16.0% of Americans lived in official poverty in 2010, according to the updated poverty report. But the poverty rate would be 12% higher, at 28.6%, except for government programs like Social Security and Earned Income Tax Credits.   
                 and 
Half of the U.S. Households Have $1 of Income while the other Half Has $4, after all taxes and transfers, according to a CBO report. 
                and
Half of all the 150 million workers earn $1 while the other half earn $7 according to a Social Security Administration report. I know that sounds preposterous, but if you take a long look, though incredible, it's true.  

I know it looks like a difficult read, and it is. You just saw links to 3 reports. It get complicated. These figures are worth the effort if only to convince you of the need for a government jobs program. 
When one looks into the inequality issue one finds some astonishing things. 


On average, while half of US households receive $1 of income, 
another half of US households receives $4 of income. This is after government taxes and transfers according to the CBO. 

This ratio, 1 to 4, comes from the Congressional Budget Office report of October 2011, "Trends in Distribution of Household Income Between 1979 and 2007". (See the summary and the full report.)


Before taxes and transfers the ratio is 1 to 6.3 (per the CBO report). 
Before taxes and transfers, the poverty rate in the U.S. would be 28.6%, not 15.2% (see this report -- just above figure 2, or see updated report linked at top paragraph). The Social Security program reduces the overall poverty rate by 6% (see this report). Imagine, two of seven Americans would live in poverty, but for the transfer programs even though the nation's economy generates $46,000 per human being every year.   


The income ratio of the lower 50% to the upper 50%  stands at 1 to 6.8 if one took the pre-tax figures from the IRS (as reported by the Tax Foundation here -- see Adjusted Gross Income of Taxpayers in Various Income Brackets, 1980-2009) that show the AGI, adjusted gross income, for the lower half of tax filers was, on average, $15,291 and the average income for the "above 50%" tax filer was $98,128 -- this is a ratio of 1 to 6.8.


But the pre-tax and pre-transfer incomes from the CBO report yields a ratio of 1 to 5. (see page 8) But after all taxes and transfers, the 1 to 4 ratio holds. The pre-tax and pre-transfer incomes per ascending quintiles is 2, 7, 12, 19, and 60. That is, the highest quintile received 60% of all income, pre-tax. The highest 1% received 21% of all income. The post-tax and post-transfer income share per ascending quintiles is 4, 9, 14, 20, and 53. That is the highest 20% of households received 53% of all income, post-tax. The highest 1% received 17%. 
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Inequality Strangles Economic Growth 
Now almost 1 in 6 live in official poverty. It would be 2 in 7 except for government transfers and programs. We have fewer private sector employees in 2011 than we had in 2000, 110 million then and 109 million now.

Chart 3. Private Sector Job Growth (10-year moving average annual percent growth)

Source: Calculated from All Employees: Total Private Industries (USPRIV), downloaded from St. Louis Federal Reserve FRED database, http://research.stlouisfed.org.

This comes from the Monthly Review article by Fred Magdoff, June 2011. The next comes from Business Week magazine, Sept. 2009. 



There are 154 million workers, 140 million are working on a daily basis (with 9% unemployed). Together they create an output product worth $15 trillion, and each worker on average contributes $109,000, (according to the Federal Reserve Bank of San Francisco). 

There are 312 million humans, and 150 million salary and wage earners, and 117 million households. 
The average household income for the middle quintile is $40,400. 
The average income for the lower-half of households is $23,040 according to Citizens for Tax Justice.  

The higher-half average is 114,760.

The ratio is 1 to 5. 
And the household average for all is $68,900. Excluding the top one percent the average is 56,200. 

Not to confuse the reader, the median individual worker median is, according to the Social Security Administration, $23,632/year among 150 million workers. Half earn less than $23,632, and that lower  half earn only 12.3% of all wage and salary income. A quick look may prove to the disbelieving reader that assertion. (I discussed this report in the previous blog post. It is worth looking at because, as I mentioned, it shows that half or 75 million workers, have $1 of wage and salary income while the other half earn $7. This is a long and difficult issue which I will write about in future blog postings.) 


But for now, I'll use the average income for the middle 20% of households, from Citizens for Tax Justice, $40,400/year, while their average (not median) household income amount is $68,900. The SSA median for individual workers, $26,362, reflects worker payroll income only. The $40,400 figure is apparently an average for the middle quintile of households. This amount is also near the average mean annual income of full-time year-round workers, $44,410, according to the US Census, while they report a median hourly rate of  $16.27, equivalent to $33,840 a year if working full-time, which is generally not the case. Half of workers earn less than $26,362 and earn only 12.3% of all payroll income.  

Using the figures from the Citizens for Tax Justice, the average for the middle 20% is $40,400, and the average income is $68,900. (The U.S. Census also reports a "mean total income" of $68,827 for 2009. Their median for households is $49,777. 


The average income for the lower 50% of households is $23,040 according to CTJ figures. And the average income for the households in the higher-earning 50% is  $114,760. This is the 1 to 5 ratio I mention above. This is pre-tax income and is consistent with the CBO report. 

The main issue and question is: how can the lower earning workers afford to buy the products they are creating? 

If the worker earns $1 while creating output worth greater than $1, how can he buy what he creates?  Owners must layoff  workers. And the cycle spirals to destruction.  


Bureau of Labor Statistics reports between 2007-2009  8.8 million workers lost their jobs, 5.7% of the labor force. Some 15.43 million were "permanently dislocated from" their jobs and only 49% found re-employment, according to this report. The recovery as of October 2011, 2.3 million jobs have been recovered. When enough workers are laid off, falling income and falling purchasing power "destroys capital". "Income destroys capital" -- meaning that capital assets --- plant, machinery, equipment, real estate,  hardware and software --- are lost, and the asset base (capital) begins to shrink. 

Martin Wolff used this phrase in an interview with Doug Henwood, and it stuck with me. "Income destroys capital" Wolff said as a last and worst possible outcome to our economic downturn. 

The last option is a public jobs program such as this one by Rutgers professor Philip Harvey, or this one by "Dr. Doom" aka Nouriel Roubini. The Great Depression did end in 1937 with the WPA and the New Deal, according to this report. After the unemployment rate dropped from 25% to 9.6%, Roosevelt cut back on the program and the unemployment rose back to 18%. 
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Gini Coefficient Index - Measuring Inequality

Before taxes and transfers the US Gini coefficient (that rate of inequality where the higher number means greater inequality) stands at 0.590, according to the CBO study, Appendix B. In comparison the Gini for Brazil stands at 0.55 (see this report). After taxes and transfers US gini stands at 0.483 according to the CBO, still the highest inequality among developed nations.  

This CBO report states that pre-tax Gini coefficient was 0.590, and the post-tax Gini was 0.483. (page Appendix B) It further states, in so many words, if the top 1% share of post-tax income were reduced from 17% to 16%, and then added to the income of the lowest 20% of households, that shift would "boost income in the bottom quintile by almost 50 percent."  Average household income for the lower-earning 20% of households in 2010 would rise from $12,000 to $18,000. 


Following this same redistribution logic, if the top 1% were receiving their 1979 share of 8%, and their 9% reduction were applied to the lower 80%, then 80% of households would receive almost a 25% increase in income (their share would increase from 40% of all income to 50% of all income). The household median would rise from $49,775 to $62,500, and 80% of households would enjoy a 25% boost. Boosting incomes like this would restore growth and create a self-sustaining recovery, as it did after World War II. Morally it would create a more just society. It might empty the prisons. Perhaps one third of the deaths are a result of inequality, according to one study. So perhaps such a shift in income would raise the life-span as well as the quality of life for a great majority. But the only way to get there, I believe, is through government public employment programs.  

Income for half is $1, and the income for the other half is $4 (post tax and transfer, CBO data). The U.S. has the highest inequality, as measured by the Gini coefficient, of all industrially developed countries. The recent Congressional Budget Office report states (page 8) the post-tax Gini is 0.489 and pre-tax of 0.590. The U.N. rates nations according to income Gini. Our imbalanced ratio is falling to the levels of Argentina - 48.8, Brazil - 55.0, Costa Rica - 48.9,  Mexico - 51.6, China - 46.9. The U.S. level is the highest among developed nations with Japan at 24.9 and Germany at 28.3 and France at 32.7. I have to warn readers that more recent U.N. reports differ from those stated at Wikipedia. But the CBO figure, 0.489, is for 2007 reported in November 2011. We are much closer to Mexican inequality levels than French inequality levels.  

To further emphasize the point. Look at the ratios between the lower-earning 10% of households vs. the highest-earning 10%. The U.S. ratio is 15.9. The Japanese ratio is 4.5. Germany's is 6.9, and France's is 9.1. Mexico - 21.6, China - 21.6, Brazil 40.6, Argentina - 31.6, Costa Rica - 23.4. We are about half-way between the French inequality and Mexican inequality.  


And a further emphasis comes with a look at wealth distribution from a study in 2008 by the UN University World Institute. Wealth is not so unequally distributed in any country save a bare few. The U.S. gini is 0.801, other's gini range in the 0.6 or 0.7 level. 
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Below a Congressional Budget Office graph, courtesy of Inequality.org 

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CBO Report on Income Distribution

The recent report from the Congressional Budget Office, "Trends in the Distribution of Household Income Between 1979 and 2007" is the best report to date on income distribution. Their distribution figures match those of the Tax Policy Center from 2006. The breakdown of pre-tax income is on page 8, Box 2, with an explanation of the Gini coefficient, which for 2007 was 0.489. The distribution of pre-tax "market" income per ascending quintile (on page 8) was 2%, 7%, 12%, 19%, and 60% (the last 20% of households received 60% of pre-tax income). The post-tax distribution per ascending quintile was 4%, 9%, 14%, 20%, and 53%. (The highest-earning 20% of households received 53% of post-tax income.) The pre-tax income of the top 1% equaled 21% of the total income, which is also the exact pre-tax income of the lower-earning 60% of households. The post-tax income of the top 1% was 17%, which is approximately equal to the combined incomes of the lower-earning 44% of households. Consistent with this distribution is the statement, "For every $1 of income received by the 51 million households in the lower-earning 44% of households, the 1.2 million households in the top-earning 1% of households receives $44 of income. The two groups received equal incomes, 17%  and 17% of post-tax income." 

This is the fuel of recent occupy Wall Street and other protests. It's also the rot that will bring down the entire economy. 

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Hard Times  --- the Musical Version 

As Stephen Foster sang, "Many days you have lingered around my cabin door, Oh, hard times, come again no more."

Listen to James Taylor sing "Hard Times Come Again No More", with Yo Yo Ma accompanying Taylor ---

http://www.youtube.com/watch?v=pyV60kTvEFE

1.

Let us pause in life's pleasures and count its many tears,

While we all sup sorrow with the poor;

There's a song that will linger forever in our ears;

Oh hard times come again no more.

Chorus:

Tis the song, the sigh of the weary,

Hard Times, hard times, come again no more

Many days you have lingered around my cabin door;

Oh hard times come again no more.

2.

While we seek mirth and beauty and music light and gay,

There are frail forms fainting at the door;

Though their voices are silent, their pleading looks will say

Oh hard times come again no more.

Chorus

3.

There's a pale drooping maiden who toils her life away,

With a worn heart whose better days are o'er:

Though her voice would be merry, 'tis sighing all the day,

Oh hard times come again no more.

Chorus

4.

Tis a sigh that is wafted across the troubled wave,

Tis a wail that is heard upon the shore

Tis a dirge that is murmured around the lowly grave

Oh hard times come again no more.

Chorus

This graph is inaccurate. In 1937 unemployment had dropped to 9.6% because of WPA employment that has not been properly assessed according to this source at New Deal 2.0. 


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Complex Addendum Note

U.S. Census, Mean Total Income, 2009 = $68,827

http://www.census.gov/hhes/www/cpstables/032010/rdcall/1_001.htm

The Census data is grouped by household, not individual worker income, but the mean average of both are identical. The medians are much different, $49,777 for households, $40,400 for individuals. Yet multiplying 117 million households times their median income of $49,777 yields approximately the same outcome as multiplying 150 million workers times their median income of $40,400. 

Nice inequality graph, CBO,  

http://www.economist.com/blogs/dailychart/2011/10/income-inequality-america

CBO report ---

http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf


From the Center for Budget and Policy Priorities and the Tax Policy Center:

Half of U.S. workers have incomes below $26,364, yet the average output per worker is $109,000 ---- please explain (see #3 below)
I often show on this site startling economic conditions, like the one above. This week I show four ideas and conditions. 

1.) FDR in 1938 takes on Fascism in the U.S. -- Will Obama?  

2.) The Real Unemployment Rate and the Misery Rate 

         (21.4% and 32.3%)

3.) The Sinking Median Income  ---

       $26,364 or less is the income of half of working America.
             75 million make more, 75 million make less. 

4.) Productivity Gains Over the Years and Middle Income Stagnation 

So much attention to economics in the country, happy days are : 

(Thank you Brian Narelle for the use of your cartoons  -- See his site here.)

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Here are four topics that are relevant to my thinking and their inter-relationship will become clear. 

1.) On April 29, 1938, Franklin Roosevelt addressed Congress about  

"Curbing Monopolies" in which he defines Fascism. 

"Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people.

The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is Fascism—ownership of Government by an individual, by a group, or by any other controlling private power.

The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.

Both lessons hit home.

Among us today a concentration of private power without equal in history is growing.

This concentration is seriously impairing the economic effectiveness of private enterprise as a way of providing employment for labor and capital and as a way of assuring a more equitable distribution of income and earnings among the people of the nation as a whole."

Read more at the American Presidency Project: http://www.presidency.ucsb.edu/ws/index.php?pid=15637#ixzz1c2UDu94B

There are fewer "private sector" workers today than in 2000, 11 years ago. Today there are 109 million, in 2000 there were 110 million. See this Bureau of Labor Statistics reference, and another BLS reference in section 2 just below. The population that makes up the labor force has grown by 33 million people, from 207 million to 240 -- and private sector employers have added a net ZERO new jobs in the past 11 years. This should concern everyone who lives in this country. See below for more about this.

I received the Roosevelt quote from the writings of John Weeks, a Socialist economist from Great Britain. (See the source.)

Wouldn't be pleasant to hear our president speak as FDR spoke, and even more pleasant to live in a country where most people knew what he was talking about?   

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2.)

         

21.3% -- the True Unemployment Rate   

32.2% -- the Misery Rate 

Since 1999 we have added a net zero to the number of private employees in the U.S.A. There were 109 million private sector workers in 1999, and there are still 109 million private sector workers in 2011 --- 12 years and no growth in the private employment sector. View the data here:

http://data.bls.gov/pdq/SurveyOutputServlet)

Since 1999 the population of potential workers -- everyone above 16 years old -- has grown by 33 million or by 16%, from 207 million to 240 million. Let us suppose that the labor force would have grown at the same rate as the working population. Then today there would be 20.5 million additional workers participating in the job market. But in fact the labor force participation number grew by only 15 million. Some 5.5 million workers are missing, people who chose not to enter the labor force. They are not counted in any BLS figures of unemployment or underemployment. That is an additional 3.2% added to the unemployment rate of 9.1%, or a total of 12.3% unemployed. 

(See BLS figures at http://www.bls.gov/cps/cpsaat1.pdf 

To that you can add the discouraged workers and the under-employed workers, an additional 9.3% to the 12.1%, for a total of 21.4% true unemployment. (See njfac.org/jobnews.html)

And that's not all. Add the additional 10.9% who work full-time and year-round in jobs that pay less than the official poverty rate for a family of four. Then you find that 32.3% of working America are either 1) out of work, 2) can find only part-time work and want full-time, 3) have dropped out of the job market, or 4) have a lousy paying job. Find the figures for all these under- and unemployed here. 

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3.)
Distribution Figures 

$47,000 --- The economy generates over $47,000 of output per citizen, man, woman, child, and elderly person --- over $47,000 per capita. 

$109,000 --- It generates over $109,000 of output per worker (see http://www.frbsf.org/csip/data/charts/chart17b.cfm). 

$26,364 --- But the median wage, according to a very recent report by the Social Security Administration is now $26,364. See the David Cay Johnson article . The net compensation for all 150.4 million payroll stubs is $6 trillion, which averages $40,000 per worker ($39,959.30 to quote the SSA exactly). This figure includes only what is reported on the W-2 paycheck statement, and does not include compensation from capital gains and business income, about 18% of all income. Nor does it report pension income, nor government transfers such as Earned Income Tax Credit or Temporary Aid to Needy Families. This is pre-tax income for wage earners. The figures on wages are "awful" according to Johnson. Worse than last year. 

The Citizens for Tax Justice site reports a mean average income at $68,900 for 2009. The U.S. Census reports a mean average income for 153 million individuals as $42,466. The reports are widely different. I expect that the U.S. Census just does not capture all income in their figures. The CTJ figure may include more income from the very highest 1% of earners, driving $42,466 to $68,900. U. C. Berkeley professor Emmanuel Saez reported that 23.5% of all income went to the top 1% in 2007, exceeding the pre-tax income of 60% of households. Another problem is an explanation for the low median figure of $26,362. One conjecture is that pension income may be very large, driving upwards the mean average, separating the $26,362 median from the $42,466 mean. The questions abound, and they are important because, in the words of professor Robert Wade, "I have suggested, first that the West is likely to experience several more years of slow and erratic growth; and second, that another big financial crisis within a decde is quite possible. . . . The second prediction rests on the failure to push through reforms to finance that would stamp on the practices that produced the current crisis, and to change the incentive structure facing the banks, with its built-in bias toward moral hazard. It also rests on factor beyond the financial sector. The latter high top-end income and wealth inequality."

"Anyone who wants to understand the enduring nature of Occupy Wall Street and similar protests across the country need only look at the first official data on 2010 paychecks, which the U.S. government posted on the Internet on Wednesday," says Johnson. 

The Tax Policy Center generated a breakdown of income, its sources and distribution, in 2006.  The State of Working America, 2006/2007, published it on page 79. The lower-earning 80% of households received 40.0% of all pre-tax income, the top-earning 20% received 60.3% (as you can easily see if you link to the table). 

This is pre-tax income. I made a point to calculate the fraction of total income that the lower-earning 80% received through wages and salaries: it was 28.2% of total 100% of personal income. About 80% of the work force are non-supervisory workers. 28.2% is their labor-reward share of all income that our economy produces. The labor-reward share for the top 20% is 36.3% of total income, 8.1% higher than all 80%'s share. The lower-80% receive 11.8% of their income from pension and other sources. 

Using the Tax Policy Center's numbers, for every $1 of income received by the lower 80%, $6 of income are received by the top-earning 20% of households. (When 40 is divided by 80, each receives 0.5, and when 20 is divided 60, each receives 3.0. The ratio is 1 to 6.) The figures from David Cay Johnson are alarming, but not as alarming as the Tax Policy Center. The Johnson figures do not include the capital and business income that goes almost entirely to the top 20%, mostly the top-most 5% who own 72% of all financial assets.   

__________________________

See the report by Citizens for Tax Justice on overall effective tax rates. You will find average incomes for each 20% grouping and the overall tax bite each income group pays effectively or actually, not just the nominal rate.   

_______________________________

4.)

Workers Produce More, But Wages Stagnate 

What would be the median worker's income if wages had matched productivity? Les Leopold writing at Alternet, 10/23/11, gives his best analytical guess: 

I calculate that the median would have risen from $31,824 to $61,360. That's about  double.  Imagine your neighbor has a normal job, but he earns $60,000 instead of $30,000. It is possible even still. See my February essay. Read  this link to the chapter "What Should Be Done: A New Deal for the Middle Class" in Aftershock by Robert Reich. Les Leopold uses weekly wages to find the median, not annual median as David Cay Johnson reports from the Social Security Administration. Thanks, Les. 

The same graph but done by the Economic Policy Institute at their site State of Working America looks like this:


The median compensation increased by about 15% and productivity increased by 92%. Using the Social Security Administration figure for median income, $26,364 in 2010, then the median would increase by 77% to $46,600. Half of 150 million workers would earn less than $46,600.

And finally, the Congressional Budget Office presented their study last week that showed the changes in the sizes of the income-pie-slice received by different income groups. Their graph shows the top one percent getting most if not all the economy's increase, while the other income quintiles shrunk in relative size. Note: "After Transfers and Federal Taxes". That would be transfers like welfare and Earned Income Tax Credits.



_________________________________

Now, why do I do all this calculating? The same reason people are sleeping outside at the Occupy sites. The economic arrangements are perverted. On top of this we send about $1.4 billion a day over seas to our commercial foreign trade partners. For four years it was over $2 billion a day. The wages for manufacturing labor in China is reported by the Department of Labor, Monthly Labor Review, March 2011, to be $1.36 an hour, and in the U.S. it's $34 an hour. We have an uphill fight to stabilize our median income. I think the population should respond intelligently by viewing the facts as clearly as they possibly can. That's why I write. 

___________________________________
Dollars and Sense Magazine published an article that summarizes our problems and presents solutions that match what I have presented on this blog. The author is Katherine Sciacchitano in the September/October 2011 issue. This is a short quote: "It took the New Deal to get the economy growing. From 1933 through the end of the Depression, GDP rose and fell with government spending. By 1936 unemployment had fallen from 23% to 9%."

How could unemployment fall so rapidly? Answer: public job creation. SeeRutgers  University professor Philip Harvey's solution and follow the campaign at the Full Employment web page.
_______________________________________________

THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, December of 2010. We can do two major things in this nation: we can make sure all jobs pay a decent wage -- they don't, believe me --- and democratically we can create jobs for everyone.

                            

A Very Short Course in the U.S. Economy 

Often while talking on the phone to a friend I realize that he or she has a very sketchy concept of the economy and how to solve its problems. So I have put together some quick graphics, about 7 of them from web pages, with a short narrative connecting the story, plus some solutions. The reader can flip through the pages and graphs, and come out with an improved vista._________________________________

Photo originates here: New Deal 2.0, a good source. 
_________________________________
(Note: On October 15, 2011 my friend sent me a link to an article that is better than my summary here. 
The title is "Here's What the Wall Street Protesters Are So Angry About . . ." Be sure to also read that article.) 
__________________________________

The general picture is that we've gone through several decades of growing income and wealth disparity while at the same time degrading the structure of the economy. We may never recover --- I would not joke about it --- and if we do we'll have to make some big changes. It's all here in a flash. 

1.) Income disparity

What has been the economy's problem? A look at three graphs explains the inequality problem. The first and second show changes in income distribution 1979 to 2007; the third shows changes in wealth distribution, 1983 to 2009. 

This comes from the Economic Policy Institute, a report by Lawrence Mishel and Josh Bivens, Oct 26, 2011. See the entire article here. 

The next graph on income gains comes from Jared Bernstein's blog, titled ""The Policy Backdrop of Inequality and It Implications for 'Class Warfare'". His source is the Congressional Budget Office.

Imagine a pie cut into five pieces each representing the amount of income distributed to the five groups of 20% households. Over time the pieces get bigger and/or smaller.  The top 20% piece is sub-divided. The top-earning 1% fared well over the past decades, their piece of pie grew from 7.5% to 17.1% (post-tax). The sizes of all four lower-earning 20% groups, representing 80% of the population, shrunk. That is the gist of this graph. It fails to show the relative sizes before or after the comparison, showing only the changes. According to the Tax Policy Center, the sizes (of the "income pie") per each 20 percentile household group in 2006 was 2.5%, 6.4%, 11.4%, 19.8% and 60.3% for the incomes of the five quintiles of households. This is pre-tax income. The top 20% received 60.3%. See my other essay previous to this one for similar comparisons. The income to the top 1% was approximately equal to the combined incomes of the lower-earning 60% of households.
See the Tax Policy Center for actual figures.

2. Wealth Disparity
Top 20% = yellow
Bottom 20% = not visible or 0.1%
20% to 40% = not visible or 0.2%
40% to 60% = 4%
60% to 80% = 11%                               (Source PBS News Hour)

For a full report on wealth see State of Working America's Wealth. 
The graph on household wealth gains, 1983 to 2007, shows the same picture. It derives from Lawrence Mishel at the Economic Policy Intitute, September 15, 2011. The bottom 60% of households have lost savings since 1983. This is consistent with U.C. Berkeley professor Sylvia Allegretto's study that showed the bottom 80% of households on average lost 40% of their savings between 2007-2009. 

Once again, the pie chart showing wealth distribution is missing. But here are some aids. State of Working America's Wealth, a 2011 report by U.C. Berkeley professor Sylvia Allegretto, pages 4 and 5, shows the relative sizes. The lower-wealth-holding 60% own a mere 2.2% of the total wealth. 
Mother Jones magazine ran an article, "It's the Inequality, Stupid" in March/April 2011. Check out the graphs. 

Combine this with the knowledge that the GDP/capita (the economic output per citizen) in the nation has more than doubled (an increase of 100%) since 1963, while the typical family or household's income has increased by 22% from 1967 to 2003. The economy more than doubled, the typical household saw income rising by a quarter. The St. Louis Federal Reserve Bank provides the first graph showing an amazing increase in output per human being. The next graph, from the U.S. Census, shows a less amazing  distribution of output where the median household barely grows its income. 

Real GDP per Capita in the United States (USARGDPC)

Edit Graph    Print    PDF    Save

 The majority of Americans did not experience the full benefits of a growing economy, in fact in our present decline, a majority are seeing declines in wealth back to levels of 1983, while income has not budged for individuals since the mid 1970s.

Now, if you are interested in learning about the recent recession, you can catch many graphs at this site, "The Legacy of the Great Recession" at Center for Budget and Policy Priorities. But you might skip that to avoid overload. But if you crave overload, look at Inequality.org, part of Demos.org. 

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What is the solution:

Public Employment

Public employment worked in the 1930s and '40s, it may be our last hope to end the epidemic of unemployment and underemployment. About 30% of workers, or 45 million, are either out of work (9.2%), under-employed (5.8%), discouraged and dropped out (4.2%), or working full-time year-round for below poverty level wages (10.9%). It is a sick economy. 

There are plans to create public jobs, professor Philip Harvey, Rutgers University, published on at Demos.org in January 2011, "Back to Work". 

On page 11, Table 3, you'll see Harvey's plan would create 1,000,000 jobs plus 414,000 additional private sector jobs for a net cost of $28.6 billion. Harvey states, page 12, "We currently need about 8.2 million more jobs to reduce the nation's unemployment rate to 4.5%. Creating that many jobs in a program like the one described in Table 3 would require a net increase in federal spending of about $235 billion during the first year of the JLRS initiative. If the Bush-era tax cuts had been allowed to expire at the end of 2010, the federal government would have collected about $295 billion in additional revenue during 2011." I recommend readers look at the graph on page 2 and the table on page 11. 

Marshall Auerback at New Deal 2.0 writes (in The Real Lesson from the Great Depression) that the "Roosevelt administration reduced unemployment from 25 per cent in 1933 to 9.6% per cent in 1936, up to 13 per cent in 1938 (due largely to a reversal of the fiscal activism which had characterized FDR’s first term in office), back to less than 1 per cent by the time the U.S. was plunged into the Second World War at the end of 1941."

There is no reason to review Auerback's essay in a very "short course", but you will be interested to know that the public jobs program built real structures, "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!"

Restore Manufacturing

And finally look at Ron Baiman's essay of September 7, 2011, "What We Need to Do to Revive the Economy". He states that government spending is not enough to revive the economy, it needs restructuring. "In the absence of restructuring there is no magic date in the future after which point the economy will be able to grow without public or private deficits.5

The need for fundamental restructuring to revive our economy makes our current downturn more like a "Depression" than a "Recession".  . . . The U.S. economy suffers from major macroeconomic imbalances and a three decade loss of productive capacity that cannot be corrected by a decade long spree of public infrastructure spending (though this would certainly help in the short-term and the long- term)."  

He further states, 

"We don't need to "shrink the size of the public sector" ([which is] what the real underlying "deficit" debate is all about about). Rather, we need to dramatically increase it. We need to vastly expand our taxing and spending in order to reorient our economy away from a rentier [finance dominated] and back to a productive [manufacturing] and balanced advanced economy configuration by enacting a massive federal jobs program that will expand public and private sector employment in: a) social services, b) infrastructure, c) new green technologies (CPEG 2009, 2011). We desperately need a new New Deal."

The graphs on unemployment, page 3, and the conclusion beginning on page 5 are very instructive. 

Also look at the articles at New Deal 2.0 by William Lazonick and John Rynn dealing with restoring manufacturing industry to the U.S. 

At this point you might try my essay, February 2011, in which I try to offer 6 or 7 indispensable changes needed. It's a "basic solutions" essay. 

In Short

There is no happy ending. It is a royal mess. 

The economy should not serve only those who seek fabulous fortune. Greed has perverted the society. What if the GDP/capita graph (from the St. Louis FRB) that showed 100% growth between 1963 and 2007 had matched the median household income graph? And what if the other wealth and income graphs had even growth for all income sectors? And why shouldn't they? Between 1947 and 1979 those graphs did match; there was even growth for all income sectors. 



In Contrast, the years since 1979 are starkly different:

Source: U.S. Census Bureau, Historical Income Tables: Families, Table F-3 (for income changes) and Table F-1 (for income ranges in 2009 dollars).

These two graphs come from Inequality.org, and originate at the  Economic Policy Institute. The EPI created a web page called State of Working America.

See this interactive graph at State of Working America, and compare the share for the bottom 90% before and after 1969. You will notice as you swing the pointer pre-1969 that the blue sector is visible, indicating the 90% of households made income gains. What do you see when you swing the pointer post-1969?  We had growth for all sectors 1947 - 1979, but the top earners still captured half or more the growth. The income tax bracket was over 90% on income above $200,000 from 1951 to 1964. (See this table.) Or we could just establish a maximum wage set at 20 times the median household income. There are plenty of solutions for curbing inequality. 

Ben Leet  

You finished this session. Now go to the next:
THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, December of 2010. We can do two major things in this nation: we can make sure all jobs pay a decent wage -- they don't, believe me --- and democratically we can create jobs for everyone.
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I left this comment to the article I cited above, "Here's What the Wall Street Protesters Are So Angry About . . ." Here it is:

Excellent. Add this: 40% of the savings of the typical family (the median household) were lost between 2007-2009, their savings dropped from $105,000 to $65,000, down to savings level below 1983 levels. This is according to Sylvia Allegretto, U.C. Berkeley professor, writing in State of Working America's Wealth. The wealthiest 1% own 225 times more than the "typical" or median family. 1 in 4 households have "zero or negative" net worth (savings) and another 1/8 have less than $12,500. Our economy generates over $47,000 per year yet 15% of the population lives in poverty. The St. Louis Fed also has a chart showing that the average worker contributes over $100,000 yearly in output to the economy, but the median income is around $30,000.  And the National Bureau of Economic Research conducted a survey and half the adults said they would not be able to handle a $2,000 emergency within 30 days without borrowing or selling something. And add that about 30% of the young people below 18 years old get their food from the Food Stamp program. The economy is a mess. The Labor Department reports that manufacturing workers in China earn $1.36 an hour, and in the U.S. $34 an hour or about $70,000 a year. This is why 1/3rd of U.S. manufacturing jobs were lost in the past ten years. In fact, in the year 2000 the economy had more private sector employment, 110 million workers, than today in 2011, 109 million workers. Protest or lose what little you have. Excellent report. See my blog, http://benL8.blogspot.com for more. Excellent report here. 

This photo credits: http://www.socialistproject.ca/bullet/553.php -- a good source of socialist thought.