Wednesday, November 23, 2011

The Majority of Americans Are Struggling to Survive

Can a nation have a prosperous economy when most of its workers are poor or stuggling? That's a fundamental question I think we're going to have to deal with if we ever hope to fix the economy. The idea behind capitalism is that the trend was always up - higher living standards for more and more people. Now we see that this is not happening - life has become a brutal struggle just to get by from day to day. Sure, if you compare American's living standards with, say 1940, it's much higher. But remember, life back then was more family-oriented, less stressful, and there was a sense of optimism. No more. And no amount of electronic doo-dads can change that fact.

The New York Times Economix Blog has been on tear recently, doing some great work in actually looking beyond the statistics at how far most Americans have fallen in their living standards:

Voices of the Near Poor.
When the Census Bureau this month released a new measure of poverty, meant to better count disposable income, it began altering the portrait of national need.

The new method, called the Supplemental Poverty Measure, was designed to add in many of the things the old measure ignored, like the hundreds of billions the needy receive in food stamps and tax credits. At the same time, it subtracted the similarly large sums lost to taxes, medical care and work expenses.

One surprising difference with the new measure, outlined in an article today, was the 51 million people with incomes less than 50 percent above the poverty line. That category, sometimes called “near poor,” was 76 percent higher than the official account, which was published in September. (The portion of people under the poverty line, meanwhile, increased by just 5 percent in the new measure.)

About a fifth of the people who appear near poor in the new measure are lifted out of poverty by benefits the old measure ignores, like food stamps and tax credits. But more than half were pulled down into near poverty from higher income levels by taxes, medical costs and work expenses like child care and gas. Taken together with people under the poverty line, a full third of Americans – or about 100 million people – live in poverty or in the economically vulnerable area just above it.

In Washington and its suburbs, the near poor are people with incomes between $31,693 and $47,539 for a family of four with a mortgage.

Reporters talked to people in the Washington area this week with incomes in this category. They spoke of the knife-edge quality of their lives, in which one unexpected bill could knock them off balance. Many owned the usual trappings of middle-class life – cars, houses, cellphones and air-conditioners. But payments on those possessions were juggled, often unsuccessfully, depending on the unpredictable tides of their incomes. None saw themselves as poor. Most saw themselves as part of the middle class. But they focused on how hard they had to struggle to remain there.
The article has interviews with actual people, unlike what you normally here out of the ivory-tower statisticians who normally pontificate on economic affairs. The stories have a common thread - working full-time jobs, two incomes, and yet costs for food, housing, transportation and health care make them struggle to get from paycheck to paycheck, with one unexpected expense having the potential to cause utter destitution. They are stressed, tired and demoralized; economic cannon-fodder whose labor fruits flow almost exclusively to the 1 percent.

The article raises a common pint conservatives always use - they like to point out all the electric doodads these people have. "Look, cell phones!" "Flat-screen TV's!" "X-Boxes!" "These people aren't poor!" they cry. Because consumer electronics are cheap thanks to exploiting the global economy, we're supposed to believe that everything's A-OK, and that poverty is a figment of our imagination. Never mind the fact that you cannot afford decent housing, education or health care, or that there is no money or time left over after working and commuting nearly every minute of the day.

Imagine if these people went without a TV or cell phone. Well, first, those things last years, so the cost must be spread out. Second, even if they were not purchased, it would make almost no difference in their finances, since those things are so cheap. It's the ongoing costs that bite - paying the cell phone bill and paying the cable bill every single month (one reason why I have neither).

You've heard the statistic - 70 percent of the economy is consumer demand. How are workers going to buy stuff when they're broke? Anyone? And if they're more broke every year due to rising health care, education, and gasoline costs, how exactly is the economy supposed to grow? We've already tried debt, and that didn't work. And as we've pointed out before, it's not just the bottom - even educated people are seeing incomes shrink, while only the top 5 percent or so are seeing incomes rise (mainly due to rent-seeking, or price gauging in health care and education).

Here's a recent post on economic insecurity:
A new report from Wider Opportunities for Women, a nonprofit group that previously produced an index of what it takes to do more than survive while working, shows that 45 percent of United States residents live without economic security. That means they are not earning enough income to cover basic expenses, plan for important life events like college or save for emergencies like unexpected health bills.

“What does it take for households in this country to get by and be able to plan for their own futures based on the work that they do?” said Donna Addkison, president and chief executive of Wider Opportunities for Women. “We’re really looking at not just the lowest of the lowest income households but that slice of households that live somewhere above the poverty line but are constantly in danger of being thrown into financial catastrophe, and that’s a much larger slice of the American public than we are currently talking about.”

Although the study uses median incomes on a national basis, Wider Opportunities and its research partners are working on tables that define what economic security would mean on a state-by-state basis. Obviously, the income needed to cover basic expenses would be higher in New York City than in Omaha.

The report showed that 55 percent of children live in households where families do not earn enough to achieve economic security. Even among those households with two full-time workers, 22 percent of those families with children earn less than is necessary to guarantee economic security.

The most vulnerable households are those led by single mothers, as well as African-American and Hispanic households. Only 18 percent of households headed by single mothers are living with economic security, while two-thirds of Hispanic households and 62 percent of African-American households are not earning enough to cover basic needs and saving requirements.

Part of the problem, Ms. Addkison said, is that so many jobs pay low wages. According to the report, less than 13 percent of the jobs that the Labor Department projects will be created by 2018 will pay wages that will be sufficient to allow families to keep their heads above water.
And government does make a difference: Millions Caught by Social Safety Net:
According to the Center for Budget and Policy Priorities, the percentage of the United States population living in poverty increased by 0.6, to 15.5 in 2010 from 14.9 in 2007.

The poverty measure refers to resources available to families, accounting for the taxes they pay and subsidies they receive. Considering all that happened in the economy over those three years, 0.6 percentage points is quite a small change. Measures of the poverty rate typically change more than that over any three-year interval.

The study found that many people were technically above the poverty line in 2010, although their incomes were low, because they received government assistance like unemployment insurance, food stamps and refundable tax credits. The government assistance permitted them to have living standards above poverty, even while their market incomes were below the poverty line.

Were it not for government assistance, the study found, the recession would have pushed 4.2 percent of the population into poverty, rather than 0.6 percent.
Once the social safety net is abolished due to "austerity", expect millions more to fall into utter destitution. It's only a matter of time. Poverty, crime, suicide, child-abuse, drug use, etc. will all increase, pulling us down even further as we have to spend more GDP dealing with all the social fallout.

The idea that our threadbare safety net is keeping workers from getting jobs is ludicrous. As the articles show above, even families with two jobs have nothing left over once the bills are paid. How exactly are these people supposed to "pull themselves up by their bootstraps?" And what happens when all the children who grew up in poverty, with all the dysfunction and trauma that causes, become the majority of the populace as the Baby Boomers die off? How will they afford soaring tuition rates? What will they do for a living?

Can we have a successful economy while the vast majority of Americans are nearly destitute? Is that where capitalism is headed? And what can possibly reverse this trend? My head hurts.

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