Decline Explained, and Blog Contents

A reader stumbling on to this blog might wonder what to read. The essay below is easy and basic, "America's Economic Decline Simply Explained". The next about Stark Inequality is a little harder, but full of basic info. The Solutions essay breaks a lot of assumptions about how to solve economic problems, and the Full Employment is good, also bursting with unconventional ideas; and last of all the Radical Populist Budget is one of my favorites. The most popular essay is "The 1950s and Today." I have few readers, but few is better than none. This is my public record book where I store thoughts. I also enjoy constructing the photos and making detailed and very involved searches  -- Growth and the Federal Budget is such a long-winded and overly detailed screed. Often I'll come back and realize that I've forgotten the content of an essay. That's because they are too dense, but, then, also I repeat a lot. The graph from Olivier Giovannoni on the decline of income share for the lower-earning 90%, from 1980 to the present, is the most important thing a reader should learn. Most of the above articles I recommended contain this graph. The Radical Populist essay has it, and in several more it appears. Even this present essay could use, so here it is, again. 

What does the graph show? The deep blue area represents the "labor share" to the lower-earning 90%. Note that in 1980 is begins to decline, from 55% to 38%. Here's what Giovannoni states at the Levy Institute: "This amounts to a transfer of $1.8 trillion from labor to capital in 2012 alone and brings the US labor share to its 1920s level." In 2018 the share decline, of 17%, represents $2.75 trillion. Without this drop the incomes of the lower-paid workers would be about $19,000 higher per worker among each one of the 144 million workers whose income is below $90,000 a year. So this is a major shift in income distribution, and if we could ever regain the "labor share" of 1945 to 1980 we would be living in a much improved society. Not perfect, by any means, but improved. That's why the graph is so important.  

The following is a short introductory essay on the economy. It should be published somewhere soon, it's not long or complicated. 

  America’s Economic Decline Simply Explained       

Many people  wonder why the U.S. economy is not working for them. I’d like to explain in simple terms. I’ve written a blog for 10 years, Economics Without Greed. I may be an amateur, yet my reasoning is not that far off. Here’s why the economy is not working: 

1. Most people work for large corporations or non-profits. The U.S. Census shows that 82% of private sector workers are employed in firms with more than 20 workers, 65% work in firms with over 100 workers, and 51% work in firms with more than 500 workers. (I have to warn the readers to not focus on the numbers, but  focus on the main concepts.) The largest 1,909 corporations, all employing more than 5,000 workers in the U.S., generated 44% of all revenues, and employed 34% of all workers. The health (or non-health) of these large companies spills over to the smaller ones. 
2. Large corporations distribute around 91% of their profits to shareholder owners, not to workers in higher wages, nor to plant expansions, nor to research. Wages are kept as low as possible. Since 2001, when corporate profits were 4.6% of GDP, they have increased to 8.9% of GDPin 2018. Some years these large corporations distribute more than 100% of their net profits to shareholders, thus looting their own companies. Professor William Lazonick’s research has shown “How American Corporations Transformed from Producers to Predators.” (Also “Profits Without Prosperity” published and winner of best article of the year at the Harvard Business Review.) 
3. Most of the profits (85%) generated by corporations end up in finance seeking the highest rates of return; this surplus is not recycled into productive economic activity that would employ workers and increases prosperity. It is tied into hedged bets which act to diversify risk of catastrophic decline. Assets are added to existing value of financial assets. Seventy-five percent of financial assets are owned by 5 % of households.
4.  Since there is a limited amount of corporate stock, these stocks necessarily increase in value. Wealth then accumulates exponentially for the minority owner class. In the past 9 years, since January of 2009, financial assets have increased their value by 87% (inflation adjusted), from $48 trillion to $98 trillion. In the same period wages for non-supervisory workers grew by 5%. And looking further back, since 1964 the S&P 500 Index has increased by 250%, and average weekly wages for nonsupervisory workers are exactly the same as in 1964, a zero percent increase. The aggregate value of stock more than triples, while weekly (and yearly) wages for 80% of the work force stays frozen. The economy’s per capita “disposable personal income” has tripled since 1964 (inflation adjusted) shows the Bureau of Economic Analysis. But average weekly wages for 80% of workers have not increased at all.                                                                          
5. Labor organizing rights are suppressed by both corporations and by law; most of the change occurred by judicial amendment of the National Labor Relations Act, not by enacting a new law. Now strikes are rare because the original purpose of the NLRA has been nullified, and strikes normally result in lay offs. 
6. If wages had matched the growth of productivity, the average wage income would not be today’s $46,640 but $69,648 (and that’s 49% higher). The median worker’s wage would not be $30,553 but $47,703 (and that’s 56% higher). Half of U.S. workers earn less than $30,553 a year. Adding their collective income, they earn a little more than $1 trillion in an economy that generates $16.2 trillion. Their collective average income, for 81 million workers, is less than minimum wage paid to a full-time year-round worker. There’s an interactive web page at the Economic Policy Institute that asks and answers the question “What Should You Be Earning?” It shows how large the productivity to wage gap is. Most workers could be earning about 50% more income. 

Earnings --    Would Be   ----                                  wage income    

                                                                                   percentile         

 $10,000    ----    $17,845        --- a gain of   78%            22              

$20,000    ----    $32,256                        of   61%            36              

$30,000    ----    $46,855                        of   56%            49              

$40,000    ----    $60,744                        of   52%            61              

$50,000    ----    $73,299                        of   47%            70              

$60,000    ----    $82,747                        of   38%            77              

$70,000    ----    $92,308                        of   32%            82              

$80,000    ----   $100,453                       of   26%            86              

$90,000    ----   $107,919                       of   20%            89              

$100,000   ---   $115,832                       of   16%            91               

$110,000   ---   $123,807                       of   13%            93               

$120,000   ---   $131,782                       of   10%            94               

According to the EPI table and the Social Security table, at least 61% of workers (all in the lower earning 61%) would receive more than a 50% increase in income. Of the 163 million American workers submitting W-2 forms to the Social Security Administration in 2016, 91% reported income below $100,000. 

These are the reasons the economy is failing so many. 

The U.S. Census report, “The Supplemental Poverty Measure”, shows 43% of Americans live in households with incomes below 200% of poverty (see Figure 6). 


This interesting graphic shows one important facet of the economy: many households, about 20%, are pushed below 400% poverty. They are pushed into the lower income ranges, and the range between 1.0 and 1.99 of poverty enlarges, nearly doubles. That is, taxes push incomes down, government programs do not raise incomes upwards out of poverty, for the most part.  
Some researchers say that 200% of poverty income is poverty, and some say that 140% is actual poverty (Kathleen Short, page 23). Below 140% includes 28% of Americans. Short, a 30 year veteran of the Census department, stated, "This suggests that families with resources below approximately 140 percent of the SPM threshold, rather than 200 percent, may be characterized as not able to meet their basic needs and achieve a safe and decent standard of living, or as families with ‘low income’."
 That sounds like a definition of poverty, "not able to . . . achieve a safe and decent standard of living." Either way, a sizable portion of Americans, perhaps 93%, live with incomes below the average “disposable personal income” which the Bureau of Economic Analysis places at over $44,000 per person in 2017. A household of four with the per capita average “disposable personal income” (meaning post-taxes) would have an income of $178,000 (and that is post-tax income, so pre-tax would be about $210,000). An income of $48,600 for a  four-person family, which is twice the poverty level (200%FPL), is slightly over a quarter of the average of $178,000.  

As the SPM shows, 43% of Americans live below 200% FPL, and their pre-tax income is less than a quarter of the AVERAGE. This is inequality of a very high, extreme, stark nature. In my opinion the resources flowing to the highest income groups putrefy and go to waste. Hoarding is waste.

Shared prosperity is a long, difficult American dream away for many Americans.