Class Warfare Blog

June 3, 2019

Why Are There So Many Signs of Distress in a Supposedly Robust Economy?

Over at the Naked Capitalism website there is a post focused on the St. Louis area but I think has application all over this country—St. Louis Fed Study Shows Rising Level of Financial Desperation Among the Poor, Hidden by Aggregates by Yves Smith.

I have blogged recently on economic indicators, basically claiming that if you use indicators of economic health that basically measure the fact the “the rich are getting richer,” you aren’t looking at the right indicators. For example, using the health of the stock market as an indicator of how ell the economy is doing is ludicrous at best.

This post by the wonderful Yves Smith addresses a ZIP code by ZIP code analysis of economic measures of economic distress and wealth accumulation or the lack of it, etc. The basic point is using “aggregate” economic measures (aka averages) masks the real situation.

Also, the “traditional” (aka what has always been recommended) strategy to “get ahead” no longer works. As a youth I was told that if I worked hard, saved some money, and was careful I could achieve the American dream. Because of wage suppression, run away health care costs, and near zero interest rates on savings, this strategy is broke, busted, and we are disgusted.

People work hard, often with more than one job, but sky high rents and health care costs, suck up the majority of what is made and no savings accrue. Actually debt is increasing in the bottom rungs of the economic ladder.

My first full time job made me the grand sum of $9000 per year. Today, health insurance for a family of four is around $16,000 per year. Granted that there has been a considerable amount of inflation since then, but. . . . As another comparison, if one were to work a job, full-time: 8-hours per day, 5 days per week, with 11 unpaid holidays and no vacation, you would gross around $14,400. That’s gross, not net, so taxes (little in the form of income taxes, but payroll taxes) and whatnot have to be taken out to get at the actual amount of income this job would provide. If a household had two such jobs, the total net income might reach $26,000 or about $2170 per month. If this family is four in number (kind of an average) there will be no health insurance in that budget. Even subsidized health insurance would eat up quite a bit of that. In many areas of this country, that would barely cover rent and food, with transportation in the form of a family car (insurance, gas, maintenance) being out of the question.

It seems that the majority in this country now lives pay check to paycheck (I do) and that had been the case for most of the history of this country, but we were starting to get away from that after WW2. Now we are backsliding, with the skids being greased by the greedy rich who have bought Congress and much of the judiciary.

This is an interesting post and I recommend it to any interested in our current economic system.

Postscript Any politician who runs around claiming that the economy is robust or strong and beats their chest about it will be crushed at the polls in the next election. People are hurting and having smug elites tell them they are wrong to hurt will just increase the disaffection with the status quo that got us first Barack Obama and then Donald Trump. The GOP is likely to put up Donald Trump again and if the Dems decide on an avatar of the status quo (like Joe Biden) expect the repercussions to be severe.

 

 

20 Comments »

  1. That was a great read by Yves Smith. Thank you for sharing Steve! The link to The Unequal Recovery: Measuring Financial Distress by ZIP Code study on the Fed Reserve Bank St. Louis was outstanding too!

    You know, it is quite ironic (sadly) that most all of this present economic stress and the shameful gap/schism between the upper 10% and lower 90% in the U.S. was predicted in 2011 (probably sooner) by two renown Nobel Prize winners in Economics: Joseph Stiglitz and Paul Krugman. And of course they were not the only socioeconomic scholars to have predicted this result and the ones still to come — it really isn’t that complicated to foresee.

    As long as our society — at least the upper 30% – 40% — continues to go about the business as usual, Happy Days are still here sort of denials from secluded Ivory Towers in specific zip codes, there’s only going to be only ONE outcome and it won’t be pretty or peaceful by any means! In 2011 Stiglitz wrote:

    Beyond the costs of the instability to which it gives rise, there are several other reasons why high inequality – the kind that now characterizes the United States – makes for a less efficient and productive economy. We discuss in turn (a) the reduction in broadly beneficial public investment and support for public education, (b) massive distortions in the economy (especially associated with rent seeking), in law, and in regulations, and (c) effects on workers’ morale and on the [problematic myth] of “keeping up with the Joneses” [or a consumer-driven society].

    […]

    Our failure to make these critical public investments should not come as a surprise. It is the end result of a lopsided wealth distribution in society. The more divided a society becomes in terms of wealth, the more reluctant the wealthy are to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security. They can buy all these things for themselves. In the process, they become more distant from ordinary people. […]

    The wealthy also worry about a strong government – one that could use its power to adjust the imbalances in our society by taking some of their wealth and devoting it to public investments that would contribute to the common good or that would help those at the bottom [or their perceived competitors/threats?]. While the wealthiest Americans may complain about the kind of government we have in America, in truth many like it just fine: too gridlocked to redistribute, too divided to do anything but lower taxes.

    That one single, no-brainer outcome? Uncontrollable civil/criminal unrest leading to revolution and eventually a rebalancing as all civilizations throughout history have sunk to by their severe inequality. Shakespeare’s King John perhaps described it better as “painting the lily.”

    The top 1 percent [to 10%] have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99-90 percent live. Throughout history, this has been something that the top 1 percent eventually do learn. Often, however, they learn it too late.

    Amazing how history constantly repeats itself as long as those in the present do not thoroughly learn and understand their/the past — and this cannot be learned/grasped with only a high school diploma/education.

    Liked by 2 people

    Comment by Professor Taboo — June 3, 2019 @ 1:04 pm | Reply

    • In our (Merika’s) earliest days there was a common topic of discussion and that was civic virtue. We spent time thinking about what we owed each other and not just on what I could get for myself. Even in my youth, corporations paid at least lip service to this virtue. With the advent of neoliberalism (libertarianism in drag) we have gotten to a “it is all about me and fuck all anyone else” position. This is sad because it means the end of our grand experiment in governing ourselves. We are turning over our government to an autocracy.

      Liked by 3 people

      Comment by Steve Ruis — June 3, 2019 @ 1:53 pm | Reply

      • Couldn’t agree more Steve. Even the common parishioners and brethren — in particular the CEOs, COOs, CFOs, and Board of Directors of those parishes/congregations — have turned their backs on “Scriptural” commandments. Few follow or behave what they publicly proclaim.

        Liked by 1 person

        Comment by Professor Taboo — June 3, 2019 @ 8:34 pm | Reply

  2. Even worse is that the current economic “boom” is running out of steam. So the negatives hidden by the aggregates are going to get even worse as the aggregates get worse.

    Liked by 1 person

    Comment by James Cross — June 4, 2019 @ 6:28 am | Reply

    • This is under the category of “Dear god, show me a sign!” when everything is right there to be seen. But we keep holding up shiny bits for people to view so they are distracted enough to not see the obvious. This, I believe, is Donald Trump’s job description.

      On Tue, Jun 4, 2019 at 6:28 AM Class Warfare Blog wrote:

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      Like

      Comment by Steve Ruis — June 4, 2019 @ 8:18 am | Reply

  3. I sure hope your postscript comes true. The collective we of this ‘Merikkka have let these political clowns run free for far too long.

    Like

    Comment by Walter Kronkat — June 4, 2019 @ 2:19 pm | Reply

  4. Oh, one extra thing. I never did figure out why the stock market doing great made it to my paycheck. It never seemed to do so my entire working life.

    Like

    Comment by Walter Kronkat — June 4, 2019 @ 2:42 pm | Reply

    • It doesn’t. The stock market has degenerated into a casino where rich people make bets and the house guarantees they will win. What we were taught about in in school no longer applies.

      On Tue, Jun 4, 2019 at 2:42 PM Class Warfare Blog wrote:

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      Like

      Comment by Steve Ruis — June 4, 2019 @ 9:40 pm | Reply

    • It works the other way around, actually – you (and others’) paycheck barely going up is in part what’s making the stock market do so well.

      Like

      Comment by List of X — June 13, 2019 @ 4:24 pm | Reply

  5. Was the post-war comfort not sort of a delusion?

    Like

    Comment by The Pink Agendist — June 4, 2019 @ 3:41 pm | Reply

    • Reply. Nope, most of the rest f the western World had been bombed to shit and we emerged unscathed (except for the dead and wounded). After WW2 there was a sense of “we are all in this together” and everyone behaved themselves (sort of). Lasted until the 1970’s with the petroleum/gasoline hijinks and eventually Reagan and “government is the problem.” That “government is the problem and “small government” advocates were simply trying to defang the government as it was the only thing left in position to oppose anything Big Business wanted to do.

      Liked by 1 person

      Comment by Steve Ruis — June 4, 2019 @ 9:43 pm | Reply

      • There’s a 2012 article in the Atlantic on the US history of debt you might find interesting: https://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/
        The exploitation cycle was certainly changed after WWII, but I don’t think it was ended. I have the impression hierarchies were just re-organised. The American model has always had exploitation play an important role in it, even if the exploitation is imported (as in foreign workers) or exported (as in taking place outside its borders.)

        Like

        Comment by The Pink Agendist — June 5, 2019 @ 3:52 am | Reply

        • Civilization required slavery to support it for its first 5300 years, so that this attitude still reins in a country such as this is not shocking … depressing but not shocking.

          Consequently, claiming to be civilized is not such a complement.

          On Wed, Jun 5, 2019 at 3:52 AM Class Warfare Blog wrote:

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          Liked by 1 person

          Comment by Steve Ruis — June 5, 2019 @ 11:15 am | Reply

  6. Politicians always want to take credit for boosting the economy, however, none of them know just how much the majority of us are suffering. I consider myself blessed because I can maybe get away with missing one check. I have no faith in our government rectifying this imbalance of wealth. I believe it’s in God’s hands now. 2 Timothy 3:1-5 mentions we’re living in the last days and that people will be “lovers of money”, “without love of goodness”, and “disloyal”. We see this everyday in government and all over the world. I hope these last days end soon.

    Like

    Comment by heatherjo86 — June 12, 2019 @ 7:57 am | Reply

    • The “last days” will continue on until the earth and/or the human species subside. Timothy was not special in his observations related to money-lovers. As long as currency as been around, there have been those who always want more-more-more. IOW, as your bible says, What has been will be again, what has been done will be done again; there is nothing new under the sun. Ecclesiastes 1:9

      Like

      Comment by Nan — June 12, 2019 @ 10:50 am | Reply

      • You’re right. People have exhibited these traits since the beginning of time. And I do believe things will continue to get worse as long as human governments continue to rule. However, I believe God’s Kingdom will be the end of that vicious cycle. The prophet Daniel prophesied, “In the days of those kings the God of heaven will set up a kingdom that will never be destroyed. And this kingdom will not be passed on to any other people. It will crush and put an end to all these kingdoms, and it alone will stand forever.” (Daniel 2:44)
        The prophet Isaiah and the Apostle John mention all the benefits of this Kingdom and I hope I’m there to see these prophecies come true. Otherwise, how can mankind continue living under these conditions? What other hope do we have?

        Like

        Comment by heatherjo86 — June 12, 2019 @ 7:19 pm | Reply

        • For me, “hope” does not come from a several thousand year old book. And I’m most definitely not holding my breath for the kingdom you speak of. But you go ahead and keep waiting and watching. Let me know when it happens.

          Like

          Comment by Nan — June 13, 2019 @ 1:11 pm | Reply

          • I understand. Many people feel the same way. So what gives you hope that conditions will change for the better?

            Like

            Comment by heatherjo86 — June 13, 2019 @ 1:45 pm | Reply

            • I don’t recall making any claims that “conditions will change for the better.” In fact, I purposely quoted from the bible in a prior comment about this very thing. Here is it again to refresh your memory: What has been will be again, what has been done will be done again; there is nothing new under the sun. Ecclesiastes 1:9

              In other words, life is going to continue on a similar path as it is today. Catastrophes will happen. Political leaders will screw us. Preachers and pastors will continue to fleece their flock. There will be good times and there will be bad times. Happy times and sad times. It is what it is.

              The only thing that concerns me is how so few humans are paying attention to climate change. That is probably the one thing that is going to affect all of us in the not-too-distant future. Then again, who knows? The powers-that-be may finally wake up and start taking steps to keep this planet on an even keel. Time will tell.

              Like

              Comment by Nan — June 13, 2019 @ 5:39 pm | Reply

            • Little hope, much desire. Hope will rise if any of the serious reformers rise on the list of candidates.

              On Thu, Jun 13, 2019 at 1:45 PM Class Warfare Blog wrote:

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              Like

              Comment by Steve Ruis — June 14, 2019 @ 11:57 am | Reply


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