Category: interesting

America Without a Middle Class

Can you imagine an America without a strong middle class?
If you can, would it still be America as we know it?

Pundits talk about “populist rage” as a way to trivialize the anger and fear coursing through the middle class. But they have it wrong.

Elizabeth Warren
Chair of the Congressional Oversight Panel

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can’t make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.

Families have survived the ups and downs of economic booms and busts for a long time, but the fall-behind during the busts has gotten worse while the surge-ahead during the booms has stalled out. In the boom of the 1960s, for example, median family income jumped by 33% (adjusted for inflation). But the boom of the 2000s resulted in an almost-imperceptible 1.6% increase for the typical family. While Wall Street executives and others who owned lots of stock celebrated how good the recovery was for them, middle class families were left empty-handed.

The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s.

But core expenses kept going up. By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago — for a house that was, on average, only ten percent bigger and 25 years older. They also had to pay twice as much to hang on to their health insurance.

To cope, millions of families put a second parent into the workforce. But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder. Even with two incomes, they tightened their belts. Families today spend less than they did a generation ago on food, clothing, furniture, appliances, and other flexible purchases — but it hasn’t been enough to save them. Today’s families have spent all their income, have spent all their savings, and have gone into debt to pay for college, to cover serious medical problems, and just to stay afloat a little while longer.

UK’s Telegraph:

“We started our research seeking men in their 20s who had never consumed pornography,” said Professor Simon Louis Lajeunesse. “We couldn’t find any.”

The study found that men watched pornography that matched their own image of sexuality, and quickly discarded material they found offensive or distasteful.

On average, they first watched pornography when they were 10 years old.

“Not one subject had a pathological sexuality.”

Robert Brenner’s Into the Eye of the Storm:

Bubbles were no accident.

The massive expansion of credit was the only way to cope with manufacturing overcapacity.

If this is correct, there is no easy fix for our problems.

The blowing of asset bubbles is not an unfortunate side effect of regulatory capture or Wall Street’s greed.

It was the only way governments could keep economic growth from falling below politically dangerous levels once traditional Keynesian methods of fiscal stimulus through deficit spending were no longer adequate to compensate for the sclerosis at the heart of the advanced capitalist economies: “worsening difficulties with profitability and capital accumulation.”

via Yves Smith.

On a general point, here’s a brain dial calibration, something to re-frame the actual world from the pseudo-world that preoccupies our daily politics.

Our media impresses politics and governments as if the entire globe is hinged on policies and statements of a few capitals and committees …or pulpits and pundits. Perhaps because profit margins are greater when managing only a few offices and stringers.

How much do we know about the real world?

Stock and currency markets turn over about $900 trillion each year and derivatives another $625 trillion while Congress frets over healthcare crippling us at well under $1 trillion. I don’t have the numbers handy on industrial transactions, inter-port carry, etc. etc.

We are uninformed.

In 1958, financial sector debt was 6% of GDP. Last year, it was 115% of GDP. Compare this to the day to day drumming about federal government debt.

But if the amount of DNA evidence is too small to be definitive, because we do that with dinosaurs already, should Amanda Knox be convicted of murder?

Yes, forensic DNA can now be built from the DNA of everyone.

I said, building evidence from the DNA of anyone.

Dr Karl’s Great Moments In Science.

Let’s look at these myth about the hyena, one at a time.

One, the horrible hyena is a pussycat.

NY Times:

The average person experiences loneliness about 48 days a year, but having a lonely friend can add 17 days of loneliness annually.

By comparison, every additional friend can decrease loneliness by about 5 percent, which translates to about two and a half fewer lonely days a year.

Chris Nelder’s frank and conversational piece on moves the big money is making into hard assets:

America is quickly learning that a purely service economy is simply not sustainable.

And the final pillar that the dollar stands on — its role as the world’s reserve currency, and the primary oil trading currency — is slowly eroding. Whether you argue it on the basis of money supply or fundamental value, the dollar is going to remain weak and under attack.

He was an angry, unhappy and frustrated man who was not able to control his emotions or his hands.

As a child I witnessed his repeated violence against my mother, and the terror and misery he caused was such that, if I felt I could have succeeded, I would have killed him. If my mother had attempted it, I would have held him down.

For those who struggle to comprehend these feelings in a child, imagine living in an environment of emotional unpredictability, danger and humiliation week after week, year after year, from the age of seven. My childish instinct was to protect my mother, but the man hurting her was my father, whom I respected, admired and feared.

Patrick Stewart on violence at home:

The situation was barely tolerable: I witnessed terrible things, which I knew were wrong, but there was nowhere to go for help.

Worse, there were those who condoned the abuse. I heard police or ambulancemen, standing in our house, say, “She must have provoked him,” or, “Mrs Stewart, it takes two to make a fight.” They had no idea. The truth is my mother did nothing to deserve the violence she endured.

She did not provoke my father, and even if she had, violence is an unacceptable way of dealing with conflict. Violence is a choice a man makes and he alone is responsible for it.

No one came to help. No adult stepped in and took charge.

Where you’re born, where you live, determines what will kill you?

Harvard School of Public Health: The “Stroke Belt” of the American South continues its tight grip on stroke risk among its native population, according to a new analysis of stroke mortality.

People born in the region and living there as adults still had a one-third greater risk than the general population.

Dr. Howard Kirshner: a hefty slide presentation with a 45 minute podcast.

Reuters reports: “Being born in one of the seven southeastern U.S. states making up the “Stroke Belt” increased a person’s likelihood of suffering a deadly stroke, whether or not they still lived in one of these states.”

…a giant captive entertainment demographic that exists solely to be manipulated for ratings and ad revenue…

Matt Taibbi:

For those of you who can’t connect the dots…

You teabaggers are in the process of being marginalized by your own ostensible party leaders in exactly the same way the anti-war crowd was abandoned by the Democratic party elders in the earlier part of this decade. Like the antiwar left, you have been deemed a threat to your own party’s “winnability.”

And do you know what that means? That means that just as the antiwar crowd spent years being painted by the national press as weepy, unpatriotic pussies whose enthusiastic support is toxic to any serious presidential aspirant, so too will all of you afternoon-radio ignoramuses who seem bent on spending the next three years kicking and screaming your way up the eternal asshole of white resentment now find yourself and your political champions painted as knee-jerk loonies whose rabid irrationality is undeserving of the political center.

Matt Taibbi:

…when the press corps decides to abandon all restraint and go for the head shot, it usually tells us a lot more about the reporters’ bosses and what they’re thinking than it does about the reporters themselves.

Your average political reporter is a spineless dweeb who went to all the best schools and made it to that privileged seat inside the campaign-trail ropeline by being keenly sensitive to the editorial wishes of his social and professional superiors.

When their bosses were for the war, they were for the war, and they battered any candidate who was “weak on foreign policy.” When the political winds shifted four years later and the consensus inside the Beltway suddenly was that Iraq had been a hideous mistake, the campaign-trail reporters mysteriously started sounding like Sixties peaceniks…

Ed at Gin & Tacos:

It is not really debatable that credit card issuers make very little money off of the wealthy.

For people with ample resources who pay their balance monthly, the only way a credit card company is making money is from an annual fee (which is a drop in the bucket to the wealthy) and merchant fees for purchases, usually 3%. There’s no reason to give a rich person a credit card beyond the hope that they will buy a lot of expensive things and rack up fees at the point of sale – fees that are paid by retailers and are invisible to consumers.

No, rich people with $250,000 credit limits aren’t of much use. Giving a bunch of poor people a $2,000 limit and then assholing them with late fees and 28% APRs is where it’s at.

This is common knowledge.

What is not as widely recognized is the redistributive effect.

Exorbitant interest rates on high-risk borrowers effectively subsidize the interest rates paid by the more affluent.

J. McManus at Hanley Wood Construction:

The thing we’re all left to worry about and somehow solve: The main economy has not started working yet.

It’s still stuck. The central banks’ monetary strategies may have been brilliant in reining national economies back from a too-well-imagined abyss. But, the continued erosion of the jobs universe directly correlated to the continued erosion of home values and residential real estate assets tell us the real [non-stimulus] economy is clogged up, still broken.

…
As we’ve written here, we think that Federal and state policy have done about all they’re going to be effective at doing. Recovery is really in the hands of those who survive and resurrect from the ashes.

Unity will get home builders farther right now than competing head to head with each other for the few home buyers out there. Foreclosure sales are the No. 1 competition for new home builders, not other new home builders.

A semi-related thought occurs to us on the 174th anniversary of the birth of Samuel Clemens, and it is this. He lost his job as a steamship pilot, which he was very good at and paid good money to learn to do. If he didn’t lose that job–because of the onset of the Civil War–we would not know the work of Mark Twain.

It’s America.

Thankfully, we can still hope that good can come of very troublesome times.

If you are tired of all of the nonsense about the recent climate nonsense.

Incentive-based carbon policy,

1. … would change people’s behavior (a lot),
2. … is cheaper than command-and-control,
3. … revenues don’t much matter,
4. … would lower overall economic activity (a little),
5. … also creates benefits.

Unusually frank interview with Howie Mandel:

Were you afraid of being being labeled crazy?

Yeah. In Middle America and corporate America, if in the course of a day you said, “I need Thursday afternoon off to go to the dentist,” nobody would even flinch. But if you said, “You know what, I need an hour off because I’m going to run to the psychiatrist,” your coworkers may not flinch outwardly, but you might see some ramifications later on. And even with nothing seemingly wrong, you go twice a year to your dentist to see if everything’s OK and get a cleaning, but God forbid you should just go and speak to somebody and say, “Is this normal that I’m reacting this way or I feel this kind of pressure or anxiety, or my relationship is a little tough right now, or I feel this kind of pressure at work?” just to make sure that you have the coping skills. And that’s whether you’ve got a label or you don’t have a label, whether it be OCD, depression, or you’re just anxious about something, or a family member has been diagnosed with something, or you lose somebody, or you’re feeling pressure at work.

I’m guessing this will be on the table soon enough:

Excessive leverage is highly destabilizing to the financial system.

Companies borrow, in part, because they believe that debt capital is cheaper than equity capital. That is certainly the case under the U.S. corporate tax system because interest is a deductible business expense in calculating income subject to tax whereas dividends are not deductible.

Interest deductibility could be phased out over the next 10 years.

Next year, 90 percent of interest would be deductible; the following year, 80 percent would be deductible, and so forth, until interest would no longer be deductible at all.

With this simple change, the federal government would encourage businesses and households to become less leveraged.

We have learned that leverage makes not only individual companies more vulnerable to failure but also the economy less stable.

We use tax laws all the time to promote socially desirable behavior; eliminating the deductibility of interest would reduce the risk of failure of large companies—especially, large firms—and thereby reduce the collateral damage inflicted by such failures.

The Obama administration’s fiscal boost program has also significantly helped the economy: aid to impacted states has been a big win, the jury is still out on the effect of the tax cuts in the stimulus, and the flow of government spending on a whole variety of relatively useful causes is in train and is boosting production and employment in the same way that everyone’s boost to spending boosts production and employment.

And the cost of carrying the extra debt incurred is extraordinarily low: $12 billion a year of extra taxes would be enough to finance the fiscal boost program at current interest rates, and for that cost American taxpayers will get an extra $1 trillion of produced goods and services and employment will be higher by about ten million job-years.

J. Bradford DeLong:

For two and a half centuries economists have believed that the flow of spending in an economy goes up whenever groups of people decide to spend more.

1. Sometimes and to some degree these increases show up as increases in prices
2. and sometimes and to some degree as increases in production and employment.
3. Sometimes these increases come because there is more spendable cash in the economy
4. and sometimes because changes in opportunity cost make people want to spend the cash they have more rapidly.

But always it has been that spending goes up whenever groups decide to spend more–and the government’s decisions to spend more are as good as anybody else’s, as good as the decisions of the mortgage companies and new homebuyers to spend more buying new houses during the housing bubble of the mid-2000s or of the princes of Silicon Valley to spend more building new companies during the dot-com bubble of the late-1990s.

Chicago economists’ arguments that fiscal stimulus can’t work are at best incoherent and usually simply wrong.

Republican politicians’ arguments that fiscal stimulus isn’t working are simply ripped out of the Newt Gingrich playbook: lie all the time.

Serious reductions:

In 1981, 84% of China’s population was below the poverty line of $1.25 a day; in 2005 the share was just 16%. [ ! ]

Brazil’s share of those in poverty fell by half from 17% to 8%, an annual reduction of 3.2%.

India’s share below the poverty line fell from 60% to 42% between 1981 and 2005.

Warhol’s 15 minutes of fame is a thing of the distant past, simply because it’s so boringly long. – Ilargi

When only 15% of the primary care physicians polled say they feel comfortable treating a condition that affects 10-20% of the entire population (not just those over fifty), there’s a psycho-social problem layered onto an enormously debilitating health issue: PAIN.

Coming up to Copenhagen:

“The Copenhagen Diagnosis: Updating the World on the Latest Climate Science” is not an official IPCC report; it’s a summary of the hundreds of peer-reviewed research papers that have been published since the IPCC’s last assessment.

It was released now to fill the long gap in between official IPCC reports—the last was released in 2007, but the drafting text is more than three years old, and the next isn’t scheduled until 2013. It was also timed to the Copenhagen climate talks, of course.

The essence of the new report is that things are grimmer than the IPCC has reported. And it’s not like the panel has been painting a rosy picture—its 2007 report concluded that the warming-induced melting of the Greenland ice sheet could create significant sea-level rise in this century. IPCC chairman had said at the time, “If there’s no action before 2012, that’s too late. What we do in the next two to three years will determine our future. This is the defining moment.”

Stuns me the funds spent on jawboning, as if cousins and relatives of some sort. While we claw at the great requirement to put efforts on the ground, many seem to have endless secrets about how they pay their rent.

We failed to watch and gave far too much leeway.

In this crash, zeal had many followers, a base of millions trumpeting around the world that governments are no good and the finance market should be left alone. A ‘casino’ hid behind popular but untested belief, anti-oversight, that key players were both funding and promoting.

I finally found a bright and honest account of some of this gamble’s roots.

The Chinese public may wonder whether its future lies with capitalism after all … [Yes] there’s a real chance that, soon enough, Chinese economic weakness will be a bigger problem than was Chinese economic strength.

For ourselves through all time, not predisposed to be a friend is a cause of action.