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Wednesday, December 15, 2010

Eighty percent of workers receive twenty-eight point two percent of the nation's income

Dear Congressman Stark, December 10, 2010

Until wealth and income inequality are fixed, the economy is broken. The lower earning 80% of American families earn 28.2% of the annual income and own 12.3% of the private wealth of the nation. 24.1% of the nation’s families own nothing.

I try not to waste your time, Congressman. I’ve written before about economics.
Today I have a specific plan I’d like your help with. I think we need better information about the economy than what we have. I have recommendations, but you will have to read my story.

Twenty-eight point two percent, 28.2%, is the portion of the nation’s entire income that the lowest earning 80% earned in salary and wages in 2006. I know this because of a table printed in State of Working America, 2006-2007, published by the Economic Policy Institute. They took the table from the Tax Policy Center which is run by the Brookings/Urban Institute. The table is called the Microsimulation Model Version 0305-3A, and if you e-mail them they will send you a copy. *
The bottom 80% received 40.0% of all income, but about 12% was "other income", mostly pension income from Social Security. Readers can view the document from the Tax Policy Center at this address, Table 1.17,

I had no idea my computer could do that, but there is the table; page 79 of the book State of Working America. How much income is total Salary and Wages?
64.5%. (Look at the bottom of the far column at the left) How much of that do the lower 80% of households get? 43.7%. (Look at the top column in the middle labeled “Wages & Salaries”) If you multiply the two, then the lower 80% of households receive 28.19% as their portion due to their labor. The top 20% receive 60.3% of all income.

Most people would say that the condition of 80% of the workers receiving only 28% of all income was inadequate, unfair, and maybe immoral. Few economists know these figures much less report the details of income distribution, and most citizens are basing their judgment on bad information. I had to use some imagination to multiply the 64.5% with the 43.7%. No one else has ever reported this data. This is why I’m writing.

Some 80% of the workforce are non-supervisory workers --- not managers, not owners, not professionals or self-employed. The post-tax picture looks much like the pre-tax picture.

Is it immoral? Just as invading Iraq on bad information and causing one million civilian deaths (see Wikipedia article Casualties in Iraq) can be ascribed to moral torpitude of the invading nation, there is a moral dimension to such one-sided income distribution. This is an important distinction. Voters may base their judgments on the supposed laziness and unworthiness of recipients of “entitlements” and other government provided social benefits. Much of the right-wing media presents this picture. Many Americans think that success is simply a matter of work-effort, not of opportunity. The following should be a part of everyone’s working assumptions: about 10% of the workforce are involuntarily out of work and actively looking for work, about 10% are underemployed and want full-time employment, or have given up on active job searches but still want to work, and a last 10% are employed full-time and full-year at wages that pay less than the poverty level for a family of four. That’s 30% of workers for whom work opportunity is very unpromising. That is 46.5 million adult working Americans, not counting their dependent children, almost a third of the nation, for whom the American Dream is out of reach. There is, in December, 2010, about 1 full-time job opening for every nine job seekers. (Go to and search the unemployment numbers from BLS data to confirm those figures.)

Immoral? Our economy generated in 2009 over $46,000 per citizen per year (multiply 310 million Americans by $46,000 to get a GDP of over $14 trillion). With such a rich economy, how can any worker be “working poor”? We generate over $100,000 per worker per year, and that includes the 36% who work part-time. Yet 16.3 million workers in 2009 worked full-time and full-year for less than the annual income needed to raise a family of four above the government’s poverty line (See How can the poverty rate be 15%? Why is it that Italy has an average wealth per adult of $115,000, Japan $102,000, Canada $94,000, and the U.S. has a wealth/adult rate of $44,000? Maybe our economic system is lacking, not the moral fiber of the population. (See the Credit Suisse Bank Research Institute Global Wealth Report, October 2010)

The 28.2% income distribution fact is very important for several reasons, and in your office as Congressman I think you can create legislation to make figures about the economy easier for the average citizen to access. Voters need accurate and relevant information, and the source should be from the government, not the Brookings or Urban Institute. I do not know where this information could be found in government documents. I wrote the U.S. Census for a simplified version of the federal budget, and they had nothing. I’ve looked at the President’s budget, the CBO, the BEA, Wikipedia, and other non-profits and foundations. The Tax Policy Center is the best I’ve found, but even they are inaccurate and inadequate. The average person, concerned citizen, does not have time for this search. The media is helpless at best.

One friend of mine thought that half the government’s expenditures went to welfare. What was I to tell him? That was not too difficult, but ask yourself, how much goes to education? And I don’t mean just federal dollars. You have to go to Wikipedia to find out. What is the “overall” tax rate (federal, state and local) for those who earn less than $20,000? You have to go to Citizens for Tax Justice, because they compile a roster of “overall” tax rates for all incomes in all states. What about Medicaid expenses, or public health? The military, does it spend $1.5 trillion like I heard on the news, and Chalmers Johnson said $1.1 trillion, and officially it’s $873 billion or something like that.

I’d like to spend a minute on the latest tax compromise deal, the Obama Republican tax compromise. 84% of the national income is subject to Social Security taxes, and that income will have a 2% drop in taxation, down to 4.2%. This will add spending power to the economy. Since 2007 much consumer spending power has been lost, about 1.5% of what was there in 2007, arguably. What was wrong with just increasing the Earned Income Tax Credit? Or just printing the money and mailing the checks? Same outcome except you don’t spend down retirement savings accounts for workers who can’t afford to spend their retirement today and have little tomorrow.

The Citizens for Tax Justice has a pdf. file article that shows, state by state, who gets the benefit of the tax cut. Overall 64% goes to the top 20% of families who receive 60% of all income. In California, the 20% receive 70% of tax cuts. Thought you should know.

Most of what I’m saying you know, in part. But I’ll continue. My point is that the public should not have to buy a book, they should be able to e-mail the Bureau of Economic Analysis, Department of Commerce, and find their information.

One professor of economics at U.C. Berkeley, Emmanuel Saez, recently received the MacArthur “Genius” Award. He has been analyzing IRS data from 1913 to the present, disaggregating it into income percentiles. His report “Striking It Richer” the August 2010 Update, shows a graph that shows the income portion of the top earning ten percent of households from 1913 to 2007. During the period 1940 to 1980 the top ten percent never received more than 35% of the nation’s total income. In 2007 they had 49.7%. You might know this. It is becoming well known, especially the top one percent receiving 23.5% of all in 2007. Between 1946 and 1972 all income groups, quintiles, doubled their incomes in real terms. Between 1983 and 2007 the median family increased their income by 7.7%, even though the nation’s economy had expanded GDP per capita by 64%, and the worker’s productivity went up by 90%.

You may know that the Chairman of the Federal Reserve Bank during the Great Depression, Marriner Eccles, laid the blame for the Great Depression on income inequality. You may know that U.C. Berkeley professor Robert Reich also now claims, in his blog and his book After Shock, the 2008 recession was brought on by inequality. Now you know, exactly, that 28.2% of all income is what the non-supervisory workers got for their labor. I don’t think many people know this. They would conclude this is immoral, as I believe. It is not a fair Linkreward. And it’s not just wrong, it’s really bad for the economy.

The 28.2% figure and the 49.7% figure came not from government but from an academic or a non-profit source. There should be a people friendly authoritative government source of information. There is not. Maybe you can direct me to someone who can talk to me about these issues. The White House now has a White Board video web page that explains different economic issues. That’s a step in the right direction. How about a simplified explanation of all government spending and revenue? A visit to the site does not provide a simple picture and answer to my questions. For instance, I never knew that 8% of ALL government revenues is federal revenue shared with states and localities, but then I went to the Tax Policy Center web page. Federal revenue amounts to 49% of all government revenue. How much does welfare amount to? I’ll tell my friend about 4% of GDP. Close enough.

I have a blog page,, and it has an essay about eight different proposals to create federal jobs. I recommend it to you (see April 2010, second essay). We need federal jobs. Marshall Auerback wrote a good article that shows between 1933 and 1937 the unemployment rate descended from 25% to 9.6% (See “The Real Lesson from the Great Depression”). And several other reliable authors have picked up this figure, so I imagine it must be accurate. It’s new data that shows a revision in the metric for unemployment before 1940. James Galbraith says we need an active deficit, that is a jobs program.

I was an elementary teacher, Oakland and Richmond, for 16 years. Now I’ve been reading economics for the past four years. I hope as more of my age cohort retire they will spend their energy sorting out our problems and making your job less frustrating. I disagree with you plenty. We should have creamed the banks in 2008, we should have fought for a 90% top marginal income tax rate, and so on. But I would never wish to have your job, and you deserve a big thank you, from my heart. Bernie Sanders finished his talk this evening, and I’m not going to type for 8.5 hours tonight. Thanks, best wishes.

Ben Leet, San Leandro, California.

For additional information:
Go to the Citizens’ Commission on Jobs, Deficit Reduction and America’s Economic future at for a plan for economic recovery. See also Representative Jan Schakowky’s plan for deficit reduction. See the report “Battered by the Storm” from the Institute for Policy Studies. See for additional information on inequality.
I’m enclosing four charts। The third is the one I talked about from the table in this letter. I have not fixed it, the figures are not perfect, but for now close enough.

About half of the U.S. workforce (47% to 52%) are working full-time full-year at income above the poverty level income. Many people wrongly believe that everyone can find full-time work in a good paying job. They are wrong. This is the logic: There are 155 million in the workforce, subtract the 15.2 million unemployed, leaving 139.8 million working each day. Subtract 36% or 50.3 million who work part-time, leaving 89.5 million. Subtract 16.3 million who work full-time full-year for below poverty level wages, leaving 73.2 million. This number of workers, 73.2 million, is either 47% of all who work each day or 52% of the total workforce. Therefore, about half who work are full-time full-year workers receiving more than poverty level wages.

We should note though that about 80% of part-time workers do not want full-time work. None-the-less, finding that “good job” is not simply a matter of stepping up and applying your talents. As Professor Frank Stricker noted in his book Why America Lost the War on Poverty, there are never enough good jobs.

Potentially we could improve our nation by: providing child care for all parents, improve public education, make energy efficient all public buildings, and then private residences, repair and upgrade all roads, parks, bridges, ports and water systems, evolve our energy system into a non-fossil-fuel clean energy system, create a majority of clean electric vehicles, and allow for additional vacation time for all workers. To accomplish this would require intelligent policy, not just the invisible and blind hand of the market that has created a grossly out-of-balance and unfair distribution of income and wealth.

There are policies that would increase total employment and compensation for non-supervisory workers. These policies would make for both a healthier economy and a healthier society. Full employment for all who want to work may not be a realizable inalienable right, but it is an admirable goal, probably attainable.

Contents from the Beginning

Contents to Economic Reform 2008

I have not updated this Contents in a year. Click "Economic Reform" at the top to go to current essays.

How Inequality is Strangling the Nation
8/18/10 by Ben Leet

An Essay in Six Sections
7/7/10 by Ben Leet

Short essay about federal jobs
4/13/10 by Ben Leet

Public Service Employment
4/13/10 by Ben Leet

How to Double Incomes for Millions of Workers
3/18/10 by Ben Leet

We Should Learn from the New Deal
1 comment 2/10/10 by Ben Leet

We Must Transfer Wealth, Again ...
3 comments 12/22/09 by Ben Leet

Bernanke should not be reappointed --- No to Bernanke
12/22/09 by Ben Leet

Comprehensive Plan for a Jobs Program, Nationalize the banks
11/17/09 by Ben Leet

The Forbes 400 Equals the American 150 Million
8/11/09 by Ben Leet

Wages Must Rise
8/8/09 by Ben Leet

Comments and Suggestions to Your Call Radio
2 comments 7/22/09 by Ben Leet

3rd Letter to Congressman Stark June 2009, to Stark
6/24/09 by Ben Leet

U.S. Ranks 75th in Inequality U.S. 75th
6/24/09 by Ben Leet

Cause of Recession Is Low Wages
3 comments 4/21/09 by Ben Leet

Blog Contents
4/5/09 by Ben Leet

Why Obama should nationalize the banks
4/4/09 by Ben Leet

Blog Contents, December, 2008 2009, Brussee comment, March 22
3/22/09 by Ben Leet

A Man A Plan Jack Rasmus' Recovery Plan
3/18/09 by Ben Leet

Tax Wealth, Create Public Jobs --- U.S. Ranks 75th
1 comment 3/5/09 by Ben Leet

Blog Contents Blog Contents
1 comment 12/29/08 by Ben Leet

Why Full Employment
12/29/08 by Ben Leet

Case for a Full Employment Policy
12/5/08 by Ben Leet

Full Employment Leads to World w/o Poverty
10/10/08 by Ben Leet

Suggestions for the Meltdown/Bailout
10/10/08 by Ben Leet

Nationalize or Bailout? not Public Private Banks
9/28/08 by Ben Leet

Understanding the Crisis --- Once I built a tower ...
1 comment 9/20/08 by Ben Leet

Justice Revolution in Economics
1 comment 8/21/08 by Ben Leet

Bottom Half of U.S. Owns 2.5% of Wealth, Earn 15% Yearly
8/17/08 by Ben Leet

$100,000 per Year per Worker --- Celebrate!
8/13/08 by Ben Leet

Infectious Greed Overwhelms the U.S. Economy July 2008, Letter to Liam
7/31/08 by Ben Leet

Contents of this Blog Blog Contents
7/21/08 by Ben Leet

Are Economic Rights Human Rights?
7/21/08 by Ben Leet

Three Short Articles
1 comment 6/17/08 by Ben Leet

What Government Can Do --- A Ten Point Plan to Raise Incomes
1 comment 5/1/08 by Ben Leet

Another Letter to Congressman Pete Stark 2nd letter, Cong. Pete Stark
5/1/08 by Ben Leet

There Are Solutions
1 comment 4/6/08 by Ben Leet

A Wealth Tax to Eliminate Poverty
2 comments 4/6/08 by Ben Leet

Poem -- White Birds
4/6/08 by Ben Leet

The Twilight Zone takes over my mind
3/14/08 by Ben Leet

Letter to Congressman Pete Stark, February 5, 2008...
3/14/08 by Ben Leet

Economic Justice and Democracy by Robin Hahnel
3 comments 3/14/08 by Ben Leet

Odd, Very Odd
3/5/08 by Ben Leet

Is There a Middle Class?
2/21/08 by Ben Leet

Eleven Economic Failures, Seven Solutions
1/24/08 by Ben Leet

Wednesday, August 18, 2010

How Inequality is Strangling the Nation
--- National Wealth and Income Distribution, and the need for a Government Work Program

Examining Edward Wolff's Wealth Report, March 2010

Extreme inequality is counter-productive.
Forty percent of U.S. households hold on average $2,200 in savings while the economy generates over $47,000 per capita per year in 2007, and the wealthiest 1 percent of households garner more income than the bottom 60 percent. These are the principal findings of a study of wealth and income distribution by Edward Wolff, eminent scholar of wealth distribution.

Social inequality at an extreme is destructive and unproductive. It squanders human potential and diminishes the quality of life for all as the recent book The Spirit Level argues. This essay draws on the recent March 2010 study by Edward Wolff that illuminates quantitatively the extent of U.S. inequality 1983 to 2009. I then propose a solution in the Conclusion, a path out of inequality towards greater productivity and social justice. One in three U.S. workers today is either out of work, has dropped out of the workforce, is working part-time when he wants full-time, or is working for poverty level wages. This is wasteful. Extreme inequality is counter-productive.


In March, 2010, Edward N. Wolff released an updated report on household wealth and income in America. Wolff, the author of Top Heavy, and professor at N.Y.U. and researcher for the Levy Economics Institute, is a widely respected scholar of the economics of wealth distribution.

In a report such as Wolff’s the abundance of numbers and numerical relationships are central, but the overall effect is daunting and overwhelming at times. My report of Wolff’s report is also excessively numerical, and I am afraid that readers are apt to lose the main picture of the “forest” for all the “trees”. I think that if the reader can hold any three data points from Wolff’s report they should be:

1) The average household savings of the bottom 40 percent of American households is $2,200 --- this in an economy that generated over $47,000 per capita per year in 2007. 2) The top one percent of U.S. households owns more than 90 percent of households at the bottom of the wealth scale, and 3) earned in 2007 more income than 60 percent of households at the bottom of the earnings scale. 4) The fourth data point that I think is very important to consider comes from another study, by Emmanuel Saez, (See Striking It Richer, Update July 2010)professor of economics at U.C. Berkeley, who found that from 1942 to 1982 the top ten percent of households never received more than 35 percent of the national income, while in 2007 their portion had grown to 49.7 percent of it. The distribution of both income and wealth have not always been so skewed in favor of the wealthy; when the fruits of the economy have been more fairly spread around, i.e., 1940 to 1980, the economy worked far better for all income sectors --- the poor, the middle income earners and the very topmost earners. 5) --- the Conclusion --- Politically we can change this distribution trend.

Once the reader begins to stall in his comprehension due to an overload of too many numbers, I recommend that he or she skip down to the Conclusion. It will be better for his overall comprehension.

I am venturing a report of Edward Wolff's paper "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze --- An Update to 2007", published March 2010 by the Levy Economics Institute of Bard College, titled Working Paper 589; available at In addition, Wolff summarizes the changes in wealth and income in the U.S. between 2007 and 2009 in his report on page 33. I have placed in quotations his report, and added my own commentary.

Concerning disappearing wealth between 2007 and 2009, on page 33:

"According to my estimates, while mean [average] wealth (in 2007 dollars) fell by 17.3 percent between 2007 and 2009 to $443,600, median [middle or typical household] wealth plunged by an astounding 36.1 percent to $65,400 (about the same level as in 1992!)."

This indicates that the total wealth of the nation's households plunged from $64 trillion to $53 trillion, an $11 trillion drop or 17% in two years. That means, of course, one in six dollars of savings disappeared in two years! This is why the word "meltdown" is used to describe the financial institutions’ --- banks’, hedge funds’, insurance companies’ --- implosion.
Though Wolff said that median household (or the middle household out of 116 million, or household #58 million in a bottom to top scale, often called the ‘typical’ household) wealth was at the level of 1992, $65,400, a drop from $102,000 in 2007, he might also have said that the median wealth was 6% lower than the 1983 level of $69,500. The middle household, #58 million, in 2009 had about $4,000 less savings 26 years after 1983, in spite of the economy’s expansion of 115 percent.

During the 2007 to 2009 period,
"The [wealth] share of the top 1 percent advanced from 34.6 to 37.1 percent, that of the top 5 percent from 61.8 to 65 percent, and that of the top quintile [20 percent of households] from 85 to 87.7 percent, while that of the second quintile fell from 10.9 to 10 percent, that of the middle quintile from 4 to 3.1 percent and that of the bottom two quintiles from 0.2 to -0.8 percent. There was also a large expansion in the share of households with zero or negative net worth, from 18.6 to 24.1 percent."

Another way to state this is, the bottom 80 percent of households own about 12.3 percent of all the nation’s wealth, or savings. Or that 60 percent own only 2.3 percent.

The households with zero or negative worth grew to 24.1 percent, a big jump from 18.6 percent, and by extrapolation from earlier reports by Wolff, the portion of households with less than $5,000 in savings probably today, in 2010, approximates 33.1 percent, and those with less than $10,000 amount to nearly 40 percent of the U.S. population, though this data is not shown in the report. That is, 40 percent of the U.S. population lives in households with less than $10,000 in savings, and 33 percent live in households with less than $5,000, and one in four Americans live in households with no savings. This is why one in four children in the U.S. now eat food bought by food stamps, December 2009, because in order to qualify for food stamps one can have no more than $200 in assets.

In 1983 15.5 percent of households, as opposed to 24.1 percent today, had zero or negative net worth. From 1983 to 2007 median household annual income grew from $43,500 to $50,200. (page 35). But, of that growth, 76 percent happened between 1983 to 1989. Household median income growth has been virtually flat since 1989.

"Moreover, the average wealth of the poorest 40 percent declined by 63 percent between 1983 and 2007 and, by 2007, had fallen to only $2,200.”

If the poorest 40 percent had on average $2,200 in 2007, how much did they have in 2009 after the meltdown? Wolff offers no estimation. (page 36)

“All in all, the greatest gains in wealth and income were enjoyed by the upper 20 percent, particularly the top 1 percent, of the respective distributions. Between 1983 and 2007, the top 1 percent received 35 percent of the total growth in net worth, 43 percent of the total growth in non-home wealth, and 44 percent of the total increase in income. The figures for the top 20 percent are 89 percent, 94 percent, and 87 percent, respectively.”

Restated: 11 percent of savings’ growth went to the lower 80 percent of households, 1983 to 2007. This is while the net worth of all households, on average, increased by 64 percent, 1983 to 2009.

“The biggest story for the early and mid-2000s is the sharply rising debt-to-income ratio, reaching its highest level in almost 25 years, at 119 percent in 2007. [Up from 68 percent in 1983, page 48] Also the debt-equity ratio (ratio of debt-to-net-worth) was way up, from 14.3 percent in 2001 to 18.1 percent in 2007."

Combining the data on page 44 (to 2007) with the data on page 33 (to 2009), the trends show that during the period 1983 to 2009 the median household wealth shrunk by 6 percent from $69,500 to $65,400. In the same period the average mean wealth of all households grew by 64 percent, from $270,000 to $443,600. The income growth (not wealth) between 1983 to 2007 (not 2009) shows that median income grew by 15.5% while average mean income growth grew by 27.9%. This can be restated: the average income grew 80% faster than the median (middle) income. And as stated above, over three quarters of the median household income growth, 1983 to 2007, occurred between 1983 and 1989. So, while median income virtually stayed flat, 1989 to 2007, the average income grew by around 80 percent. This is the evidence of stagnant wages and income in a growing economy. And while wages were stagnant, the net asset worth of the median household declined 6 percent, 1983 to 2009.

The majority of American families have been left out. In 2007 the top one percent of households earned more income (21.3 percent of the national total income) than the bottom 60 percent (who earned only 20.7 percent in 2007) (see page 45). The top one percent, owning 37.1 percent of all assets, owns more wealth than the bottom 90 percent of U.S. households. Again, the bottom 40 percent of households own less than $2,200 on average. For every one dollar in savings among the lower 40 percent of households (or 48 million households or 120 million citizens out of 309 million total population), the top one percent holds $9,000 in savings. ($18.5 million divided by $2,200)


This imbalance of wealth and income bodes ill for economic recovery. This is why I, and others (see previous essays here), argue for a 1939 style government sponsored work program that would directly hire the un- and underemployed, at least 17% of the workforce or 26 million workers, in work paying between $14 to $18 an hour over a period of five years or more to shift the income and wealth distribution of the nation. This is what the nation did between 1939 and 1946.

Capitalism flourished after WWII because aggregate demand was restored. Wealth distribution had become more balanced by 1949. Between 1929 and 1949 the the top one percent of households' portion of the nation's wealth decreased from 44 to 27 percent (See, indicating more savings and more purchasing power to the middle class. Idle and unproductive wealth in the 1940s was invested in war bonds, this transferred into workers' paychecks, and then into workers' savings accounts --- a transfer of wealth. In 1939, ten years into the Great Depression, unemployment held stubbornly at 19 percent. That rate dropped steadily for four years due to government jobs creation in the war industries. Finally, during 1943,
1944 and 1945 the unemployment rate sank below 2 percent. Concurrently national household savings exceeded household debt creation for the only time on record, 1913 to 2010. For instance, in 1944 the average family savings was $12,807, and debt creation was $7,475. This in contrast to 2007 when savings was $449 and debt creation was $121,650 (according to The Debt Trap, New York Times interactive article; link to "series index" and then to "Interactive, The American Way of Debt" by Amy Schoenfeld and Matthew Bloch. --- when you get to the page, look at the bottom right for
"series index" and clicking that will pull up a row of images, look for the third to the left,
click that and you'll see the chronological portrait of debt creation vs. savings). During much of this seven year period, 1939 to 1946, consumer goods were not in production. For instance, "between 1943 and 1945, the American automobile industry produced exactly thirty-seven automobiles," according to John Steele Gordon (An Empire of Wealth, page 357). With the rationing of thirteen commodities and the wholesale conversion of industry to wartime production, a wartime austerity hit the American family. Mostly war armaments and equipment were produced, and because young men were away at war, household debt creation was suspended for the duration of the war.Full employment -- that is, everyone working -- and nothing to buy built the bank account savings of American families. In 1946 the nation was prepared and ready to spend. Even though the national debt hung over 120 percent of GDP, gradually the economy grew through the national debt and it was reduced to 35 percent of GDP by 1965, where it held for 15 years until the Reagan era. After WWII the popular labor union mentality was strong, aggregate demand was restored, and importantly

the 90 percent income tax on only the topmost incomes held the tide on inequality. The economy was prepared for a 30 year unprecedented run. The real incomes of all American families -- poor, middle, and upper income -- all doubled in real terms during the 1947 to 1973 period. The economy grew and all families shared the growth, unlike the past 30 years.

Today the nation still has an immense amount of important work to do such as child care and educational services, highway repair and infrastructure construction, green energy conversion projects that run the gamut. The imperative of allocating capital and resources only into profit creating enterprises is strangling the nation. The inequality that has been the hallmark of the past three decades has crippled aggregate demand, so that purchasers and consumers have not enough purchasing power to revive corporate expansion which would drive, and historically has driven, economic growth. Capitalism must harmonize its competing cross purposes; the national surplus (annual profits) must be distributed to both consumers and owners of corporations. Without consumer purchasing that powers corporate expansion, jobs will not be created, incomes will languish, and purchasing power will be absent. As the King, Yul Bryner in The King and I, said: “Et cetera, et cetera.” It’s a downward spiral.

Politically we must demand a shift in our practices and thinking.

On August 14, 2010, Robert Reich, former Secretary of Labor, published an article outlining the same strategy. (See “Forget a Double Dip. We’re Still in One Long Big Dipper.” See Marshall Auerback's essay "The Real Lesson from the Great Depression -- Fiscal Policy Works" at New Deal 2.0 where
he states, "the Roosevelt administration reduced unemployment from 25 per cent in 1933 to 9.6% per cent in 1936", and claims,
"It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock. So much for the notion that government jobs are not “real jobs”, as we hear persistently from critics of the New Deal!"Furthermore, the web pages Drive for Decent Work -- Full Employment Now and have many federal jobs creation proposals to peruse.

August 17, 2010

Wednesday, July 7, 2010

Six Short Pieces, July 7, 2010

This installment has six sections:
1. Dean Baker on Inequality, the Best Article in Years, and Inequality in Short, a Quick Guide with sources.
2. One in Three Americans -- Less than $5,000
3. A 1932 Question with a 1931 Answer -- about the federal deficit 2010
4. The Bush Years --- The National Debt and the Annual Federal Deficit, The Tea Party during the Bush Years Saw 16% Over-Budget Spending for Eight Years
5. A comment to a radio station about the extent of ‘the problem’
6. Reliable Information Sources

I hope to offer fairly simple explanations about complicated economic riddles. Naturally, no one agrees about economics, but we should all try to have an informed opinion. “Intelligent people can and often do disagree,” as Warren Brussee often notes.

Dean Baker on Inequality, the Best Article in Years

This morning I read the best summary article about the economy that I’ve read in months if not years. Dean Baker’s “The Right Prescription for an Ailing Economy” printed in the Nation magazine, and printed at his web site, Center for Economic Policy Research, --- ---
offers the best summation I have read. If you read no other article on economics, read this one. Inequality is the problem.
The Nation magazine published six essays about inequality, all good, especially Dean Baker's and Robert Reich's. Jeff Madrick's I found not up to his normal excellence, but still good. Baker summarizes his argument noting the growing mismatch of productivity gains and wage stagnation in this paragraph:

This virtuous circle was broken by Reagan-era policies intended to weaken the power of ordinary workers. Wages no longer kept pace with productivity growth, eliminating the automatic link between productivity growth and demand growth. This led to excess capacity in the economy, which was filled in the 1990s with demand generated by the stock bubble and in the 2000s with demand generated by the housing bubble.

As Robert Pollin pointed out, 1973 to 2005, productivity increased by 90% while median weekly income decreased by 10%. But the economy grew because of what Robert Brenner calls "asset bubble Keynesianism." Demand is then powered not by self-sustaining organic income growth, nor by federal job creation as in the New Deal and World War II era, but by government orchestrated escalation of asset prices by regulatory mismanagement. The word "mismanagement" is a conscious choice here. A market can sell no more than what purchasers can purchase. Cut wages and you cut purchases, which unchains systemic shrinkage. The economy ratchets downward. When the bubble breaks there is a lower "normal." Inequality matters, it is foremost.

Inequality in short:

At least 33.1% of Americans live in households with less than $5,000 to their names. Regrettably 24.1% live without any savings at all, according to Edward Wolff, as I cite below. If you are serious about learning about inequality, you will check these sources of info. More sources I provide at the bottom of this July 7, 2010, installment.

As 33.1% struggle --- and that is more than 100,000,000 citizens in the richest nation in the world whose annual GDP amounts to over $47,000 of output per citizen, and whose workers produce on average more than $100,000 per worker ---
Peter Edelman and Barbara Ehrenreich point out in March, 2010 (,

Millions of Americans are in dire need. Six million have no income other than food stamps, which is astonishing, since food stamps by themselves provide help at a level that is just 37 percent of the poverty line. Not surprisingly, extreme poverty -- having an income below half the poverty line, below $9,100 in 2009 terms -- had already skyrocketed before the recession, from 12.6 million people in 2000 to 15.6 million in 2007, well over 40 percent of the poor and more than 5 percent of the entire population. In 2008, with the recession beginning to bite, the number swelled to 17.1 million.

The Commerce Department reported that for the second time in 71 years, personal income dropped by 1.7 percent in 2009. (See:

Americans have lost not just income but wealth. The median household net worth dropped from over $102,000 to $65,400, the 1992 level,
a 36.1% drop, while the mean (average) net worth dropped by 17.1%. That means that the nation has 1 in 6 fewer dollars today compared to three years ago. It went up in speculative smoke. One can read Edward Wolff's summation (Working Paper 589) of the effects of the downturn on page 34 of his report at the Levy Economics Institute, (

One paper estimates that net worth will shrink by 45% to 55% for ages 45 to 64, as summarized by Rosnick and Baker, The Center for Budget and Policy Research. They estimated this loss in September 2009 in their paper, "The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble." (

"The Income Gaps Between Very Rich and Everyone Else More Than Tripled in the Last Three Decades," reports Chad Stone and Arloc Sherman at the Center on Budget and Policy Priorities. ( The after tax income of the top one percent in 1979 was 7.5% of national income, in 2007 it was 17.1%. Between 2001 and 2007, "Households in the bottom fifth of the income spectrum received tax cuts averaging $29, which raised their after-tax incomes by an average of 0.4 percent." "Within the top 1 percent, those with incomes exceeding $1 million received tax cuts averaging $114,000, which raised their after-tax incomes by an average of 5.7 percent."

Here are some writings I’ve knocked out lately:

One in Three Americans -- less than $5,000

One in three Americans lives in a household with less than $5,000 in savings. It is more accurate to say, one in four live in a household with zero savings, and another nine per cent live in a household or family with less than $5,000. Typical poverty measures only take into account annual income, not savings.

Just how many people are poor in the U.S.? About one in three, at least. Here's how I draw that conclusion.

Income: Almost one in three workers are either unemployed (9.5%), under-employed (8.7%) or working full-time full-year at below poverty wages for a family of four (11.6%). These three groups make up 29.8% of the workforce, June, 2010. But the official measure for poverty covers not workers but households. (See for BLS statistics) With workers almost 1 in 3 are out of luck.

Savings: The edge of absolute poverty draws closer and sharper when you realize that, beyond annual income, the fall-back savings, wealth, or net worth of about 1 in 3 Americans is also extremely low. The net worth, or savings less debt, of around 1 in 3 American households is less than $5,000 in 2009. So a household of 3 with less than $5,000 has about $1,667 per person in savings. I consider that poor. Households are between 2 and 3 people on average, and 1 in 3 Americans reside in a household where there is less than $5,000 of savings. And, again, 1 in 4 households have zero net worth, with an additional 9 percentage with less than $5,000 to their name.

According to Edward Wolff following the economic downturn between 2007 and 2009 the percentage of U.S. households with zero or negative net worth increased from 18.6 to 24.1 percent (page 33 from Working Paper No. 589, Levy Economics Institute of Bard College, March 2010). According to another report by Wolff ("Recent Trends in Household Wealth in the United States" June 2007), the percentage of Households with net worth less than $5,000 has ranged since 1983 to 2004 from 8.9% to 9.8% above the percentage of households with zero or negative net worth. In his 2010 report he does not mention the percentage with less than $5,000. But it's reasonable to conclude that those with less than $5,000 in 2009 is at least 9% higher than 24.1%, which is to say it stands at 33.1% and probably a little higher.

The conclusion: one in three Americans lives in a home with under $5,000 to their name, and about 3 quarters of these folk have no savings at all. Not all these are single earner households, but some are. And the annual earnings status of about one in three in the workforce is 'without a job', 'with not enough job', or working for less than poverty-level income. If you enlarge your criteria for poverty to a more realistic poverty income, then the percentage of Americans who live in poverty enlarges even more than one in three.

Why cannot our economy, with the aid of or our public policy, generate more jobs? And why can't jobs in general pay more, that is, generate higher wages? Currently our economy generates over $47,000 per citizen each year. Per citizen includes everyone, those who do not work included with those who do work, or generate economic value. With that very high level of economic activity, it’s a wonder that anyone is poor. Maybe our policy is deliberately designed to create poverty? The top one percent of households in 2007 earned 23.5% of pre-tax income, and 17% of post-tax income, both amounts more than what half of America’s households, at the bottom of the income scale, received collectively. Over the past 35 years the average worker’s productivity, that is dollar value produced per hour, has gone up by 90%, yet non-supervisory workers’ average incomes have stayed even or shrunk.

Public policy questions in a democracy should focus on these contradictions, injustices and social suffering. These are the policy questions the nation should ask. We have to find a way to employ virtually everyone who wants to work, and pay each a handsome wage. Each worker generates on average almost $100,000 a year. Half of those workers receive less than $33,000 a year, and often much lower. Maybe we are just trying to create poverty and succeeding.


A 1932 Question with a 1931 Answer

An article at web-page questions the policy decision of the German government to cut its stimulative spending, asking whether it is time to stimulate the national economies with more government spending or to cut government deficits; it’s a worldwide problem. The Germans are declaring victory from the recession and pushing to restore balanced budgets in European nations. This is called “The Treasury View.” The author calls this into question in his article; “The Treasury View Failed in the 1930s. Why Should It Work Now?” by Roberto Tamborini, July 1, 2010.

This is my response to his article:
What is the basis of sustained aggregate demand? As the author states, no leader or banker or economist will state that "large worldwide displacement of aggregate demand that was caused by the financial crisis is behind us," The pre-crisis demand was founded on financial bubble-economics, not on organic demand. Demand is based on wide-spread distribution of income, making feasible consumer spending. Capitalism has to overcome its contradiction, it has to sustain demand while maintaining profits, and in the process maintain reinvestment to propel productivity. Professor Emmanuel Saez's report Striking It Richer, August, 2009 Update, shows that between 1942 and 1982 the top 10% of households took in no more than 35% of the national income, but today they receive almost 50% of the national income. Most of the increase has gone to the top-most one percent of households. The bottom level households have seen their incomes squeezed; that is the pie grew, but the slices for most did not. The aggregate demand from these households has been stunted. The demand we witnessed pre-crisis was speculation driven, not socially driven. On the other hand, from 1939 to 1945 unemployment dropped from 19% to below 2%, and for 1943, '44, '45, the rate was below 2%. This high employment was a result of high deficits, a full employment program, that effectively transferred both wealth and income into households without the means to stimulate the economy. The Treasury View, as per this article, has relevance during most periods of economic history and normally can contain and overcome recessions.

But for the last decades worldwide economic "growth of private sector real non-residential capital stock" has declined since 1960, dropping from 5.0% per annum in the 1960s, in the 70s to 4.2%, in the 80s to 3.1%, in the 90s to 3.3%, and in the U.S. 2.1% between 2000 and 2005. The failure of investment to replace capital stock is a consequence of crowding out of aggregate demand, also called lowering wages. The data of the last sentences comes from OECD database as reported in Robert Brenner's Book Economics in the Age of Global Turbulence, 2006, page 282. "(T)he Treasury View is a foggy road with many dangerous pitfalls," is most certain. I'm waiting for some world leader to proclaim all those turn-around events that this article mentions. In the U.S. median household wealth has dropped by 36% since 2007 according to Edward Wolff of the Levy Economics Institute. Some 32% of households have less than $5,000 to their name. Where will the sustained aggregate demand come from to sustain economic dynamism? This article makes a strong case that that demand element is still missing. This is not a minor question. We are in a 1932 moment with a 1931 answer. Professor Jack Rasmus' book Epic Recession also draws much the same conclusion.

This is the relevant quote from Tamborini’s article that the world is waiting to hear from it’s political and economic leaders:
“Going through Buiter's list, neo-supporters of the Treasury View should be ready to go on TV and tell people more or less the following:

The large worldwide displacement of aggregate demand that was caused by the financial crisis is behind us. We have largely succeeded in bridging the gap between aggregate demand and potential capacity of our economies. Inventories are thinner, plants are approaching full capacity, job creation is brisk, prices are soaring, credit lines are plentiful. We can now return the main control leverage of the economy to the hands of the central bank; nominal interest rates are sufficiently far from the zero-lower bound, interbank markets are calm, and the transmission mechanisms of ordinary monetary policy ensure prompt effects on credit supply and economic activity.”

It is obvious this is not the case, and as the author concludes,
“Far from being the polar star towards recovery, the Treasury View is a foggy road with many dangerous pitfalls. It is clear that the G8 governments should elaborate a credible exit strategy from extra-ordinary deficit spending in the medium-long run, but what is happening in Deutscheuroland is most probably too much and too early. If this is "imposed" by financial markets and LCFE, it only means that they have not stopped destabilizing the world economy, and we all are in serious trouble.”


The National Debt, and the Annual Federal Deficit:
The Tea Party during the Bush Years: 16% Over-Budget for Eight Years
I spent some time looking up the (over) spending behavior of the Bush administration, 2001 - 2009. I researched the figures at and drew the above conclusion, on average the Bush years saw 16% more out-go than in-come, expenses over revenue. So, imagine, $1,000 is the expense, $840 is the revenue to pay for the expense, $160 is what goes on the credit card. Multiply by eight years and trillions of dollars. Under Bush, the national debt expanded enormously.

Bush years added $6,068 billion to the national debt, according to the above web page. The increase went from $5.807.5 trillion to $11.875.9 trillion, and increase of over $6 trillion. These dollars are not adjusted for inflation. To better understand the increase, one takes the percentage of GDP from both beginning and end years, 2001 and 2009. I have not done that.

The 16% over-budget amount is not even drawing out the Social Security and payroll taxes that are not discretionary spending. When Social Security is withdrawn, the budget over-spending was 20% a year. That means, the Bush people ran up a bill, but for every $1,000 of expenses they only collected $800 to pay for it, and the rest was put on credit. Prudent? Where were the Tea Party folk when we needed them?

About the 2009 Budget Deficit:
The best article I’ve read is by John Miller at Dollars and Sense Magazine, November/December 2009, “How I Learned to Stop Worrying and Love the Deficit.” He states “Even after correcting for inflation, $1.58 trillion is a record federal budget deficit. But this eye-popping number needs to be seen in context. A trillion and a half dollar deficit will equal 11.2% of Gross Domestic Product (GDP) for 2009, according to CBO estimates. That too is a record for “peacetime” deficits. The Reagan deficits in their worst year reached 6% of GDP. During World War II, however, military spending pushed the federal deficit to qualitatively different levels, reaching 31.3% of GDP and never dropping below 14.5% during the war years 1942 to 1945.” The gist of the article draws from a report from the Economic Policy Institute, The 2009Budget Deficit” by John Irons, Kathryn Edwards, and Anna Turner, August 20, 2009.

In summation, he and they say, there are four drivers: 1) 42.3% of the deficit results from the economic downturn (less tax revenue), 2) the Bush tax cuts to the rich (less tax revenue), the unpaid wars in Iraq and Afghanistan, the unfunded addition to Medicare, Plan D, caused another 42% of the drop-off, and 3) the Bank Bailout contributed 7.7%, and 4) the Obama Stimulus Package of April, 2009, another 7.6%.

The downturn was a result of financial system mismanagement under Greenspan. The tax cuts, etc., came under Bush. The bailout and stimulus were a consequence of economic mismanagement under the Bush regime. Clinton and Democrats had their hand in deregulating the financial system, and the Democrats are not exonerated or exempt from severe criticism.


I sent the following to radio station KPFA after a good session with an economist.

I like Max (the economist interviewed), I might call in.
This is a good question: According to Edward Wolff who studies wealth in the U.S. between 2007 and 2009 the mean (average) household wealth dropped by 17%, but the median household wealth dropped by 36%. If there is about 1/6th less money in our nation, and the typical household has about 1/3 less savings or net worth, how will the economy recover quickly?
Recovery means people buy stuff and services again, generate profits for companies, the companies add workers, it's a positive self-sustaining cycle. The typical family owns about 1/3 less, and income is declining, and fewer people are working. Access to credit is difficult, people are saving to pay off their debts. The mortgage crisis is as bad as ever. How can we bounce back quickly?

I know, you wonder about my sources. I was reading in an article about the meltdown of wealth.

That article led to this essay/report by E. Wolff,
And this is a quote from page 34 (of the 59 page report):
"A somewhat rough update, based on the change in housing and stock prices, shows a marked deterioration in middle-class wealth. According to my estimates, while mean wealth (in 2007 dollars) fell by 17.3 percent between 2007 and 2009 to $443,600, median wealth plunged by an astounding 36.1 percent to $65,400 (about the same level as in 1992!.") (The Stanford University's Center for the Advanced Study of Poverty and Inequality published in fall 2009 a summary article by Wolff, for another look at his findings.)
And a few paragraphs below it says, interestingly:
"There was also a large expansion in the share of households with zero or negative net worth, from 18.6 to 24.1 percent." (that is 2007 to 2009) So, about one in four households own nada, zip, nothing, and that's why one in four children get their food from food stamps. According to the Wealth Inequality Reader, a book by Dollars and Sense magazine, the portion of households with less than $5,000 net worth in 2004 was 27.1%, so let's say it is now 5.5% higher, at least, that's 32.6% of all households, call it one in three -- less than $5,000. And at the bottom of Wolff's report there is a page about income distribution: the top one percent over 21%, the bottom 60% under 21%.

That's why I do not understand Max when he says a hefty income tax would not be a good thing. Between 1940 to 1983 the highest marginal income tax ranged between 70% to 90%. It was Reagan who dropped it to about 35%. (First to 50% then to 28%)

Thanks Brian, I can't take up all your day. Good weather this week-end. Enjoy.
If you want to read more of my writing,

Reliable Information Sources --------
Here are some sources I find very interesting.

The Nation magazine carried six articles about inequality in America, which is
my continuing thesis --- according to former Chairman of the Federal Reserve,
Marriner Eccles, you have to spread the surplus or you will stunt the entire system.

I am continually looking at Too Much ( online for its weekly take on inequality.

I read Dean Baker every week at his Center for Economic Policy Research
---- (

You can also read the twin,, or Center on Budget and Policy Priorities.

Robert Pollin writes at the Political and Economic Research Institute

Levy Economics Institute offers the best in scholarly Keynesian proposals.

Economic Policy Institute is the grandfather of liberal economics.

I found Hazel Henderson's Amazon web profile a very informative place to browse.

I read Warren Brussee twice a month to stimulate my mind about the on-going slump.

And all are professional sources of information with scholars who have devoted their lives to
capturing the essence of good public economic policy.

Now I’m done for the day, July 7, 2010. I hope this expands your understanding of the national and world economies, and the challenges that lie ahead for all of us. Ben Leet

Tuesday, April 13, 2010

Short essay about federal jobs

Public Service Employment --- the Time is Now

by Ben Leet, 4/12/2010
This essay was printed at, in April 24, 2010

One percent of U.S. households received 23.5% of the nation's income in 2007. I think this is blatantly unfair. It amounts to theft from the other workers in the U.S. The contribution of the one percent to the nation's prosperity was significant, but they did not do a quarter of all the work. I see it as a market distortion, just as a monopoly is a market distortion. Today one of every four children in the nation lives in poverty, about one in six adults is out of work or underemployed, and the poverty rate is rising. One in three workers in 2009 experienced unemployment. The nation needs capital resources to employ those whom private employers will not hire. Look at the following facts and numbers to decide whether we should create public jobs for all willing workers.

Income distribution in the U.S. over the past decades has tilted to the wealthy. The top ten percent of households now takes in more than they did thirty years ago in 1980. In 2007 the top ten percent of households received 49.7% of the national income, according to Professor Emmanuel Saez, U.C. Berkeley (see Striking It Richer, Update, August, 2009). In contrast, for forty years, between 1942 to 1982, the top ten percent's share never exceeded 35%. Contrary to logic the income tax rate on highest incomes was cut in half. The top marginal income tax rates between 1942 - 1982 were 90% and 70% for two twenty year periods, but from 1982 to 2010 their rates have averaged around 35%. Of the income shift that went to the top ten percent of households --- a shift from 33% to 50%, 1976 to 2007, a 17% shift --- 14% went to the top one percent. The top one percent dramatically increased their share of the national income from below 9% to 23.5%, as previously mentioned. Our economy performed much better from '42 to '82 when incomes for all households --- low, middle, and high --- doubled in real terms. President Kennedy observed "A rising tide lifts all boats."

This stands in contrasts with "When there is more for me, there is less for you," which describes the performance of 1980 to 2010. All boats have not risen, the tide has selected only a fraction to rise, the others have kept flat incomes. There has been "more for me" and that means in general less for the majority, and the aggregate demand in the economy has suffered. Aggregate consumer demand accounts for 70% of the economy and it drives the economy. So when it slacks off, as it has recently, we have a recession and high unemployment. We need a federal jobs program that would transfer wealth to middle and low income families.

In 2009, for the first time in 51 years (in 1949), and the second time in 78 years (in 1932), personal income dropped according to the Department of Commerce. It dropped by 1.7%. You would not think such a minor drop would create the destruction of a sixth of the nation's wealth. But it did. The financial institutions were so poorly managed that they self destructed. In the wake of their destruction, the net worth of all U.S. households dropped by 17.3% according to Edward Wolff (in the same March 2010 Levy Institute report, page 34). The median (middle family's) household's net worth sank by 36.1% down to its 1992 level. Those families lost 17 years of savings. You could say one in six dollars simply went up in smoke, and go on to say that a third of all housing value for middle income families went right out the window. Another report cites the loss of wealth to baby-boomer generation couples as approaching 45% and 50%.

Right now we pay about 10 million workers to sit unemployed receiving benefits. The payments amount to a little over $300 a week. Doing the math, you can easily calculate that $160 billion dollars is spent yearly, and no work is produced as a result. That sounds really crazy. But the ideologues that are opposed to government creation of public jobs would prefer just to keep those workers at home. And then complain about how expensive it is. The following essay on this site shows six plans to put them to work that would prove useful to the nation.

The nation in 1938 was in its ninth year of Depression and unemployment was at 19% when FDR accelerated the federal jobs programs, the PWA and the WPA. Between 1938 to 1946 idle wealth was poured into federal bonds and transferred to working families. During the war years we had under 2% unemployment for three years, 1943, 1944, 1945, due primarily to government sponsored job creation. If you check you can find details that show the top one percent's share of wealth fell from 44% in 1929 to 27% in 1949. We won the war, World War II, and now we should win another. We can create public service employment, put low income workers back to work, provide services our nation needs, and restore a lost balance to our income and wealth divided nation. There are several proposals; Rutgers University Professor Phillip Harvey calls for spending $666 billion dollars annually to create 18 million jobs paying $14 an hour with benefits. Such a powerful plan would create full employment, and spark private sector re-employment. A much higher tax affecting just one percent of the nation's households, would easily finance the expense of this plan. See the web page Drive for Decent Work,, and National Jobs for All Coalition for other detailed proposals to constructively carry forth this proposal.


Rarely mentioned facts:

The 400 wealthiest Americans own as much as the 150,000,000 least wealthy Americans --- half the U.S. population; both groups own approximately 2.5% of the national household net worth, according to the Federal Reserve report Survey of Consumer Finances. One in four households in the U.S. have no appreciable assets. Some 32.1% have less than $5,000. (Wealth Inequality Reader, p.10, and a new report by Edward Wolff, March 2010, Levy Economics Institute. page34)

The U.S. ranks 78th out of 125 nations in inequality. Seventy-seven nations distribute their national income in a more equal manner. Among industrial, advanced nations we are last in equality, first in inequality. (Source: United Nations Human Development Index, Gini Measurement, also see 'gini', where the U.S. ranks #72)

One in four U.S. children live in poverty in 2010. This is double the rate compared to other advanced nations. One in four children were eating food purchased with food stamps in December, 2009. One in two U.S. children experience poverty in some part of their childhood.

Recessions are not natural disasters, they are man-made. Similarly they are man-prevented. See (March 31, 2010) for essays by professor Jack Rasmus for a working theory on the “fundamental forces,” the lesser “contributing causes,” and the still lesser “enabling causes” of the global crisis.

Globally, the wealth of 1,011 billionaires exceeds by two times the wealth of half of humanity. (see, March 11, 2010)

We need public jobs because private enterprises are unable to hire. About 29.6% of the U.S. workforce are unemployed or underemployed (18.1%), or working “full time and full year” for less than poverty wages (11.5%), --- total 29.6% or 46 million out of 155 million workers. (see March, 2010)

These numbers may be just too, too, TOO MUCH to handle, so just take the last one. About 30% of our neighbors are with 'no job' or 'not enough job' or 'a job that pays below poverty level.' Nice work if you can get it. As stated before, 32.1% have less than $5,000 to their names or live in such families, almost 100,000,000 Americans. I think it is obvious what needs to be done. We need to do everything to raise wages and create jobs through public employment and incentives to hire. It is not time to cut back on government spending, unless you want to add years to the discomfort of millions.

Hone your arguments for creating public service employment. See,,,,,,,,, and the American Prospect Magazine.

Public Service Employment

Dear President Obama, and others, April 2, 2010

Needed: A Federal Jobs Program

To President Obama and others, April, 2010

Since December of 2007 we have lost 8.4 million jobs. I am sending a mix of plans to create federal jobs.

The Jobs Future: But first let me quote from a Rutgers University report, “Erasing this [jobs] deficit will require substantial and sustained employment growth. Even if the nation could add 2.15 million private-sector jobs per year starting in January 2010, it would need to maintain this pace for more than 7 straight years (7.63 years), or until August 2017, to eliminate the jobs deficit!” The Executive Summary also notes, “To put this new millennium into perspective, during the final two decades of the twentieth century [1980 - 2000], the nation gained a total of 35.5 million private-sector jobs. During the current decade [2000 - 2010], America appears destined to lose more than 1.7 million private-sector jobs.” (Sources at end of essay) The proposed rate of growth, 2.15 million new private-sector jobs per year, would be 80 percent faster than the growth rate from 2000 to 2007, and 10 percent slower than the growth rate 1992 to 2000.

So I offer these different plans to chose from:

1. The plan by the Levy Institute of Economics, “Why President Obama Should Care about ‘Care’” would employ 2।4 million mostly women and low-income, less educated workers at a cost of $100 billion, or about $42,000 per job. The focus of their employment would be childcare, pre-school education and in-home health care.

2. Providing work to mostly men is the plan by Robert Pollin, published in The Nation magazine, February 18, 2010, that would push $500 billion into the economy by guaranteeing to banks the loans they make to local and state governments to retrofit and insulate public buildings, and subsequently expand the loan guarantee to projects that would insulate private residences.

3. Rutgers University Professor Phillip Harvey provides a program that spends a net $666 billion to create 18 million jobs paying $14 an hour with benefits। In “Learning from the New Deal” the costs are broken down, and I’ve included the last page. Professor Harvey has been writing about full employment for over 20 years. (available for download at His program is my first choice for your administration.

४. The brief plan by Princeton University Professor Martin Shubik outlines a plan for a permanent “Employment Reserve Authority” headquartered in the Federal Reserve. This would establish a permanent WPA-like job repository of public works projects in all 50 states, so the nation would not have to wait for Congress and the states to slowly respond to a crisis in unemployment.

5. The plan by Jeff Madrick, outlined in his book The Case for Big Government, would bring our economy more in line with other advanced economies by increasing federal government expenditures from 21% to 24% of GDP। It would cost $432 billion annually.

6. Joe Persky of the University of Illinois at Chicago offers a 5 year program to ramp up to a $975 billion expense to create about 18 million jobs paying over $18 an hour, funded mostly by a financial transaction tax. See “A Permanent Jobs Program for the U.S.” at

I was planing to include pages from these reports, but I think brevity is better. All these are available on the www net.

7. Professor Emmanuel Saez of the University of California, Berkeley, has shown that the top one percent of households received 23.5% of the national income in 2007. The bottom 60 percent of households took in less, only 20.3%. (This datum comes from State of Working America, 2006/2007, page 779 from a report by the Tax Policy Center, Brookings/Urban Institute) Moreover the one percent group received 65% of the economic gains the economy generated 2000 to 2007, as well as receiving about 35% of the tax cuts that in turn added over $800 billion to the national debt.. The top ten percent of households took in almost 50% of the national income, which amount is about 17% higher than its average income during the forty year period 1942 to 1982 when the economy flourished as never before or since. His report is on the www net.

The sum of 1) the U3 unemployment, 2) the U6 under-employment and 3) full-time workers earning below poverty wages --- is 1 in 3 workers (35.9% in March, 2010) who are not meeting their needs. They are poor, or becoming poor. We need a bottom-up stimulus. One in three workers in 2009 experienced unemployment. The next election will be fought over a new stimulus.

According to my reading of The State of Working America 2006/2007, page 79, the bottom 60% of households received 20.3% of the national income, while the top 1% took in 23.5% (this last datum from the Saez report). That is to say, about 70 families with the average income of the lower 60% would equal one family income of the top one percent. In regards to wealth, the bottom half of U.S. households owns 2.5% of the national household net worth, while the top 1% owns over 34%. That is about $23,000 vs. $14 million. That indicates that 609 average families in the bottom 50 percentiles are equal in savings to one family at the top.(see Federal Reserve report Survey of Consumer Finances).

I currently read the twice monthly blog by Warren Brussee. In 2004 he wrote the book The Second Great Depression, Beginning in 2007, Ending in 2020. He was ahead of almost everyone else, and he still is. I recommend you read his reports at WordPress blog, and you will be more wary of the economy’s putative good news.

Vice President Biden’s economic advisor is Jared Bernstein. In 2007 he wrote, “Finally, there is a role for direct public-sector employment to create employment opportunities for the least advantage in society.” (See, Briefing Paper #200) He knows a lot about this, he also co-authored a book with Dean Baker. The Economic Policy Institute, where he once published, offers a plan amounting to a $400 billion one-time stimulus.

The nation is in a teachable moment. The November election will revolve around a Democratic stimulus and a Republican rejection. You will have to carry the argument.

I hope everyone in the nation writes you a similar letter, and then watches closely.

Best wishes and Take care,

Ben Leet

--- in San Leandro, Calif.
see my blog at
see the blog for additional ideas.

Sources: see my blog, the three previous essays for full resource notation.

Thursday, March 18, 2010

How to Double Incomes for Millions of Workers

Raising Living Standards in America
by Ben Leet, March 2010

In my last essay I claimed to have found a way to double the incomes of 94 million out of 155 million workers. Like pouring water from a very full glass into a partially full glass, my plan is essentially an adjustment of water levels, not a creation or destruction of new income or wealth. I claimed that 1) a reinstatement of the 90% marginal income tax rate on very high yearly incomes over $400,000 combined with 2) a federal jobs program creating 18 million new jobs would be enough to double the incomes of 60% of the workforce. I claimed that just these two measures would be sufficient. (See my essay “We Can Double Incomes . . .” at this blog, or This was simplistic. This essay will try to fill out a more comprehensive strategy for raising the incomes of the lower income earning majority.

Presently 60% of households receive just 20.3% of the national income, and that means that 40% at the top receive about 80%. The top 1% of households receives 23.5% of pre-tax national income, more than the bottom 60%. These are the two metaphorical water glasses I’m dealing with. The average yearly income for the bottom 60% of households was around $36,000 in 2005, and for the top 1% the average income was over $1,000,000. As for wealth, not yearly income, the imbalance is even greater: the bottom 50% of U.S. households own 2.5% of the national household net worth, the top 10% holds approximately 70% of wealth, with the top one percent holding 33.4%. The average wealth of the bottom 50% (60 million households) is below $23,000 per household, the average for the top ten percent (12 million households) is over $3,000,000, and for the top 1% the average household wealth is over $14,500,000.
(Most of this data is referenced at the end of “We Can Double . . .” essay)

Apparently something breaks down in the distribution of income at the very top level. Our unconscious assumption is that markets determine automatically and fairly the prices for labor, goods and services. A $800 dollar hammer will be bought only by the Pentagon. A $400 dollar an hour plumber will not find work. And the gradual sloping curve of rising incomes holds true for most jobs and professions, but at the highest level the curve breaks down, reason and logic no longer apply. I submit that the income distribution system is broken at the highest end, and it will take an exogenous force such as taxation to bring the highest incomes into line with fairness. Naturally fairness is in the eye of the beholder, so this level will be endlessly debatable. See for a graphic of wealth distribution.

How to Lift Wages
The obvious economic challenge for the nation is to create a sea change in wages; but this is like defying gravity. To counter the downward pressure on wages we have already enacted minimum wage laws, and the Earned Income Tax Credit. One boosts wages, the other boosts income. Other methods include: a tight labor market such as at the end of the 1990s, a federal jobs program such as in the 1930s and ‘40s, federal subsidies to employers to hire new employees, an Employee Free Choice Act facilitating employee unions, a legislative fix of the National Labor Relations Board enabling unions, a restructuring of corporate charters that empower workers on corporate boards as prevails in Europe, more cooperatives and joint ownership enterprises. A national manufacturing strategy, and trade agreements that insist on higher income growth among foreign export workers would recapture lost manufacturing employment. Increasing wages is an international problem. Increasing research and development credits to business would propel new technologies. There is a long list of options that would create jobs and increase wages.

The changes in corporate charters enacted in Germany allow German workers to create a GDP/capita of $44,600 a year vs. the U.S.’s $47,500 a year, while the German worker works 360 hours (or 9 weeks or 2 months) less every year. (See Germany’s Economic Engine, Eamonn Fingleton, American Prospect magazine, March, 2010) Most economists know that U.S. household income has increased by 15% over the past 30 years only because women in households are working 3 months more every year. Where the wife has not entered the workforce household income has not grown at all over 30 years.

For 40 very positive years, 1942 to 1983, the top marginal income tax rate held at 90% and 70% for two twenty year periods. The top ten percent of households never earned more than 35% of the national income. Today they earn almost 50%. This shift of 17% (1976 to 2007) could be reversed through taxation (the metaphorical glasses of water) combined with a jobs program and other measures to reduce necessary expenses, towards the goal of raising living standards for the majority of low-earning workers. That’s the basic program. If wage gains from 1976 to the present had matched the gains in worker productivity, then incomes of 94 million non-supervisory workers would be double what they are today. (See Les Leopold’s argument in The Looting of America, page 16, or my previous essay “We Must Transfer Wealth, Again.”)

Measures of Social Health
In short, all measures of social health --- the rate of poverty, of childhood poverty, of homelessness, of households living in sub-standard housing, of the population not owning assets, of inequality, of population not receiving regular health care, of functional illiteracy, of high school dropouts, of not attending nor graduating from college, of drug abuse, of incarceration, of teen-pregnancy, of non-marital birth, of divorce, --- would improve across the board with higher incomes and lower expenses for workers at the bottom of the income slope. The national happiness quotient would also jump. This proposal is based on an economics of cooperation that curtails competition. Competition is fine for sports, but for the exigencies of life and death, intelligent cooperation is superior. To think otherwise is to be a pessimist and perhaps a Scrooge.

The real question is not is it doable, because it has been done before. Nor is the question, “Is it a good idea?” The question is how do we effect a sea change in wages and income? How do we double the incomes of 94 million workers? I’ve listed briefly above the various means to address the problem.

Today’s Great Recession is ongoing, there are signs that it will double-dip into a full-blown Depression. Many economists in March, 2010, are viewing darkening clouds on the horizon. Many business men and women, as well as economists and politicians, investors and financial advisors are waiting for the “self-sustaining expansion,” the expansion that “gains traction” that causes employers to hire and consumers to spend. It’s like waiting for Godot. Towards the end of the Great Depression and during the World War II mobilization we did transfer wealth to workers’ paychecks, and we should do so again.

We do need a federal jobs program creating 18 million jobs (see Rutgers University professor Phillip Harvey's essay “Learning from the New Deal” at Last year about 140 million workers worked each day creating a product worth $14 trillion a year; each worker produces on average $100,000 a year. But half the workers earn less than $33,500, no where near the average $100,000 each worker produces. It is time to bring up the median worker income from below $33,500 a year. From the book State of Working America, 2006/2007, page 121, we see that average hourly wages for the the following percentiles: 10th = $7.20, 20th = $8.84, 30th = $10.21, 40th = $12.12, 50th percentile worker $14.29 an hour. The average of those percentiles is $10.53 an hour, which is less than $22,000 a year for half of America’s non-supervisory workers who make up 80% of the workforce.

The U.S. ranks 78th among 140 reporting nations on the United Nations’ index of income inequality. Seventy-seven nations distribute their incomes more equally. The U.S. also ranks #37 in probability of living to age 60. You, your family, your children and your neighbors are entitled as citizens to a fairer system. We can literally double the incomes of millions।

These are sources I use and recommend:

Drive for Decent Work, http://fullemployment।
National Jobs for All Coalition at
Warren Brussee’s blog,
Brussee is the author of The Second
Great Depression
Robert Kuttner’s articles in The American Prospect magazine
Robert Pollin’s essays in The Nation or at
The Levy Economics Institute,
The Economic Policy Institute, http://www।

See previous essay or essays for complete source documentation