Nutshell

In a Nutshell

I want to capsulize or reduce to the size of a nutshell the main ideas of this blog. This post does that. And, new and staggering, I am adding a subsidiary blog to this main blog where I will post  my comments to articles I read elsewhere.  My first comment here (click the link) argues that the true unemployment rate for October 2013 is 12.4% not 7.3% -- (I just added to it, so read the last paragraph also). 
--- now, as concise as I can make it --- this nutshell. 

Wealth has increased by 31% in the past five years, a gain of $17.6 trillion ($17,600,000,000,000) (see the Federal Reserve report, page i). That's a lot of money. The top 5% of households own 75% of all financial wealth (see reference, page 11), therefore on average each of the six million households in the top 5% gained $2,200,000. The other households in the nation lost income over the past five years, the median household level income dropped from $54,000 to $50,000, an 8% drop. The country now can boast of $74 trillion in net household worth, that's $616,000 per household if it were evenly distributed among the 120 million households. The lower-saving half own just 1.1% of all wealth (see reference here). 

Half of U.S. workers earn only 6% of all personal income. Some 47% of workers earned less than $25,000 in 2012. That is, 77  million workers earned $745 billion, according to the Social Security Administration's wage income report for 2012. Total personal income is $12.95 trillion (call it $13 trillion, not billion), according to the Bureau of Economic Analysis. So, half of workers received 6% of all income. The median wage income according to the SSA was $27,519. "Per capita personal income for the nation  was $41,560," states the BEA report. (Read a news story about it here.) Dividing the total personal income by all workers yields $84,640 per worker. About 44% of all workers 67 million out of 153 million) earn below the official poverty threshold, $23,218. The average income for the lower-earning half is below $10,000 a year while the average for all is over $84,000. For additional info on income distribution see these two sites here and here. The first says that average household income in 2011 was $104,163, and the second says that 1% of households earns 21.7% of all income while 60% earn 21.4%. 

Total personal income spread evenly among all 317 million American citizens equals $41,560, but the average income for half the workers is $9,802 (divide $745 billion by 76 million workers). 

The Lower-earning 50% or 76,816,000 Workers
Who are the workers in the lower-earning half? Almost 19 million (12% of workers) work part-time voluntarily, and nearly 8 million (5%) work part-time but want full-time work -- see the BLS figures here. Some 18 million (11.7%) work full-time and year round for less than poverty level income (see NJFAC data here). That leaves 21% still earning less than $27,519. These would be the unemployed  (7.3%) and temporary partial-year full-time workers (7%) or full-time year-round workers earning above $23,050 and less than $27,519, (6.7%) . The U.S. Census does not keep data on temporary workers; I have written them and received that answer. Again, the lower 50% have an average wage income of $9,802. The average annual worker's income (dividing total personal income by all workers) is $84,640. The 2012 poverty threshold is $23,050 for a family of four -- see HHS numbers here. 

I've done a little math and discovered that the combined incomes of 110 households in the lower-earning 25% of households equals one income in the highest 1%. 
In the lower-earning half it takes 65 households to equal one income in the top one percent. 
In the lower-earning three quarters it takes 43 households. 
The top one percent has received 95% of all the economic gains of the past three years. Their income share has never been higher except in the year 1928. 
The Ryan budget, supported by all the Republicans in the House, proposes to cut the top income tax bracket from 39.6% to 25%. They are rabidly opposed to budget deficits but this is their first priority, cutting taxes for the richest. For the last four years of the  Clinton presidency, the federal revenues were equal to 20.0% of GDP (see the source, page 27), but today federal revenues take in 15%, an $800 billion difference; but the right wing never tires of claiming that balancing the budget is a spending problem. Logic is not their strong suit. Their budget would achieve 66% of its cuts from programs assisting the poorest families. Concern for the poor is not their strong suit. Unfortunately Obama plays into their hands by negotiating cuts instead of demanding a direct federal jobs program needed to re-employ the over 12 million who would be working today if the employment to population ratio were as high as it was in 2007. See the Progressive Caucus budget that would pour $700 billion per year, creating 17 million jobs, perhaps more. We have about 25 million who want full-time work, see the National Jobs for All Coalition analysis. That's an unemployment and under-employment rate of 15%. 

A tighter labor market, or full employment, raises wages for all the 80% of workers who are employees. It increases purchasing which drives almost 70% of the economy. The nation's infrastructure needs refurbishing. The direct government jobs program is almost self-financing. After employment reaches fullness the government can step out of the job creation business as private sector hiring replaces government hiring. That's how the system works -- but it requires a balanced distribution of income. From 1933 to 1937 unemployment dropped from 25% to 9.6% (see reference). From 1940 to 1945 the number of daily workers surged by 40% due to the war mobilization (direct government job creation), and still the  unemployment rate dropped below 2% for three years. The employment to population ratio in 1944 was very close to today's employment to population ratio, just 0.7% below. Unions thereafter kept wages high and all earners and families enjoyed a 30 year period of increasing income until by 1976 all income levels had doubled in real, inflation adjusted dollar income -- see reference. 

           SOLUTIONS
As for solutions, The Way Forward is the best summation of and prescription for our economy's problems. I continue to read it and be amazed. The report's authors prescribe three pillars of change. I have grasped more understanding about the economy than from  any other report. Recently Dan Alpert, co-author of The Way Forward has published The Age of Oversupply. I'm on chapter four today, very good so far. Read the wsj review here. Any very  determined follower of this economic mess will want to read the entire book. 
                   Robert Kuttner wrote an article  that simplifies the needed policy solutions in nine points, The Task Rabbit Economy. This also is a key article for understanding the economy. He leaves out a much needed housing debt-overhang resolution, so we should make it a ten point program. 
The Congressional Progressive Caucus' budgets are very interesting reading, as well as the Economic Policy Institute's supporting reports on their budgets for 2013 and 2014. 
I'm reading Sam Pizzigati's book The Rich Don't Always Win; a history of the U.S. economy since 1890 emphasizing the progressive gains that balanced the distribution of personal income over this dynamic period, an issue key to economic health. (Here's Pizzigati interviewed on TV.) He edits the weekly newsletter TooMuchonline.org. 
" Policy must begin by fixing the unemployment situation because growth is a byproduct of strong employment—not the other way around," states this report on Full Employment at the Levy Economics Institute.  
The nutshell of the nutshell. 

A Prescription

   A Prescription for a Sick Economy --- In Brief

(On October 1, 2013, I wrote and sent a letter about Obamacare to the local newspaper who never published it, and now I have put it at the bottom of this essay. Look for the photo of medical care to a youngster. The more important message is this "Prescription" essay which I leave at the top. Also, you might consider reading  Robert Kuttner recent article  at the American Prospect that summarizes my positions and recommendations; I suggest reading the nine point proposal section at the end that begins with "Suppose we wanted to get serious about creating an American economy of greater employment security and higher wages, in which nobody who wanted to work full time would be poor. For starters, we’d need a national strategy of using every available policy tool."  I hope I haven't deflected the reader's interest in reading the main article of this blog, which follows below.)

     INCOME
Income and wealth distribution is today's central economic problem. We are on a path of self-annihilation it seems, like a gladiatorial battle, until only one family is left standing with all the nation's capital resources. For example: 
The lower-earning 80% of households -- 96 million households or  256 million citizens -- earn just 40% of all pre-tax income (see this CBO report, page x.) and 20% at the top earn 60%, and 10% earn 50% and 1% earn 22%. You can say accurately that the 20% at the top earn 6 times the average of the lower-earning 80%. Today the combined incomes of the top-earning 1% of households is greater than the combined earnings of the lower-earning 60% of households (see here). The top 1% receive 21.9% of all income, the lower-earning 60% receive 21.4%, or restated, 3 million people have more income than 192 million. It takes 63 family incomes from the lower-earning 60% to equal one family's income in the top 1%.  
In the past 20 years the top 1% of households have received 66% of the nation's household income growth (see this TooMuchonline.org  "In Focus" article and this article) and in the past 3 years have received incredibly 95% of all growth. 

     WEALTH 
And leaving aside annual income, the wealth figures from the Federal Reserve report shows, on page 17, the average wealth per household is $498,000  -- since revised upwards in September 2013   to $616,000 per household. Half of the nation's households own just 1.1% of all wealth, according to a Congressional Research Service report referenced in this article. And a report on "liquid assets" states that  44% of U.S. households would be unable to pay an emergency bill of $2,000 (see the FDIC study here, another study here and still another here). In regards to both income and wealth, the nation demonstrates a colossal nearly unbelievable, and certainly pernicious, disparity among citizens. Government charity provides to one in seven Americans their food and to one in five their medical treatment. (The next essay at this blog has a section on government charity programs.) 

How well-off are we as a nation? 
Total taxpayer income reported to the Congressional Joint Committee on Taxation, 2012, was $11.468 trillion (see page 28), which averages to $35,837 per human being, and that is $96,760 per household on average. This is too low, according to the Bureau of Economic Analysis. They state the average disposable or after-tax personal income for all Americans is about $39,215 as of July, 2013, according to the Bureau of Economic Analysis, see here. And for average family saving? So again, we prove to be very wealthy, over $70 trillion in net worth (see here, page i), about $583,000 per family on average, and our income is very high, over $39,000 after-tax income per human being. Isn't it obvious we don't share and that great social inequity and suffering is the result? Starvation or death through inability to access medical attention are human sufferings of the most ancient type. We could shift the economic system just slightly, and people of their own could afford to buy food, find health care and live with economic security.   

Are you $146,000 richer since five years ago? Most average households are. 
During the past five and a half years the nation has had a recession, the worst in 80 years, and a recovery, though few have felt it. Now, in October 2013, all households (on average!) have 30% more savings than before 2008, on average $146,666 more. That's a recovery, yet most households have lost more than 8% of income. How could both those statements be true? Ask yourself, how could most households lose income yet the average savings for households goes up by over 30%? Was your household among the 95% who missed out on the wealth gain? Since 2008, the nation has increased its total household net worth to over $74 trillion (see here page i of a Federal Reserve report), a 31% increase in the past 5 and a half years, that is a $17.6 trillion increase in five years --- an increase of over $146,000 per household, yet the income of the  median income household has dropped by 8.1%, from $54,489 to $50,054 (see the Pew Research report here or see this graph and best of all, check out these three graphs).  ----  As the article at  TooMuch article states, 
"And the rest of America? The incomes of the nation’s bottom 99 percent rose all of 1 percent last year. Since 2009, bottom 99 percent incomes have barely bumped up at all, just 0.4 percent on average, after taking inflation into account."

I cannot explain this bizarre divergence adequately, $17,600,000,000,000.00 is a lot of added wealth in 5 years. The annual GDP was about $15 trillion for each of the five years, about $75 trillion total. It's not possible to save 20% of that. The rapid surge in wealth results from two things, the Federal Reserve pouring cash into banks, using keystrokes to create money, buying the banks' bad loans, and the cash in the banks goes into financial assets markets provoking an artificial bubble benefiting the wealthiest 5% who own 75% of all financial assets. This policy at least maintains incomes for retirees. But essentially I'm lost as to how wealth goes up 30% while income for most goes down 8% in the same period. The Pew report shows that the median is about the same as it was in 1990 --- so, no growth to median income ---  and since 1990 the economy has grown by 35% per capita (see this source here) If the median had grown with the GDP since 1990, then today the median would be $73,500, not $50,000. When will the nation wake up?   

Damage to society is self-evident and inescapable. And I'm not over-stating the obvious. Perhaps this action by the Federal Reserve was not a democratic decision, and new money that they created could have been applied more productively.  William Greider published a report at the Levy Economic Institute that outlines a direct approach that the Fed refused to apply: see the report here.  He states, "The central bank has abundant precedent from its own history for taking more direct actions to aid the economy. And it has ample legal authority to lend to all kinds of businesses that are not banks. "

Robert Reich, a University of California professor, has helped produce a movie about it, Inequality for All, see here. 

Briefly, for your information, an intelligent solution exists and has the support of one in six of the members of the House of Representatives. The Congressional Progressive Caucus proposes a plan to inject $2.1 trillion over a three year period into direct government job creation, similar to 1933-1937 when the unemployment rate fell from 25% to 9.6% (see here), or similar to the WWII years when employment increased by an  unheard of 40% while the unemployment rate dropped below 2% for 2 years (taken from Samuel Rosenberg's American Economic Development since 1945, page 20). 

We have lost a healthy distribution balance. First, look at wealth distribution. 


The lower-saving 80% own 15% of all wealth, the top 20% own 85%. The top 1% own nearly as much as the lower-saving 95% (and these figures do not include immense foreign tax haven holdings which probably would increase the top 1% share to around 45% of all wealth). 
About income, 80% of taxpayers receive 48.3% of all income after taxes and government transfers. (I noted "market" income, pre-tax and pre-transfer income, above, when I cited that the 80% receive 40% of "market" income.) After government transfers and taxes their share increases. These 80% are mostly non-supervisory workers or employees. Here's a page from the U.S. Census showing that 80% of workers (96 million workers) in private enterprise work in firms with more than 20 employees.) As a result of economic pressure, employees in general have too little purchasing power to support the full potential of our economy, and therefore national consumption has been reduced, and subsequently employment is retarded. This economic death spiral will return us to the Dark Ages. We must reverse course. Henry Ford knew this in 1912 when he raised his workers' pay to $5 a day. He needed consumers to purchase his automobiles. This is Keynesian economics. A complex blog on econometrics also makes this claim (see 8/19 and 8/12/13 entries). See A new report from the Brookings Institute and the Urban Institute's Tax Policy Center shows that 51.7% of all income, post-tax and government transfers, goes to the top 20% of households, and 48.3% goes to the lower-earning 80%. That 51.7% today once registered 41.7% in 1979. 

What would your income be if it had matched  economic productivity? Find out here at the EPI.org site.  

Most of the 10% shift went to the top 1% of households at the expense and loss to the lower-earning 80% of households.
Zero Hedge presents this graph of lowering labor share of total income. Note the trajectory since 1980 during Republican administrations. (And another similar graph from Forbes below): 

These last two graphs go back only to 1947 or so. The next one,  part of an interview at PBS with a British economist, shows a longer period. The article with it states that labor is 82% of private enterprise workers, non-supervisors.  

U.S. Census Income Data
I wish I could publish a homemade circle graph. It shows 
the first 25% of households receives less than 5% of all income the next 25% receives 12%
the next 25% receives 17% 
the last 25% receives  65%. 
I took the data from this Federal report on Poverty Income and Health Insurance Distribution, page 31. It shows median household income of $50,054 and mean average income of $69,677 in 2011. 
Why is the median 69% of the average? Why aren't they both approximately the same? 

You can go to State of Working America and confirm those figures, here. From 1 to 5, the quintiles by percent of total income: 4.0%, 8.3%, 13.1%, 19.1%, 55.5%, and the top one percent receives 19.9%, more than the lower-earning 50%. This must be post-tax and post-transfer income, as it mirrors the report from the Urban-Brookings Institute cited above and the CBO report here. The median household income in the SWA report is $69,985 while the mean average is $104,163. Again the median is 70% of the average. I can't give a good reason why the two reports have such different average and median incomes, but it has to do with assigning income as cash income for the first report, and total income for the second report.  

What would your income be if labor's share of the national income had continued at the 1980 level? 
Of all private sector employees, 82% are non-supervisory employees (94 million out of 114 million -- check BLS data). If the 1980 distribution ratios were in effect today, that is if workers took in 66% today, then the income of 94 million workers would increase by $9,760 each year for all 94 million non-supervisory employees evenly distributed. (I took 8% of $11.468 trillion from the Congressional Joint Committee on Taxation report -- page 28 -- and divided it by 94 million = $9,760, and I looked at the Social Security Administration report on wage income.) Since a fourth of all workers, or more than 37 million workers, earn less than $10,000 a year, this would double the incomes for 1/4 of all workers. But it doesn't work that way.  But it is a perspective that demonstrates the very, very low earnings of most workers.  

I was planning to go to the California State Fair with a back-to-back page that I could easily hand out.
I missed the Fair, but here is the two page handout.
Knowledge is powerful.
I may mail it, I may send it to the local newspaper.
This essay is my simple attack on the problem; the next essay below is rather broad and complex and confusing, frankly, but it shows the labor composition, the pay distribution, the U.S. budget in a simplified version, and much more. Here's the original essay, before I added and added all you have just read.  

      A Prescription for a Sick Economy

The U.S. economy is not improving.  There was no, that is zero, net job creation in private sector employment over the 12 year period between December 2000 and June 2012 (see here). This is a failing economy, clear and simple. The "working age population increased by over 30.7 million, a 14% increase. During those 12 years we expected 18 million private sector jobs to be created, but zero were created, and in the past 12 months 2.6 million have been created, an increase of from 111.694 million to 114.302 million, a 2.3% increase when we should have had an increase of 14% . The employment to population ratio since 2007 has dropped to its 1984 level and has not improved in 5 years. An additional 14 million workers is one tenth of today's workers which stands at 143 million, but it should be 158 million. Contrary to some news media hype, the housing market is not fully recovered. Between January 1 and March 31, 2013, there were 190,121 home foreclosures. This figure contrasts with 10,000 in 2006 Q1. In the past five years there have been over 5 million foreclosures, about 10% of all mortgages. This does not include the number of short sales, REO sales and pre-foreclosure sales. About 20% of all mortgages are still “underwater”. Wage income is not keeping up with inflation, so 80% of workers are losing purchasing power year by year. Most new job growth is occurring in the low-paying sector of the economy.  Investment in the economy (net of depreciation costs for capital goods and machinery) is also at a unprecedented low, while the only section of the economy that flourishes are corporate profits which are at an all time high. This benefits only a minority of Americans. 

There is a solution, it is called wage-led growth.

More jobs are needed to make wage levels grow. A tighter jobs market both reduces the unused supply of labor, raises wages, and increases the demand for labor by creating additional purchasing power. The surest method to tighten the jobs market is to create public jobs directly such as occurred during the Great Depression. The next surest is to fund public infrastructure projects and increase employment in government services such as education, pre-school services, elder care and disability care. Adding federal block grants to state budgets to restore the loss of over 500,000 local government jobs is another growth inducing method in an economic slump. Increasing the minimum wage, broadening and increasing the Earned Income Tax Credit, strengthening workers' union rights are other measures needed to create wage-led growth.  

One third of the House of Representative Democrats, or about one sixth of all House members, support the plan for direct job creation and infrastructure enhancement funding, and the other measures mentioned. They are called the Congressional Progressive Caucus. Their budget, a stark alternative to both Obama's and the Republican's budget, is available on the Internet. 

Economic Facts of Life

1. Half of U.S. households own just 1.1% of all private wealth; the other half own 98.9%. (from the Survey of Consumer Finances, 2012, page 17, a Federal Reserve report, and this report from the Congressional Research Service) 

2. Half of U.S. workers receive less than 7% of all personal income annually (from a Social Security Administration report and a Congressional Joint Committee on Taxation report, page 28). 

3. $52,577 per year or $30,155 per year? The median worker income is the middle earning worker. If wages since 1968 had matched workers' productivity growth, then the median (or middle worker) hourly wage would be 74% higher, or $28.42 an hour not today's $16.30 an hour. On a yearly basis, the numbers are those above. (See here for average work hours per year.) Annual income for the median (in the middle) household would be $92,000 a year, not today's $50,000 (according to U.C. Berkeley professor Robert Reich). Would your life be different if most of your neighbors had let's say 74% more income? 

4. We are a very wealthy nation. After all taxes have been paid, personal income is $38,000 per person. This translates into $76,000 for a family of two, $114,000 for a family of three, and $152,000 for a family of four. The average savings per family is $498,000, but the median is $77,300. In Australia most adults have more than 5 times the U.S. amount, in Japan and France they have 3 times that amount. (from BEA.gov - personal income) 

5. The collective income for the highest earning 1% of households is greater than the income of  the lower-earning 60% of households. Their wealth exceeds that of 90% of households. (See the Citizens for Tax Justice report)

6. The poverty level in the wealthiest nation in the world is 16.1%, one in six, according to the Supplementary Poverty Measure report. Childhood poverty in the U.S. is double the average poverty rate of other wealthy nations. 

7. Government spending in the U.S. ranks 30th out 33 member states of the advanced nations of the OECD (see the Tax Policy Center's graph). Only Turkey, Chile, and Mexico tax their citizens less than the U.S. Presently the cost to the federal government of charity programs to U.S. citizens is about $750 billion annually (my following essay below, June 5, 2013, deals with this in greater detail); this is about 20% of the federal budget, and 5% of the U.S. annual economy, and 1% of all private wealth. This charity includes (in descending amounts) Medicaid which is half the expense, and unemployment compensation, food stamps and the school lunch program, the earned income tax credit, supplemental security income to disabled Americans, rental assistance, children's health insurance program, temporary assistance to needy families (known previously as "welfare"), women, infants and children nutrition, and the low-income home energy assistance program. 

8. The basic budget for the median level household is $63,238. The Economic Policy Institute study states, " In the median family budget area, Newaygo County, Mich., a two-parent, two-child family needs $63,238 to secure an adequate but modest living standard. This is well above the 2012 poverty threshold of $23,283 for this family type." (See EPI calculator, and this EPI article)

Aside from increasing wage income for 80% of U.S. workers, reducing prices for common necessities such as gasoline prices, housing, medical care, and education expenses would add to the purchasing power of the common worker and increase economic growth. Mandating employer paid vacations, family leave and sick leave policies, allowing judges to reduce home mortgage principal levels in foreclosure proceedings, reconstructing student loan costs and repayments, and instituting a more progressive tax structure would further improve ordinary household incomes and living standards and economic security. The CPC budget and the Demos plan "Millions to the Middle" outline many of these proposals. 

Solutions:
The best summation of solutions I've read is here: Go to the American Prospect magazine and find the article by Robert Kuttner called The Task Rabbit Economy. The article was posted  on Oct. 10, 2013. At the end of the article he proposes raising an additional one trillion in federal revenue to create full employment. It is a serious article and excellently referenced and argued. The Congressional Progressive Caucus also recommends a $2.1 trillion direct job creation program spread over three years, see their Back to Work federal budget here. U.S. Representative John Conyers has sponsored a full employment act in Congress that would create directly and indirectly 8 million jobs, see here. The Chicago Political Economic Group has had a similar plan since 2009 posted here and here. And a link to a conference on Roosevelt's Economic Bill of Rights will update our awareness to the 21st Century. 

____________________________
Would you like to become an expert on wealth and income distribution? Here are the sources: 

_________________INCOME
Brookings-Urban Institute, Tax Policy Center, Measuring Income for Distributional Analysis, July 2013:
http://www.taxpolicycenter.org/UploadedPDF/412871-measuring-income.pdf 

I took the "Sick" idea from an article by Dan Alpert at Economonitor, a good description of recent hiring trends: http://www.economonitor.com/danalperts2cents/2013/08/05/alpert-on-the-daily-ticker-low-wage-jobs-an-all-consuming-issue-in-u-s/


Economic Policy Institute, State of Working America, Charts, Income, 
Sources of pretax comprehensive income, by income group, 2007 (2011 dollars) 
http://stateofworkingamerica.org/chart/swa-income-table-2-4-sources-pretax-comprehensive/ 

CBO, Trends in the Distribution of Household Income between 1979 and 2007: http://www.cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf
__________________________ WEALTH
U.C. Berkeley professor Emmaunel Saez, Striking It Richer: 
http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf

Congressional Research Service, An Analysis of the Distribution of Wealth Across Households, 1989 to 2010:
http://www.fas.org/sgp/crs/misc/RL33433.pdf

Economic Policy Institute, Lawrence Mishel, Confirming the further redistribution of wealth upward:
http://www.epi.org/blog/confirming-redistribution-wealth-upward/

On Wage-Led Growth, a report by Jeff Madrick: 
http://www.newamerica.net/sites/newamerica.net/files/policydocs/Madrick_Jeff_NAF_The_Case_For_Wage_Led_Growth_June_2012_0.pdf  
__________________________ VIDEOS
A book presentation video, Jeff Faux speaking on his book The Servant Economy: http://www.booktv.org/Program/13699/The+Servant+Economy+Where+Americas+Elite+is+Sending+the+Middle+Class.aspx 

Government Direct Job Creation, a video of Phillip Harvey, author of the Demos report Back to Work (11:15 a.m. video, second one down): http://www.rooseveltinstitute.org/bold-approach-jobs-emergency-0

Bill Moyers has a powerful interview with 2 women organizers, Madeline and Rachel LaForest: http://billmoyers.com/segment/rachel-laforest-and-madeline-janis-on-fighting-for-fairness/ 
and another powerful interview about hunger and food insecurity: 
http://billmoyers.com/episode/encore-the-faces-of-america’s-hungry/ 
____________________________

October 1, 2013

About Obamacare, 

The Obamacare health insurance exchanges began accepting enrollment on October 1, 2013. One can enroll at CoveredCalifornia.com, or obtain a customized estimate of premium expenses and much more information at Kaiser Family Foundation (KFF), kff.org and their subsidy calculator. The Kaiser site will estimate your expenses; for instance, living in Mariposa, a three person family with one child with an income of $30,000 can qualify for a "Silver" plan costing $1,250 a year (4% of income), or can choose a "Bronze" plan costing $0 because the subsidy covers the cost. It is a complicated system, families usually pay on a sliding scale between 2% to 9.5% of their annual income. 

I read several articles and reports lately, and here is a very brief summary of the highlights: 

1. Some 57% of all U.S. citizens report "skipping or delaying some type of care in the past year because of cost", this increases to 83% for the uninsured and 70% for those with annual income below $40,000 (from a KFF report). Our nation's per capita medical expense is roughly 2.5 times more expensive than most other advanced nations' per capita cost (from an OECD report). Medical insurance premium expenses increased by 80% between 2002 and 2012 (from a KFF report). 

2. Some 36.6% of Americans either refuse to buy or cannot afford medical insurance --- 15.7% or about 50 million Americans have no medical insurance coverage, and 20.9% (67 million) were covered under Medicaid in 2012. This is data from the U.S. Census, September 2012 (see page 70), and "Policy Basics: Introduction to Medicaid" a report from the Center for Budget and Policy Priorities. The cost of medical insurance for family coverage has risen by 80% over the past 10 years, from $9,068 to $16,351, reports the KFF. Inflation during this period was 27% according to the Bureau of Labor Statistics. This indicates an economic failure in a very wealthy nation. Our nation produces $39,215 of after tax income per person, that is, after all taxes are paid the average personal income for every human is $39,215 according to the Bureau of Economic Analysis, Department of Commerce, 2013 Q2. A family of four therefore, on average, would have an income of $156,000 after paying all taxes. Another source estimates annual "cash income" per family at $75,100, from a report by Citizens for Tax Justice, "Who Pays Taxes in America". This report shows that the highest-earning 1% of households earns more income collectively than the lower-earning 60% of households, 21.9% vs 21.4% respectively. We have a wealthy nation with over $500,000 of savings per family on average according to a Federal Reserve report, Survey of Consumer Finances (page 17), but the lower-saving half of all households own only 1.1% of all savings (from a Congressional Research Service report). As a result of severe inequality, rapidly rising medical insurance costs, and an over-priced medical system, we have a dysfunctional system where more than a third of all citizens are unable or unwilling to buy medical insurance. 

3. Over half, 50.4%, of all U.S. children either receive Medicaid (41%) or are uninsured (9.4%) according to the CBPP report. (See the last sentence of the report.) Almost half (44.5% according to the U.S. Census, or 33 million children) of all citizens under 18 years of age receive their medical care from government programs (35.1%) or live in uninsured families (9.4%). (See page 70 of U.S. Census report. When the government "shut down" comes to an end I'll be able to link this source.)

Obamacare is very complicated, but the Kaiser web page is helpful as is the Center for Budget and Policy Priorities report "Policy Basics: Introduction to Medicaid".  For instance, 44% of Medicaid expenses go to the disabled and blind, 20% go to the elderly, 21% to children, 15% to adults. 

Obamacare needs fixing, it will be a burden to some families who fall between the policy cracks, but the more exacerbating problem, greater than an out of control medical system, is the inequality of income and wealth that is crippling the nation and preventing the economy from achieving full employment. 

Yours, Ben Leet

My blog address: http://benL8.blogspot.com

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Jeff Faux's article describes his English sister-in-law who calls a physician assistant and discovers on a Saturday night that she has a detached retina. She goes in the next morning at 8 a.m. for surgery. Her bill is $0.  Read  the story here: http://www.epi.org/blog/socialized-medicine-horror-movie/  

Also read the American Prospect article "The Cruelty of Republican States in One Chart" and read my comment below it. The states requiring working parents' incomes to fall to 16% of the poverty level --- the case of Arkansas law (a family of three with income greater than $3,133 is ineligible even though the poverty level is $19,530) --- before one is eligible for Medicaid are the ones refusing the expansion of Medicaid offered through the new Affordable Care Act, even though the federal government would pay for 93% of the expanded expenses until 2022! Shame on you Arkansas.     
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Like charts? Here's the Huffington Post's Twelve Charts about Why Health Costs Are Obscenely Expensive: 
And here's a guy on YouTube who makes a point about high health care prices in the U.S.. 
And here's the facts about having a baby in the United Kingdom.  Eventually everyone will get the picture, that in the UK they pay about a third what we pay. 
Thanks, Steve, Want drama, read about Obamacare. I'll stop being so so boring, I'll add charts! Here's a chart comparing U.S. health with that of Italy. Read the article. 

Structural Damage

Structural Damage to the Economy
Jobs, Pay, Government Charity, Political Donations,

Only 1.1% of all household net worth is owned by 50% of U.S. households according to the Survey of Consumer Finances, a report from the Federal Reserve Bank, see the source (or here). 98.9% of wealth is owned by the other half of households. "Mean household net worth [for all households] was $498,800 . . ." --- on average every family has half a million in net worth --- but the mean average net worth for the lower-saving half was less than $11,000 per family or household. Only 11% of households are "average" or above "average". Not Lake Woebegone, here almost no body is above average. We look like the basketball team with one Wilt Chamberlain and nine Spuds, and the Spuds are running around like crazy while the Wilt is causing the spuds to wilt. 

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Less than 7% of annual personal income goes to the lower-earning 50% of U.S. workers (76 million out of 151 million). See the two sources, here (the Social Security Administration report on Wage Income) and here, page 28 (the Joint Committee on Taxation report on total reported income, tax year 2012). Total personal income, tax year 2012, was $11.468 trillion, and income to the lower earning 47% was $741 billion, or 6.5% of total personal income. The average income for the higher-earning 53% of workers was $131,225; the average for the lower-earning 47% of workers was $10,340.  The highest-earning 1% of households collectively earns more each year than the lower-earning 60% according to this report by Citizens for Tax Justice, and the effective overall tax rates are not that far apart --- 22.6% for the lower-earning 60%, 33.0% for the top 1%. 

The economy is not serving the majority who live under its dominion. The median hourly income today is $16.30 an hour, but it would be $28.42 an hour had wage growth kept pace with productivity growth since 1968, according to an article I cite here and below. This is a difference between a median annual cash income of $34,000 and $59,000 for full-time workers. Since many workers are not full-time and year-round, the median worker's annual income in 2011 was $26,965. If --- and it is a very big IF -- wage growth had continued to keep pace with productivity growth, the median worker's annual income would not be around $27,000, it would be around $47,000. 

Imagine such a society --- we are generally missing our potential, and the conversation in popular media does not even mention or imagine what a grave loss we've sustained because of the one-sided income imbalance we sustain and have sustained for 40 years. The top earning 1% today earn more (21.9% of all income) than the lower-earning 60% of households (21.4%), see this table from Citizens for Tax Justice. As I mention below, $38,000 per human is the post-tax annual income for EVERYONE. With 2.7 "everyones" in an average household, the average annual post-tax income per family is $102,600. This is from the BEA.gov report on income, it implies a pre-tax average income of $116,000. Here's another reliable source, from the EPI, that shows a pre-tax average household income of $104,163 in 2011 dollars. Maybe your family isn't average? Join the club. Less than 20% are average or above. I've done some re-figuring, using the effective overall post-tax income the CTJ study uses which I cite above, and the post-tax average is closer to $81,000 per family. Is this the society we live in? Would that be an improvement? Today's post-tax household median income is $37,500. Do we care? 

This stark nature of inequality is beyond doubt. This inequality is a starting point for analysis. As you'll see, this article goes all over the map, but I'd like readers to take in the three above facts, and proceed. I've written so many articles about this, it's all over this blog. Please dive in.

1979-2011
 - See more at: http://stateofworkingamerica.org/charts/real-annual-family-income-growth-by-quintile-1947-79-and-1979-2010/#sthash.60ljbfT2.dpuf

Growth for the top 5% only: 
Since 1980, roughly, family income has grown unevenly, in a lop-sided, polarized way. The lower-earning fifth drops 12% of its income over 30 years, while the higher-earning fifth gains 36% more income. This is a structural defect. Remedying the defect will take democratic change. The CBO also published a report on income distribution stating: "For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007 (see Summary Figure 1)."  ----   OK -- how much is 275% growth? Think QUADRUPLED almost. 100% growth is doubled, 200% growth is tripled, 275% growth is almost QUADRUPLED. The per capita growth was 66% during the 1979 - 2007 period, and the top-earning 1% increased their share of the economic income pie from 8% to 17%, post-tax and post-transfer income. The pie enlarged, and their share of the pie doubled. The threshold to enter the top one percent more than doubled from $165,047 per year to $347,421, a $182,000 increase (in inflation adjusted dollars), while the lower-earning 20% threshold to enter the 21st percentile increased by just $2,000 from $12,000 to $14,000 (see page 35). If the growth rate for the lower-earning 20th percentile had matched the 66% per capita growth rate, then $20,000 would have been the 2007 threshold amount. Robert Reich, on July 1, 2013, writes: "Had the real median household income continued to keep pace with economic growth [since the late 70s] it would now be almost $92,000 instead of $50,000. " (See a less-than-3-minute video of Reich explaining Inequality Is Real.)

Certainly this is a structural defect in a democratic society. 

University of California professor Emmanuel Saez reports (page 3 of Striking It Richer) that "Top 1 percent incomes grew by 58% from 1993 to 2010 (implying a 2.7% annual growth rate). This implies that top 1 percent incomes captured slightly more than half of the overall economic growth of real incomes per family over the period 1993-2010." During the same 17 year period the lower 99% of households had 6.4% total growth. Minute trickles enriched a small portion of the lower 99%, enormous floods enriched the already rich. 

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This essay installment 
is complicated, but I suggest that the reader persist through the paragraph on WEALTH. I have five sections. 
1. I try to explain that 32% of all workers (53 million of 163 million total) have either no job, or not enough job, or a poorly paying full-time year-round job. 
2. Then I briefly explain how the average post-tax income of $38,008 for all citizens from infants to centenarians hardly reflects real wage income reality. $38,008 is the Bureau of Economic Analysis post-tax annualized income for everyone in the first quarter of 2013. Did you get your check yet? Has your daughter's check arrived? Don't wait for it. 
3. I look at government charity programs. 
4.Then I take a brief swipe at election campaign funding in 2012. 
5. And lastly I add a summation about economic deformity. If a reader gets bogged down in my horrible details, skip this essay and read the next-most recent one -- that's fine, but grab the highlights here. This one is too technical for common consumption. But try to read through the paragraph on WEALTH. 
In a while I may add a section 
6. The Ryan Budget Plan, but not now, that's my next assignment. 
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VIDEO SUGGESTIONS
Here's a new interactive web page about income INEQUALITY --  Just arrived on June 22, 2013. 

Here's U.C. Berkeley professor Emmanuel Saez explaining income distribution, and proposing a top marginal tax rate of 50% to 70% to 90%. A New York Times article explains some of it. 

Or maybe a VIDEO would make the medicine go down? 
Here is a video of Representative Jan Schakowsky, a member of the Progressive Caucus, she explains for 30 minutes the reasonings  and proposals of the CPC. Did you know that the incomes of the top 1% increased by 11.2% between 2009 and 2011 and the income of the other 99% decreased by 0.4%? Recovery? Well, did you? Does it surprise you? Her video is the last and seventh one down on the linked web page above. 

The Minimum wage would be $18.67, not $7.25 an hour had it kept pace with productivity growth since 1968. The median wage would yield $59,000 a year, not $33,000. The society would be totally different. Heidi Shierholz at the EPI has an article about the disjunct in wage growth in relation to  productivity growth. If a minimum wage worker has full-time and year-round work his income is $15,080 a year --- but it would be $38,833 if wages had kept even with productivity since 1968. Today's median wage is $16.30 an hour (or $33,904 yearly for full-time work), but it could be $28.42 an hour, or $59,114 yearly for full-time workers. Compare this to Robert Reich's assertion about $92,000 per year for the median household's income. 

SOLUTIONS: The Mother Lode of Solutions is the Millions to the Middle plan from Demos, click here. I'm long on problems and short on solutions. This plan is very long on solutions, 50 pages long that are worth the nuisance of printing out  on your computer's printer. Values are the core of the plan: "The initiatives we suggest are guided by the following values-based propositions: Self-improvement should be possible, Work should be rewarded, Thrift and planning should be encouraged, Families are important, We are all in this together" (page 5 and 6). I can't recommend it too highly. But I  also enjoy reading, and you will too, the budget proposal of the Congressional Progressive Caucus, both the 2013 version --- which is more thorough than the 2014 version --- and the 2014 version. This is an outline of change, the sort of change that Obama obliquely hinted at in 2008 but then promptly forgot about. 35% of House Democrats are members of the Progressive Caucus, 16% of all House Representatives. 

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Jobs, Workers and Pay 

                    This is the difficult section  -- how many decent jobs are there? How much do most jobs pay? Look at the BLS page on employment here. 
This is complicated, and most readers will just want to look at the conclusion: 32% of all workers, some 53 million workers, have either no job, or too little work, or work full-time and year-round for too little pay. 

Now if the reader wants to wade through the details, here they are. 

   56%  -- full-time and year-round with decent wage income
   12%  -- working part-time but only want part-time work
   32%  -- no job, or not enough job, or lousy paying job
_______
 100% --  all workers in U.S. 

Just as 44% in this tally have inadequate income, this finding is supported by the Social Security Administration's 2011 report on Wage and Salary Income showing that 47.4% of workers earn less than $25,000 in 2011.

WEALTH Now to digress, let's deal with WEALTH inequality for a brief minute. The lower-saving half (50%) of households in 2010 owned just 1.1% of all net worth, the other 50% owned 98.9%, according to this Congressional Research Service report (which I found here). If you divide 1.1% of net worth among half the families, the average savings per family comes to less than $11,000 per family. The average household net worth in 2010 was $498,000 per family -- see the Federal Reserve report here, page 17. But only 11% of U.S. households are average or above average in this regard. Another report shows that liquid asset poverty afflicts 43.9% of all U.S. households, which is to say they have less than $6,000 in cash or salable asset reserves to get them through 3 months of no income. And a third report states that in September 2012 68% of households were living paycheck to paycheck. And a report from the FDIC (Federal Deposit Insurance Corporation), May 2011, states that 44% of households facing an emergency $2,000 expense would have great difficulty paying it in 30 days. Read the executive summary here. "Using data from the 2009 TNS Global Economic Crisis survey, we document widespread financial weakness in the United States: Approximately one quarter of Americans report that they would certainly not be able to come up with such funds, and an additional 19% would do so by relying at least in part on pawning or selling possessions or taking payday loans."

Annual Income per capita and per worker after taxes As I explain below this section, every human (all 315 million citizens, or per capita) in the U.S. has $38,008 annual income after paying all taxes in 2013, Q1. (See Table 2.1, Personal Income, at bea.gov, and check disposable per capita income at the bottom of the table.) That also translates to average annual post-tax income for every worker of $73,003 (which implies an average worker pre-tax income of $97,300) and that includes every worker -- those who are unemployed, or working part-time, or working temporary jobs, or working for low-wage income full-time and year-round (including the 47% of all U.S. workers, or 71 million workers) who annually earn less than $25,000 a year in wage income, see here). This should not be too surprising, as every worker contributes $109,000 per year to the annual gross output, GDP (see here, adjusted for inflation $113,000 per worker). 
_________________________________________

(OK -- you finished. 
You can stop, because here begins the really complicated part. Only the fanatics need continue.)

The Economic Policy Institute states that the U.S. median income needed to meet the basic family budget for a family of four is $63,000. Here's the quote: "In the median family budget area, Newaygo County, Mich., a two-parent, two-child family needs $63,238 to secure an adequate but modest living standard. This is well above the 2012 poverty threshold of $23,283 for this family type." See their Basic Family Budget Calculator for your region and family size. 
The present median income is close to $50,000 a year. Jobs do not pay enough, and there are not enough jobs. Most of what follows is about jobs. 

   56%  -- full-time above poverty level
   12%  -- content part-timers
   32%  -- No Job, Half Job, Lousy Pay Job
_______
  100% of all workers --- how it works out

Workers with no job, half or less than a job, or a full-time year-round job paying below poverty wages, 53 million -- I have not pin-pointed the exact # or % --- out of 164 million workers, make up the 32% number. The actual percentage may be 37.5% or 61.5 million. Between 51% (84 million) of all jobs fall into the category Full-Time Year-Round paying above poverty level wages, or above $23,050 a year. I find that surprising. I have to prove it. 
Some 12% work part-time and are content with part-time. That leaves 32.6% who --- work part-time or  temporary, are either 
1)  unemployed, (7.2%) 
2) have dropped out of labor force, (4.8%)
3) are working temporary jobs, (4.3%) -- the weakest data point
4) are working part-time but want full-time, (5.3%) or  
5) are working full-time and year-round for less than $23,050, (11.0%). --- total 32.6%  --- 53 million workers 

Here's a BLS table with basic facts: here.   And here is another table, and if that link doesn't work, search here and reference Table A-3 under "Seasonally Adjusted Data".  

I begin with #5: 11% of all in my expanded work force have full-time and year-round work paying less than poverty. 
First, I look at the quote from the National Jobs for All Coalition, their monthly analysis of unemployment which states, "In addition, millions more were working full-time, year-round, yet earned less than the official poverty level for a family of four. In 2011, the latest year available, that number was 17.9 million, 17.6 percent of full-time, full-year workers (estimated from Current Population Survey, Bur. of the  Census, 9/2012)." This indicates 101.7 million are working full-time and year-round (not temporary workers). 

There are 163 to 164.3 million in the work force, not 155 million, if one uses the 20 year average participation rate between 1986 and 2006. I think that's reasonable because the participation rate took a dive in 2007, but no one in officialdom thinks statistics should take the dive into consideration, except several professors who have voiced a similar opinion. Therefore, only 84 million (102 million full-time year round workers subtracting 18 million who are full-time year round with below poverty wage income) of the 163 million, or 51.5%, work full-time with pay above the official poverty level for a family of four. 
But that seems too low, so I use another method. I make a count  from the other end, counting the total number in these five classes --- the unemployed, the dropped-out of workforce, the part-time by economic necessity who want full-time work, the temporary workers, and the full-time year-round workers with low pay --- add them all up and subtract from the new work force number that includes the 20 year average participation rate. 

44.2% of workers (about 72 million out of 163 million) fall into the following classes: 

Total Unemployed Including Drop-Outs: 12.0%

-- 7.2% or 11.7 million --- are officially unemployed. Hint: I just enlarged the work force to  what I believe it is and in turn I lowered the unemployment rate by 0.3%. 

-- 4.8% or 7.8 million --- are unofficially unemployed (see note below about enlarging the work force) 

-- 12.0% therefore the more accurate unemployment rate.

Total part-timers who want full-time: 5.3%

-- 16.9% or 27.5 million  --- are part-time workers 

-- 5.3% or 8.2 million  --- are part-time workers who want full-time year-round work, and 12.1% work part-time who are content with part-time.  I take this 8.2 million workers number from Dan Alpert's excellent article at EconoMonitor where he states, "Moreover, after falling from a recession high of 9.2 million to a post-recession low of 7.6 million at the end of Q1 2013, the number of people saying they are working part time because they can’t find full time work (part time for economic reasons) crept back up to 8.2 million, double pre-recession levels." 
This Dan Alpert article of July 2013 is quite professional, and I find it concurs with my conclusion that the "sick-onomy" is not well. 

Temporary workers: 4.3%

--  4.3% or 7 million --- are temporary workers. See BLS source. And you'll see that this is a questionable link in my argument. It is probably higher. 

Full-time, Year-round working for poverty wages: 11.0%

-- 11.0% or 17.9 million --- are working full-time and year-round for less than poverty level for a family of four, $23,050 in 2012. That’s about $11.50 an hour. (See National Jobs for All Coalition site, unemployment for U.S. Census source data.)

Total --- 44.7% or 72.8 million workers or would-be workers (out of a labor force of 162.8 million) have no work, not enough work, too low pay with full-out work. 

But that’s too high. I must subtract the content part-timers (12.1%), and 32.6% of all workers ( or 53 million) are 

either with no work (12%), 

want more work (9.6% which combines 5.3% with 4.3%) , 

or work full-out (11.0%) for wages below the poverty level for a family of four 

--- my grand conclusion  ---- 32.6%. 

Did I get the Percentages Right? 

I think it may be 37.3% or almost 61 million workers. Here's how we get there.  The official work force is 155.4 million --- but my work force is 164 million ---, total employment is 144.3 million, and  27.8 million are part-time, resulting in 116.5 not-part-time. And 101.7 million are full-time and year-round. That leaves 14.8 million who are left without a classification. Are they temporary workers?  14.8 divided by 164 is 9.0% of my expanded work force of 164 million. And that raises the final percentage of workers to 37.3% or over 61 million out of 164 million. Here is an article by an eminent economist that comes close to my figures. 


Here's an article by Dan Alpert writing on July 24, 2013, at EconoMonitor describing the employment picture in his article about the "sick-onomy" -- his term. He claims a higher number of full-time and year-round workers, either 116 million or 114 million, he's not clear. In either case, 7 million are temporary workers --- (but what if it's 14.8 million?) ---, and using his data the percentage of workers with good jobs increases from my 51.2% to his 54% or 55.4%. That almost confirms my numbers, but adjusts them somewhat higher. Here's the reference source, again.

(Alpert co-wrote "The Way Forward" with Nouriel Roubini and Robert Hockett, a very insightful work of October 2011. The "Way" called for a $1.2 trillion public jobs program spread over five years, just one of its proposals.) And here again is the National Jobs for All Coalition source from which I drew my conclusion of 101.7 million full-time and year-round workers, in contrast to Alpert's 116 or 114 million. 


Conclusion Admittedly my figures are not iron-clad, the 32.6% number could be higher by 5.2%, but I'll stick with 32.6%. 

That is 53 million work-ready adults (out of 163 million) who deserve better from our economy. You might also say that 111   million adults have the work and income they are content with, 53  million do not. 

Technical note on the Unemployment Rate:  I claim the correct labor force participation rate is higher. I used a 20 year average, from 1986 to 2006, to estimate the correct labor participation rate and the employment to population rate.  I used the average 20 year labor participation rate, 66.5%, this is the average rate for 20 years, 1987 through 2006. The 20 year average for e/pop. is 62.7%. This 66.5% labor participation rate would yield a work force of 163,166,000 today.  But there are in May 2013 only 143,898,000 workers each day. Therefore, 19,268,000 are not working. This yields an unemployment rate of 11.8%. I'm saying 11.8% is the true unemployment rate. Either that or 12.0%. Not 7.6%, the official unemployment rate. If we assume the actual norm for labor participation is the high of 1997, 1998, 1999, and 2000, 67.1%, then the unemployment rate goes up to 12.9%. Why should the norm for participation be so low? Are workers not interested in work? The official standard should reflect how much workers need employment, not how little demand owners/employers have for employees.  

Is the grand total 30.6% or 36.1%, why the uncertainty?  Look here, reference Table A-3 under "Seasonally Adjusted Data" and see that there are 11.76 million unemployed and 6.712 million "Persons who want a job" among those who "Are not in the labor force" -- and that totals to 18.47 million or 11.3% unemployment in a work force of 163.166 million (my 20 year average workforce) or 11.8% in the official workforce. My calculation, above, states there are 7.8 million not 6.712 million who have dropped out of the workforce. This discrepancy drops my grand total from 32.6% to 31.1%. More recently a report states that 22.2% of the workers are part-time, an increase from 16.7% since 2007. (I state above it is 16.9% part-time workers) Let's assume all the 5.5% gain in part-time workers still wish full-time work. Then the 32.6% grand total increases to 38.1%, and the low estimate of 31.1% increases to 36.6%. This precise rate --- call it the "no job, or not enough job, or good job with lousy pay" rate --- should receive serious academic treatment. 

Today's labor participation rate is 63.3%, a low not seen since 1979. The 3.2% difference knocks out (and fails to account for) 7.8 million would-be workers raising U3 unemployment to 12.0%. The Great Recession reduced the labor force participation considerably, and those not counted are also not working.   
Here is the labor participation graph showing today's 63.3%:

Here is the employment to population graph showing 58.6%: 

Here's the ratio of employment to population, note that for the last  44 months there has been no growth, employment growth matches exactly population growth (a graph from CPEG.online, the Chicago Political Economy Group): 


And normal pay for jobs is much too low. That’s the next section. 

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Income Distribution 

The next question is: are one out of three workers too lazy or not sufficiently well educated to get a decent job? Or is the system inadequate and not providing enough decent job openings? 

Precisely $38,008 per year is the amount of disposable (after-tax) income available to all citizens regardless of age. For a family of four that amounts to $152,032 a year to spend, after taxes. For a family of three: $114,000 annual post-tax income, for just a couple, $76,000, and for bachelors and spinsters, $38,008. This is the Bureau of Economic Analysis figure for 2013, first quarter. Yet, half of all families or households earned less than $50,054 in 2011.

http://www.census.gov/prod/2012pubs/p60-243.pdf -- page 5

Two problems: there are too few jobs, and in general jobs pay too little. 

This is a structural problem, which is to say that if the citizens would democratically change the structure the economy this adjustment would produce more jobs and the jobs would also pay greater wage income.This would be a great boon for many who are scratching along with just a hope and a prayer, and for the entirety of the society. The Progressive Caucus has the best beginning steps in this direction, see this.  

Since only 56% of workers have full-time, year-round work that pays above poverty; and  

32% of the workers have either no job, not enough job, or a job with enough hours but poor wages, then the conclusion: 

The Social Security Administration's report on wage and salary income bears out this conclusion, almost half of all workers, 47% (or 72 million workers), earned less than $25,000 in 2011. 

http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2011

Remember, every citizen regardless of age on average has $38,008 to spend after he or she pays taxes. The key phrase is “on average”. If you take the collective total wage pay of the lower-earning half of workers, $741 billion (a figure from the above link to the SSA report), and divide it evenly among half the population, $4,631 is the before-tax amount each citizen in the lower-earning half receives, not $38,008, the official BEA average post-tax income. $741 billion is also below 7% of all personal income reported to the Congressional Joint Committee on Taxation in Tax Year 2012. (see here, page 28)  

???? ------  44% have less than $6,000, but the average for everyone is $498,000  --- ????

44% of households own less than $6,000 in liquid assets. (See -- http://scorecard.assetsandopportunity.org/2013/measure/liquid-asset-poverty-rate)

In fact the average household net worth (assets less liabilities) for 2010 was $498,000 according to the Survey of Consumer Finances, page 17, a report from the Federal Reserve. 

_________________________________

Government Charity:

The federal government necessarily takes up the slack that the economy does not provide. 

I separate real entitlements, which are Social Security and Medicare, from charity programs. 

2010 expenditures in $ billions

Entitlements

Social Security          ------------     689

Medicare                   ------------     519

Total Entitlements     ----------------    1,208 billion

Charity

Unemployment compensation            91   (see Source)

Supplemental Security Income         44

TANF (including 4 from states)          11 

SNAP                                                 65

School Lunches                               10

Earned Income Tax Credit               55

Medicaid
            (including 123 from states)    382 

Children's Health Ins. Program          11

Rental assistance                              34

WIC nutrition                                    6

Low Income Home Energy Assist.       5

Total Charity ------------------------------ 748 billion -- 22%
Social Security and Medicare ----------- 1,208 billion -- 35%

Total Entitlements and Charity -------- 1,956 billion -- 57%
Military Defense --------------------------- 1,027 billion -- 28%
Other and Debt Payment ----------------     473 billion -- 14%

Total Federal Budget, 2010 --------------- 3,456 billion -- 100%

That list of charity programs comes from the CBPP.org site I list here and below. 

Of the "Entitlements and Charity" 38% of "entitlements" are non-entitlement charity expenses paid from the general fund, and 62% are earned payroll-paid entitlements, intergenerational annuities, supported by automatic wage income paycheck deductions. 

Charity expenses also represent 18% of all federal spending, after deducting state contributions, $127 billion. And half of this Charity (or 11% of all federal spending) is Medicaid, and half of Medicaid is payments to elders in nursing homes. 

Charity      --          18% of expenses

Social Security --     19.4% of expenses

Medicare ---------     14.6% of expenses

D. of Defense ---      28%

Interest on debt --    4.6%

Other  -------------    15%

Total  -------------   100%

About Defense: I went to the historical U.S. Federal Budget tables and on page 87 took the departments and totaled all defense expenses for a total of $1,027 billion. You may disagree, but I included Energy, Veterans Affairs, Homeland Security, Other Defense Civil, and a few others to arrive at $1,027 billion.

To simplify: 
a third to defense, a third to SSA and Medicare, 
a sixth to charity, a sixth to "other". The charity section could be reduced with a direct job program from the federal government. See the Demos plan, Millions to the Middle, page 22, 23, 24, enumerating a direct jobs program creating 8.2 million jobs, reducing unemployment to 4.5%, costing approximately $200 billion per year for 2 years, funded entirely by the elimination  

of Bush era tax cuts.

http://www.cbpp.org/cms/?fa=view&id=3677

http://en.wikipedia.org/wiki/2010_United_States_federal_budget

http://en.wikipedia.org/wiki/Defense_budget_of_the_United_States -- see Budget Breakdown section for defense correction 

About Revenue breakdown for 2010: 

Borrowed selling Treasury Bonds  -- 37%

Payroll Tax                    --------------- 25%
Income Tax                    --------------  26%
Corporate and other       --------------  11%
Total Revenues             --------------  100%
See the historical tables here, page 35, and then factor in borrowed amounts and re-calculate as percentages of total expenses.

One in seven Americans, or 15.5%, of the population, receive their food through the federal government's charity nutritional program SNAP. Each meal costs taxpayers about $1.50, or monthly around $150 per person. Total cost to the nation, $87 billion.  The Economic Policy Institute has a Basic Family Budget Calculator and they estimate the normal cost per person for food to be $161 per month. 

_________________________________________
            

The nation’s economic problem should be obvious and well known. 

Marriner Eccles, the Chairman of the Federal Reserve during the Great Depression and WWII, 1934 to 1951, stated that modern economies must - it is requisite - provide sufficient income to workers so that they can purchase the value of the goods they produce. Obviously owners of enterprises faced with declining purchases must lay off workers whose purchasing power is then further reduced and the remaining workers have additional  downward pressure on their wage income. As today, when half the workers are earning about 7% of all the personal income that the economy generates, then workers will not purchase the value of what they produce. It reminds me of turgor pressure in the botanic world. Plants wilt without enough turgor pressure. The collective wage income for half the workers was $741 billion in 2011, and the total personal income was $11.468 trillion, according to the Joint Committee on Taxation. What would economic activity resemble if instead the minimum wage were gradually elevated to $20 an hour, the median to $28.42 an hour -- as EPI's Heidi Shierholz mentions in her article I cited in the first paragraphs of this post? What if we instituted a mandatory 21 day paid vacation for all corporations with more than 30 employees? Paid sick leaves for employees as is proposed by the Congressional Progressive Caucus? An elevated EITC compensation for low income workers? What is an economy for? 

Ours has an obvious a structural defect. Freedom is not destroyed when income and wealth are consciously balanced, freedom is made possible and enhanced. We are traveling backwards on the path towards Mexico, and backwards towards the slave days of the ancient Roman Empire.

____________________________

I was reading the work of Paul Buchheit this morning, and that is what got me started. He digs out important facts that help to dispel the pall of ignorance afflicting this nation. See his other articles. 

_____________________________ 

Campaign funding: 

The Open Secrets web page shows that $3.338 billion was raised for the 2012 elections. A third came from donations greater than $10,000, another third  between $200 and $10,000, and the last third were amounts less than $200. http://www.opensecrets.org/overview/donordemographics.php ---

Another report from Demos shows that almost $600 million, nearly half of the $1.28 billion in "outside spending" campaign donations came in amounts larger than $100,000. (See http://www.demos.org/publication/election-spending-2012-post-election-analysis-federal-election-commission-data) 

Therefore over one sixth of all donations came in amounts above $100,000. 

The "outside spending" is not well explained in this report, but it means not candidate spending and not party spending. See this Open Secrets page at bottom: http://www.opensecrets.org/pres12/index.php --- and this page

http://www.opensecrets.org/overview/donordemographics.php

Total donations were $3.3 billion of which $1.28 billion was "outside spending".

Over 121,000,000 voters cast ballots, about 150,000 contributers gave more than $200, which is about 0.1% of voters. Less than 2,000 gave above $100,000 which amounted to a sixth of all donations.  

Is it any wonder the politicians do not listen to the majority? 

Dollarocracy is the recent book describing the $10 billion  perversion of democracy by money. Robert McChesney and John Nichols, veteran journalists, expose the "money and media complex" that excludes all voices that have no money behind them. Here's the web page: Dollarocracy. 

___________________________________

Here’s a comment I left at the end of an article I read:

The Real Heart and Soul of the Economy 

The "heart and soul of the economy" is the confidence that our nation provides equal opportunity, shared prosperity and that  workers receive a just share of gains. I'm very impressed with the article, but since 2000 the employment to population ratio has dropped off by 6.1%, equal to about 15 million who would be employed today if we maintained that high ratio of 2000. That's an additional 10% of people at work. Wages would also be higher with a tighter labor market. Since December 2000 the private sector employment has grown by only 1.8 million, about 12,000 a month on average, while over 30 million increased the "working age" population. That means the economy is short over 18 million jobs given normal participation and employment rates. This means, again, instead of currently employing 143 million daily the economy would employ 161 million. Over the past 30 years the portion of national income going to the lower-earning 80% of workers has dropped from 57% to 47%, most of the shift went to the top-earning 1%, using the well-known CBO study. National income is around $13 trillion so a 10% shift is $1.3 trillion, and divided evenly among let's say 92 million lower-earning households (representing the lower-earning 80%) that's $14,130 more income per family per year on average. That would raise median household income to about $64,000 -- the point I'm making is that the economy has suffered structural damage in the past 30 years, and repairing the damage would have far greater benefit than the tax and healthcare improvements you have mentioned and  made a very strong case for. Just a suggestion. Excellent article.

_____________________________________
Here's a link to the Congressional Progressive Caucus' THE BACK TO WORK BUDGET for 2014. Some 35% of Democratic Party members of the House of Representatives are part of the CPC, and that means 16% of all House reps are members. This budget makes a pretty thorough case for many of the improvements this nation's economy needs.     
Here is an article about U.S. investment decline since 2000 by Gerald Friedman from UMass: here. And I left a comment.  

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