What's wrong with the economy? - - by EPI President Lawrence Mishel

[papau]

http://www.epi.org/content.cfm/pm110

What's wrong with the economy?

by EPI President Lawrence Mishel and Policy Director Ross Eisenbrey

1. Profits are up, but the wages and the incomes of average Americans are down. Inflation-adjusted hourly and weekly wages are still below where they were at the start of the recovery in November 2001. Yet, productivity—the growth of the economic pie—is up by 13.5%.Wage growth has been shortchanged because 35% of the growth of total income in the corporate sector has been distributed as corporate profits, far more than the 22% in previous periods. Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.

2. More and more people are deeper and deeper in debt.The indebtedness of U.S. households, after adjusting for inflation, has risen 35.7% over the last four years.The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 115% of after-tax income, twice the level of 30 years ago.The debt-service ratio (the percent of after-tax income that goes to pay off debts) is at an all-time high of 13.6%.The personal savings rate is negative for the first time since WWII.

3. Job creation has not kept up with population growth, and the employment rate has fallen sharply.The United States has only 1.3% more jobs today (excluding the effects of Hurricane Katrina) than in March 2001 (the start of the recession). Private sector jobs are up only 0.8%. At this stage of previous business cycles, jobs had grown by an average of 8.8% and never less than 6.0%.The unemployment rate is relatively low at 5%, but still higher than the 4% in 2000. Plus, the percent of the population that has a job has never recovered since the recession and is still 1.3% lower than in March 2001. If the employment rate had returned to pre-recession levels, 3 million more people would be employed.More than 3 million manufacturing jobs have been lost since January 2000.

4. Poverty is on the rise.The poverty rate rose from 11.3% in 2000 to 12.7% in 2004.The number of people living in poverty has increased by 5.4 million since 2000.More children are living in poverty: the child poverty rate increased from 16.2% in 2000 to 17.8% in 2004.

5. Rising health care costs are eroding families' already declining income.Households are spending more on health care. Family health costs rose 43-45% for married couples with children, single mothers, and young singles from 2000 to 2003.Employers are cutting back on health insurance. Last year, the percent of people with employer-provided health insurance fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. Taking population growth into account, 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level.

[FloridaPat]

1. Compassionate Conservative Economics

[rkc3]

2. IMHO, it will get a lot worse as the trickle down effects begin to show.

Lower federal taxes = lower public services (e.g., health care, education, highway maintenance, etc.) = high state/local taxes = lower standard of living for lower and middle income earners = lower federal taxes.

Trickle down economics = death spiral for America's economy.

[area51]

3. unemployment rate

The unemployment rate is a helluva lot higher than the nazi party says it is.

[Warpy]

4. Yeah? How about the bottom line:

The two thirds of the economy that is consumer driven is being choked off from the bottom up. The rich are bidding up antiques, fine art, and high end properties and are finding a diminished return on all the wealth that has been lavished upon them. Our economy is dying.

The money pump works from the bottom up, folks, and unless you have a mechanism for siphoning off the extreme wealth that collects at the very top and recirculating it to the bottom, that money pump is going to stop functioning.

The progressive income tax did that for a while but was fatally flawed because it was tied to specific dollar amounts instead of to the median wage, adjusted quarterly for inflation/deflation.

Now we have the wealthy paying very little tax but still screaming about what they do pay, while services for everyone else have been cut to the point that the lack is killing people. Wages are so depressed that families are starting to put groceries and utilities onto their credit card debt.

This system can't be sustained.

[Massacure]

5. I disagree somewhat.

The economy is dependant on the fact that money flows. How it flows is irrelevant. Unfortunatley, corporations like to sit on it.

[Warpy]

6. Well, you see, that's always the problem

Whether it's individual rich men or cartels of rich men called corporations, they sit on it. It flows from the bottom to the top and then just sits there, just like it's doing right now.

That's why the money pump always works from the bottom up. The bottom keeps that money in motion, and it travels all the way through the economy until it arrives at the top. With no mechanism to take it off the top and get it moving again at the bottom, the economy sputters and dies. Remember, no rich man ever hired anyone to produce a good or service he didn't have a customer waiting to buy.

The only things that have kept this economy functioning for so long are housing inflation that allowed a lot of refinancing and living on borrowed equity, and the massive unsecured credit card debt that is keeping so many families fed and clothed.

Bottom line: it's unsustainable.

[teryang]

7. Corporations have shifted the tax burden to individuals...

Rich individuals have shifted the tax burden to poor Americans.

[kineneb]

8. money is like manure, spread it around to make things grow

pile it up in one place, it stinks and does no one any good. Too much money (manure) is now at the top and is just sitting there. Another government tried that in the 18th century and they fared rather poorly. Also, they got shortened by about 9 inches after a meeting with Madame Guillotine.

What was that line about those who fail to learn the lessons of history? ;-)