everyone who has managed to save some money. It is about folks with vast stores of mostly inherited wealth (e.g. Koch Brothers). There is no good reason why someone like the Kochs or Romneys of the world should less as a percent of income than the average middle class worker which is currently the case. And I say this as someone who has managed to save a few dollars and now rely on my capital rather than my labor for my sustenance.
    Agreed, and we are in serious need of political reform. We need to ensure that those we elect or who are appointed to office never have interests which conflict with those they are supposed to represent. Unfortunately, most if not all our elected representatives have interests which conflict with those they are supposed to represent. We shouldn’t have Supreme Court justices attending secret political junkets held in luxury resorts funded by partisans. We shouldn’t have elected representatives passing special interest legislation and then going to work for those special interests. That kind of behavior would never be tolerated in a Fortune 500 company, and it shouldn’t be tolerated in our government. But it is.
    The wealthy are critically important in our society, but so are the worker bees. We need to find a balance. At this point in time, it appears and the data suggests we have gone too far in favoring the wealthiest.
    Now I hear that claim repeated over and over by right wing partisans, but I have seen absolutely no evidence to support that conclusion. The BLS numbers report fewer and fewer part-time workers with every passing month. In a recovery, as we have had, it is normal to first see a spike in part-time employment as employers first hire part-time and temporary workers before hiring permanent full-time workers. Employers like using part-time and temporary workers in the early stages of growth. It is quick way to access labor and without the risks and costs of full-time permanent workers.
    Agreed, it is a significant hindrance. The US healthcare system is a mess and Obamacare is the first significant effort to modernize the American healthcare system. Not only is the US healthcare system more than twice as expensive as those of other developed nations it is also less efficient and increasingly less effective. Obamacare should significantly improve all of those metrics. But much more needs to be done.
    True enough, and it allows would be entrepreneurs more opportunity to create new businesses and services by significantly lowering the risk and cost of doing business.
     
  17. Seattle Valued Senior Member

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    8,857
    Just to address a few of your (generally favorable) comments.

    I have an MBA in Int'l Business but I still have a big concern with the budget and debt situation. It isn't like a household budget but it isn't totally dissimilar either.

    The part time job situation isn't just a "right wing conservative" issue (I am neither).

    I agree that everyone (rich included) should have rational tax treatment and certainly I agree that the gap between the haves and the have nots is way too great. However, it's taking our eye off the ball to suggest that taxing the rich more is going to make any substantial difference in these issues.

    It should be done for fairness reasons but it won't generate the kind of dollars that you are suggesting.
     
  18. joepistole Deacon Blues Valued Senior Member

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    The budget and debt situation is always a concern or should be a concern, but it isn't the crisis it has been made out to be. And I don't think I suggested taxing the rich was a panacea. But it is something that needs to be done for economic reasons. The American middle class is the engine which drives this economy and we need to protect it. Marginal earned income tax rates for the rich have gone from 94% to 39%. But as we both know, most of the truly wealthy have little if any earned income because earned income is taxed so heavily. Income tax reform is vital to changing the wealth inequality problem in the United States and for the long term economic health of the nation.

    There are significant challenges ahead of the nation and those changes will require a number of different fiscal fixes. But, fixing the income inequality problem begins with tax reform.
     
  19. Seattle Valued Senior Member

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    8,857
    I agree. I just don't want to see stock ownership by itself suddenly be addressed as something that only the "rich" own. Many people do see it that way and since they don't own any stock (or think they don't) they are willing to stick it to "Wall Street".

    I'm just suggesting that whatever is done is done in an economically intelligent way. People are taxed plenty at their jobs. If stocks were taxed as heavily money wouldn't be able to be raised through the stock market and the economy would suffer.

    I'd like to see more of a social safety net without all the excesses that we see in Europe (lack of productivity and in some cases systems that aren't sustainable).
     
  20. iceaura Valued Senior Member

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    30,994
    You are confusing cause and effect.
    Most people's wages have stagnated. The bulk of the working population of the US is not doing fine. When a few people are doing fine and most people are not, the economy is suffering harm.
    We got into this mess by reducing the tax burden on the rich. Why do you think reversing such badly mistaken policy would not help return us to our former better situation?

    Inequality in wealth and income is the most serious problem we have. The only way to reduce it is to tax rich people more heavily - reduce and prevent excessively large accumulations of the wealth of the society by a small group of people. Nothing else will work.

    The Europeans who are committing those "excesses" are more productive than we are. Our system is not sustainable - at least, not in a good way.
     
    Last edited: Dec 20, 2014
  21. joepistole Deacon Blues Valued Senior Member

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    22,910
    True, many people own stocks. But the wealthiest Americans own the most., Most Americans only own stock in their non Roth retirement plans, which when they liquidate their accumulated capital gains, will pay normal income tax rates rather than the less taxed long term capital gains as a wealthy investor would.

    Most people don't understand Wall Street. If they did, the last thing they would want to do is stick it to Wall Street. I agree with you that whatever is done, it should be done, it should be rational. Unfortunately, I don't think anyone can honestly say our political system is rational (e.g. Tea Partiers threatening to run the nation into a debt default).

    I have heard the claim made that if capital gains were raised it would dry up capital. But I have never seen empirical evidence to back that up. In fact, all the evidence I have seen says otherwise. In 2013 the long term capital gains tax rate went from 15% for the highest income tax bracket to 20% without any adverse effect on capital. Two years later, stocks are trading at all time highs. Given that 10% of all stocks are held in 401k accounts and will are taxed at earned income rates at a minimum when withdrawls are made, I am not buying the claim that increased capital gains tax will reduce the availability of capital and I see no viable economic reason why it would.
     
  22. Seattle Valued Senior Member

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    8,857
    I'm not "rich" or anywhere close to it. However, I have saved my money over my lifetime rather than spending it. Much of what I have is in the stock market and not just in an IRA.

    If stocks were taxed at the same rates as ordinary income I would have to take a second look at the risk/reward ratio. I would also have to reconsider what would go to stocks and what would go to real estate.

    It also does little good to increase estate taxes at a level that would do the most good (small business owners) as it would just make it less likely for people to start and maintain small business.

    It does make sense to transfer some of the wealth through estate taxes on the very wealthy but that's hard to do as they have to funds and incentive to work around that.

    All I'm saying is that it's easy to tax the rich but it's not always so obvious as to what the unintended consequences might be.

    A friend of mine from Norway has a father who is a medical doctor. He made only an average salary in Norway and regardless of how many people he saw in a day he made the same amount of money.

    So, he moved to Chicago and now makes a lot of money.

    It's possible to eliminate the incentive to stand out. If everyone is a "worker" when their will be no jobs for anyone to work at unless you want the state to be the only employer.
     
  23. iceaura Valued Senior Member

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    30,994
    What we have had in America since 1980 or so is a hard lesson in the unintended consequences of not taxing the rich.

    For example, we reduced the incentive to create jobs - the payoff for taking immediate profit and mining one's business for short term gain is much greater than it was, and so people do that more often.

    Lesson? He obviously had good incentives to become a doctor in Norway - and his fellow Norwegians have the best medical care on the planet, far better than what the average person in Chicago receives.

    So the people of Chicago are paying a lot more money for the same or worse doctors, and the people of Norway have better medical care for less money and an incentive system that creates good doctors. What exactly is the lesson you see in this?

    If we have lost the capability, even, of taxing the wealthy, we may as well junk the system and start over with a new country.

    Up until 1980 or so, we successfully taxed the rich in this country. Now you say we can't? What happened?
     
    Last edited: Dec 21, 2014

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