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Even if, as its seems to be the case, the global economy doesn't depend on the US growth to start to recover, it is clear that the evolution of the US economy in the decade to come will have a major impact on the future of the global economy and the place of the United States in the global economic and geopolitical balance of power. The fact that consumer spending represented more than 75% of the US GDP growth in the years 2000 to 2007 means its evolution will play a critical role in shaping the future of the Us economy. So, it's worth having a look at an interesting paper on Zero Hedge:


A Detailed Look At The Stratified U.S. Consumer

When analyzing the recovery prospects before the U.S. economy, no analysis is complete without a detailed look at the capacity of the U.S. consumer, that dynamo that has always managed to pull the economy out of whatever hole it managed to find itself over the past 80 years.

The whole article is worth reading. However, Its most interesting part focuses on the deleveraging problem and the dire economic situation of the US middle-class regarding the said deleveraging:


The Deleveraging consumer

"Between 2000 and 2007, US households led a national borrowing binge, nearly doubling their outstanding debt to $13.8 trillion. The pace was faster than the growth of their incomes, their spending, or the nation's GDP.

The sharp recent upswing in the chart below indicates that consumers on average are commencing a paradigm shift to frugality as the "wealth effect" evaporates: the increase in consumer wealth lead to an increase in consumption financed by rising asset values. [...] The double whammy of a collapse in both the equity market and housing values will ultimately result in an increase in savings rates to long-term averages in the 9-10% range. And, as pointed out above, the adverse economic impact of this transformation in the consumer psyche will likely be in the $2-3 trillion range.

Furthermore, to the impact of the collapse of equity and housing values, we must add the rising unemployment and the decrease in wages as factors pushing to a strong and sustained increase in savings. According to theWall Street Journal:

Major retailers reported that American consumers are continuing to hunker down, casting a cloud over the durability of the U.S. recovery and underscoring the importance of overseas demand in restoring the world economy to health.
...
American consumers appear so shaken by the worst recession since the Great Depression -- and so pinched by unemployment, stagnant wages and stingier lenders -- that they are reining in spending on all but basics. Economists also see an upturn in U.S. household saving as the beginning of a prolonged period of thrift.....

So how deep will this deleveraging process will go and  how long will it last?  According to Zero Hedge:

The biggest concern from a reversion to the mean perspective is that if the ongoing deleveraging trend were to follow its full course, household debt-to-income would have to decline by 27 bps to its long-term trendline, in effect extracting $2.8 trillion from the economy.

Here I think Zero Hedge's figure is very conservative: these 27 bps refer to what they call the "long-term trend line". If you look at the graph, that would mean returning to a "normal"(!) ratio of around 115% of disposable income in 2009 (and more in the future). However, this long-term trend line is strongly influenced by the debt growth that started in the mid-80s. Maybe it would make more sense to look at what was the long-term trend line before Reagan policies led to substitute debt for wage growth:



Going back to a debt to disposable income ratio situated between 60% and 70% means a decline of 68 to 78 bps from the 2007 peak level of 138%. I am not sure it has necessary to go back to 60%, but I think there should be, at least a reflection about what constitutes a sustainable debt to income ratio.


The dire situation of the American middle-class


But, facing debt and deleveraging, not all US citizens are equal:

A drill down of disposable net income (after tax) and net worth, demonstrates why any discussion of "generic" consumers should be much more properly phrased as an observation of the "Wealthy" and "Everyone else".

The disposable income difference between the richest 10% and even the next richest decile is staggering: a 3x order of magnitude. And a fact that Taleb fans would likely appreciate most, the pretax income difference between the median and mean for the top decile is shocking: $206,900 versus $397,700. This is skewed by a statistically low number of outliers earning an abnormally large amount of disposable income.
...
Probably the most dramatic observation appears when evaluating relative leverage of the various consumer classes.

It is apparent that the problem of consumer (de)leveraging is actually one of a Middle class burdened with excess debt. The debt-to-income ratio for the middle class is on average more than 200%, almost double that of the highest decile, "Upper Class."

The divergence among the classes is even more obvious when comparing aggregate net worths:

While 10% of the population collects 40% of disposable income, it represents 57% of net worth! This is an impressive conclusion: on a lowest common denominator, the Net Worth variance between the 10% of the population that make up the wealthy and the 50% that comprise the middle class is over 8x!
...
when looking at data historically, it is once again the top decile, or the "Upper" Class the benefitted consistently over the the past 15 years, to the detriment of both the low-income and the middle-classes, which represent 90% of the population.


...
Yet estimates demonstrate that even though on an absolute basis the wealthy are losing overall consumption power, the relative impact has hit the lower and middle classes the strongest yet again.


...
And to add insult to injury, the segment of housing that has been impacted most adversely in the current downturn, is lower and middle-priced housing: that traditionally occupied by the lower and middle classes.

I certainly do not share the opinion of the author, who, after having made a very articulate analysis of the situation, argues that, given that the richest 10% represent 40% of the US consumption, they should be cajoled into consuming again and not taxed more, and says nothing about what policies/measures should be adopted to tackle the situation in which tha middle-class is mired (Vae Victis!).


Given the size of the problem facing the vast majority of the American households and particularly the middle-class, only a massive redistribution from the uber-wealthy to the middle and lower income categories will provide a sustainable solution. This means:

- ending the current system that allows the financial sector to grab the biggest part of the wealth created

- a major overhaul of the wage system towards a better sharing of the created wealth

- a bold reform introducing a strong redistributive tax policy.

Will the Obama administration be able (let alone willing) to implement a bold enough reform to help the middle and lower income classes to get out of their economic situation? Unless they do so, the US will most probably be facing many years of very slow growth and high unemployment until these categories have gotten rid of their debt.

Originally posted to Melanchthon on Thu Aug 20, 2009 at 03:16 AM PDT.

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Comment Preferences

      •  You are right in your prescription... (7+ / 0-)

        I actually wrote a diary on this a while back.  Here's a couple of excerpts:

        The answer to this dilemma is to recognize that the federal government has all the power it needs to increase spending during a recession without borrowing.  It can simply RAISE TAXES on rich people.  Contrary to the economic fantasies of the Republican Party, increasing the income tax rates of Rich People (the nation's biggest savers) is something that is guaranteed to provide a economic stimulus to the economy.  This is because doing so takes money that would otherwise have been removed from the economy (saved by rich people) and spends it instead.  Yes, you heard it right: INCREASING taxes provides a stimulus to the economy IF the citizens who are being taxed more are the nation's biggest savers.

        Let's think about this for a minute.  If the federal government and state governments and individual households and corporations were to all start borrowing less money, the result would be an accumulation of money that was taken out of the economy by rich people (saved) that no one wants to borrow and spend.  That would lead us directly to another Great Depression.  Look at it another way, if you wanted to increase savings levels without increasing borrowing levels, then the net result is an economic contraction---reduced aggregate spending---because money is being removed from the economy (saved) without it being returned through the practice of lending.  If you want to avoid a recession while maintaining aggregate spending levels, you absolutely must reduce the amount of money that is being taken out of the economy by savers.  That can be done if the government were to tax those [now excess] savings and spend it on much needed infrastructure projects or green energy projects.

        Yes, Bonddad, it is possible to reduce the nation's overall indebtedness without the kind of severe pain you are recommending (reductions in government spending).  While people and institutions are borrowing less money, aggregate spending can be maintained or even increased IF a sufficient amount of money is collected from the richest Americans and spent by the government at the same time.  Contrary to the mythology being promoted by many, it definitely is possible for an economy to experience too much savings.

        FWIW...

  •  excellent article - recommend!! (4+ / 0-)

    This especially hits home:

    Given the size of the problem facing the vast majority of the American households and particularly the middle-class, only a massive redistribution from the uber-wealthy to the middle and lower income categories will provide a sustainable solution. This means: - ending the current system that allows the financial sector to grab the biggest part of the wealth created - a major overhaul of the wage system towards a better sharing of the created welth - a bold reform introducing a strong redistributive tax policy.

    Unfortunately, if we base any guess on Obama administration behaviors so far, we won't see this...(but lets hope...)

  •  And, how did our public servants address this? (5+ / 0-)

    Ignored the predatory lenders, the payday lenders, the income tax refund anticipators, the whole usury economic models.

    They "revamped" bankruptcy laws, which favored credit card companies and the privatized student loan programs.

    "Diplomacy is the art of saying "Nice doggie" until you can find a rock." Will Rogers

    by bamabikeguy on Thu Aug 20, 2009 at 03:27:35 AM PDT

  •  Nice diary, but ... (1+ / 0-)
    Recommended by:
    miss SPED

    ... would you please link to the source of your graphs in the blockquoted material?  They are small and difficult to decipher. For example, the second one seems to indicate that the average net worth of the 60-80th percentile is close to $1.5 million, which seems, um, a little off.

    "When the going gets tough, the tough get 'too big to fail'."

    by New Deal democrat on Thu Aug 20, 2009 at 03:38:58 AM PDT

  •  Mortgages.... (2+ / 0-)
    Recommended by:
    SnowCountry, miss SPED

    don't work the same around the world.  I am not sure how exactly comparable these are.

    You shall know the truth, and the truth shall make you mad. Aldous Huxley

    by murrayewv on Thu Aug 20, 2009 at 04:07:02 AM PDT

  •  How to make the wealthy spend more.. (5+ / 0-)

    I certainly do not share the opinion of the author, who, after having made a very articulate analysis of the situation, argues that, given that the richest 10% represent 40% of the US consumption, they should be cajoled into consuming again and not taxed more, and says nothing about what policies/measures should be adopted to tackle the situation in which tha middle-class is mired (Vae Victis!).

    I agree that it's kind of hard to get someone to spend more who already has the resources to buy anything that suits his fancy. Po folks with a little more money might go to a movie sometimes.

  •  Reagan policies and median family income (6+ / 0-)

    Here is why the households debt to incom ratio started to increase in the 80s:

    •  The reason for this, of course,,, (4+ / 0-)

      ...is the Republican habit of throwing money at the richest of the rich.  What do they do with the extra money they receive from Uncle Sam?  Save it.  Increased levels of saving will cause the economy to contract unless that money is borrowed and spent.  Thus the continual increase in indebtedness and the relaxation of lending practices in order to generate more interest income for banks.

      In spite of what the Republicans like to claim, they want levels of indebtedness to increase to insanely stupid levels.

      •  The reason for this, of course,,, (1+ / 0-)
        Recommended by:
        Melanchthon

        ..is that accumulated capital is their measure of relative power amongst themselves and within the overall society, so they can never have too much.  They believe that both the absolute amount of wealth in the society and the relative portion of that wealth held by the most powerful, i.e. richest, must always increase.  If their share declines they are losing power, if the share they hold as a class relative to the whole society declines then capitalism is loosing power.  

        Unfortunately they have found ways to transfer their losses to the public through their capture of the US government.  More unfortunate is that this process is obviously unsustainable.  The share of wealth held by the top decile, not to mention the top 1%, has gotten so outsized as to strangle the whole world economy, as the US consumer was, for the last decade, a large part of what kept the world economy running.  Our financial sector is so outsized compared to the economy in which it operates as to constitute a cancer on the body politic.  At the rate we are going we might see the spectacle of the cancer surviving while the host dies.

  •  Your plots confirm my feelings. There is only one (3+ / 0-)

    possible trend for the next couple of years - a large decrease in the standard of living in the USA. If people were borrowing to live the way they do now and not only has the source of borrowing dried up, but it is time to start repaying the loans, and maybe even to save some money, the only way to meet these objectives is to live substantially more frugally. A lot of people are going to suffer a lot, lot more pain in the next dozen years.

    I voted with my feet. Good Bye and Good Luck America!!

    by shann on Thu Aug 20, 2009 at 04:40:50 AM PDT

    •  Sorry, but I'm afraid you are wrong. (4+ / 0-)

      You said there is "only one possible trend" for the next couple of years.  No decline in living standards is necessary.  IF the federal government were to collect enough $$ in taxes from rich people and then spent those $$ on infrastructure, we would not only not see a depression/recession, but would actually see an economic boom at the same time that indebtedness levels are dropping.

      •  lets hope this happens, James... (1+ / 0-)
        Recommended by:
        Melanchthon

        I'm an incurable optimist - lets see what happens...

      •  The risk of increased inequality (1+ / 0-)
        Recommended by:
        NY brit expat

        I think you're right. If the Obama administration doesn't engage in a more redistributive policy, there will very likely be an increase in the gap between the richest 10% and the rest of the population. An increased level of inequality (already quite high compared to other developed countries) would have important political consequences.

      •  I agree completely with you! (2+ / 0-)
        Recommended by:
        Melanchthon, steven pressman

        What is needed is a massive increase in progressive taxation of income and to move to actually get some of the increased wealth of the rich in the US. Spent on infrastructure and also shifted to the pockets of the poor, recently unemployed and working and middle classes (through transfer payments) will also increase their ability to consume and sustain a growth in effective demand by those who actually spent what they get in increased income.

        However, unless I misunderstood Shann, the commenter was stating that unless things do not change then the situation she/he described will be the result.

        No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

        by NY brit expat on Thu Aug 20, 2009 at 07:39:35 AM PDT

        [ Parent ]

        •  i agree too and it is not just for fairness (2+ / 0-)
          Recommended by:
          Melanchthon, NY brit expat

          There are many bad economic consequences from very unequal distributions of income. I will point out just a few here. A complete list would take pages and pages.  

          First, low taxes on the very wealthy encourages bad behavior on their part (short-term gains for them but long-term costs for the whole economy). With a much more progressive income tax, the sub-prime crisis would have been less likely since the incentives to defraud home buyers would have been much smaller.

          Second, with great sums of money comes the ability to exert a great deal of influence on public opinion. The people who are protesting the public health care option are doing because the health care industry and their senior executives have made a great deal of money and can use it to influence public opionion and pay to have people protest (the real "cash for clunkers" program).

          Third, there is a great deal of research that indicates health problems arise from great income inequality. Inequality creates stress, which in turn generates chemical reactions in the body that lead to long-term harm. Some of the best work in this area (both highly recommended) are Marmot (The Status Syndrome) and Wilkinson (Unhealthy Societies).  

          "The mind that cannot philosophize, ossifies"- John Barth

          by steven pressman on Thu Aug 20, 2009 at 08:44:03 AM PDT

          [ Parent ]

          •  Nicely stated steve and as you said that is just (2+ / 0-)
            Recommended by:
            Melanchthon, steven pressman

            for starters. The inequality of wealth and income has had (and will continue to have) grave consequences not only for the economy, but also affects political and social issues.

            Thanks also for the references, there were several people who were wondering about the impact on health of the extremely uneven distribution of income and wealth in the US on an earlier diary, I wish I had those references then. The link with poverty and ill health is a well known problem documented early in the industrial revolution and not only from the dangerous and unhealthy conditions in the factories.

            No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

            by NY brit expat on Thu Aug 20, 2009 at 08:58:00 AM PDT

            [ Parent ]

            •  a few more references for people (2+ / 0-)
              Recommended by:
              Melanchthon, NY brit expat

              interested in the impact of inequality on health. First, anything by Richard Wilkinson (Unhealty Societies is my favorite). Second, The Health of Nations: Why Inequality is Harmful to Your Health by Ichiro Kawachi and Bruce Kennedy is excellent (as is most of the work of Kawachi). Finally, for those interested in some summaries of the scientific research in relatively simple and enjoyable prose (rather than turgid academic prose) Why Zebras Don't Get Ulcers by Robert Sapolsky explains the causes and consequences of stress, and ties neatly in to the work on inequality and stress. Happy readings!

              "The mind that cannot philosophize, ossifies"- John Barth

              by steven pressman on Thu Aug 20, 2009 at 09:41:46 AM PDT

              [ Parent ]

      •  There are only two chances of more progressive (0+ / 0-)

        taxes - Slim & None - and Slim just left and None is headed towards the door (an oldy, but goody). Get serious, with Single Payer politically impossible, how are really higher taxes going to be enacted by the current government?

        Every single penny of increased taxes has been spoken for and budgeted many times over. As rich as the top 2% are, their wealth is finite (and diminished from the real estate & stock bubbles collapsing) next to the infinite needs and requirements of the rest of the 98% of us.

        I voted with my feet. Good Bye and Good Luck America!!

        by shann on Thu Aug 20, 2009 at 08:39:24 AM PDT

        [ Parent ]

        •  This is why we need to attach wealth and not (1+ / 0-)
          Recommended by:
          Melanchthon

          only income and do not forget all that lovely money hidden by individuals in tax havens, that is the only possibility that I can see besides printing money. Given the extreme inequalities in wealth and income distribution and the falling living standards of the working and middle classes (which does have serious economic and political consequences) and the fact that they cannot eliminate what is left of the welfare state, that means, that they either let everything go to hell in an hand-basket or they try and do something.

          I do agree that given the economic advisers of the current administration, I would be rather surprised if they went after the wealthy (they so prefer giving them money instead); they really  need to review their Keynes again at the least.

          No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

          by NY brit expat on Thu Aug 20, 2009 at 10:26:50 AM PDT

          [ Parent ]

      •  Shan may be right. (1+ / 0-)
        Recommended by:
        Melanchthon

        Wall Street works on the percentage they can extract from the flow, in the short term.  Thus they have sought to maximize the flow.  But assets have turned into liabilities and the shortfall may well exceed the wealth that may be practically recovered from the top few percent, even were we to make such an attempt. We need to repudiate this odious debt as any public obligation, prosecute both civil and criminal charges to the full extent of the law, and require that remaining assets be marked down to current value and that the burden falls most heavily on those who created the debts.  Then we can try to extract wealth from the top one or two percent, how ever much there is left.  Instead we are continuing with the pretense that these assets are merely temporarily distressed and that the biggest institutions are essential to any recovery.  IMO, the dissolution of the biggest financial institutions is essential to beginning any recovery.

    •  I agree. When it is a choice between paying (1+ / 0-)
      Recommended by:
      NY brit expat

      the mortgage and keeping expensive conveniences, the conveniences are going to go first. I know middle-classers with over $10-20K in credit card debt that have all the modern conveniences: 50+ inch LCD home theater, unlimited talk/text cell phones for all their kids, 500+ HD cable plans, huge gas guzzling SUVs, ... the list is long. As people give up those discretionary extras,  the economy will shrink even more.

      Q: What do you call 500 Congress-slugs at the bottom of the ocean? A: Divine intervention. (with apologies to the couple dozen honest ones.)

      by CitizenOfEarth on Thu Aug 20, 2009 at 06:23:45 AM PDT

      [ Parent ]

  •  There are problems with using the income tax (2+ / 0-)
    Recommended by:
    Melanchthon, NY brit expat

    to redistribute wealth.

    The chief one is that "taxable income" is a poor measure of wealth.

    For example, a professional couple living in the Northeast may find that their $400,000 combined earned income is just enough to pay their taxes (federal, state, local), tuitions, debts, and mortgage.

    Their neighbor, who has inherited wealth, has $18 million in tax-exempt bonds, which pay $400,000 of fully tax-free interest a year; some trusts created by her parents for her kids; and no debt.

    Using the income tax (with higher rates, etc.) to redistribute wealth screws the couple badly but doesn't even touch the neighbor.

    •  Income tax in not the only measure (1+ / 0-)
      Recommended by:
      NY brit expat

      A progressive income tax with a high top marginal rate would not be enough to redistribute wealth, but it would be a disincentive to a too high inequality in wages and a deterrent for thosethe bonus chasers.

      A bold tax policy should include taxing wealth as well as income.

      •  Exactly, ensuring proper inheritance taxes, (1+ / 0-)
        Recommended by:
        Melanchthon

        getting hold of the taxes on accounts held overseas, and actually raising property taxes on owners of several properties and main properties (over a certain well defined value that will not affect the middle and working classes) will help.

        Thanks for an excellent diary that raised issues and provided useful information. I agree completely with your conclusions and have also advocated the same points.

        No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable (Adam Smith, 1776, I, p. 96).

        by NY brit expat on Thu Aug 20, 2009 at 07:44:52 AM PDT

        [ Parent ]

    •  Right. CEO compensation is largely stock options (2+ / 0-)
      Recommended by:
      Melanchthon, NY brit expat

      Many CEOs make $1M or less in salary but tens of millions in exercised stock options. Any tax plan to enforce fair wealth distribution needs to include a graduated Capital Gains Tax which leans heavily on the morbidly rich.

      Q: What do you call 500 Congress-slugs at the bottom of the ocean? A: Divine intervention. (with apologies to the couple dozen honest ones.)

      by CitizenOfEarth on Thu Aug 20, 2009 at 06:10:02 AM PDT

      [ Parent ]

    •  Actually.... (2+ / 0-)
      Recommended by:
      Melanchthon, NY brit expat

      ...the Progressive Income Tax is the least 'hurtful' of all tax approaches, since  it collects money from taxpayers in a way that always preserves every income earner's purchasing power.  Each is spared the decline in purchasing power she would otherwise have experienced if only she had paid the tax.

      This is because the inevitable impact of an across-the-board drop in the disposable incomes of all all rich people is a drop in prices that will enable wealthy consumers to obtain just as many good & services as they had obtained previously, only at lower prices.  For a more thorough explanation of why this is true, read this:

      In a market economy, suppliers can be counted on to charge the highest prices that their markets will bear.  That is to say, they will charge as high a price as they can, so long as they are able to sell everything they have.  If a shortage develops in some market, sellers will raise their prices because they know that some people will be willing to pay a higher price for what little there is.  Buyers will pay the higher prices because (1) they have the money to do so, and (2) they don't want to do without.  Sellers also raise their prices if they notice that an increase in disposable incomes has occurred.  They want to get as much money as their customers are willing to pay, period.  The only way they can find out what the optimal price might be is by raising the price until they are no longer able to sell all that they have.

      It helps in this discussion if you understand conceptually why we say that markets auction off the scarcest goods & services to the highest bidders.  We have already noted that suppliers will always set their prices as high as they can.  Consumers who are willing and able to pay those prices get to be successful bidders.  Those who cannot afford to pay a seller's asking price will "submit their own bids" only if the official selling price is lowered to a level that they can afford.  In other words, in this kind of "auction", the only bids that are offered are those that are certain to be accepted.

      If a supplier sets her prices higher than she should, she won't be able to sell all of her product.  She will then have to lower her prices to a level that more consumers find affordable.  If, on the other hand, she doesn't charge the highest price she can get from the market, she'll find that she has too many customers clamoring for the limited amount of things she has to sell.  She will then want to raise her prices until she finds out which higher price imaginable is still low enough for her to sell all of her product.

      Due to the limitations imposed on us by Nature, our economy is not able to produce enough of the "best quality" goods & services so that everyone can experience them.  In a market economy, if you want to be one of those who is able to experience the rarest of economic privileges, you must obtain a level of disposable income/wealth that is high enough for you to outbid other potential consumers for them.  This is essentially why it is the distribution of income/wealth that ultimately determines who gets to experience them and who doesn't.

      What is important is not the dollar wealth you are able to accumulate; it's the dollar wealth you are able to accumulate compared to everyone else.  The purchasing power of your income is determined solely by its relative position amongst all accumulations of disposable income/wealth.  Because we have a market economy, an individual can improve her claim on the scarcest goods & services only if she can improve her comparative bidding position within the hierarchy of national income/wealth distribution.

      Whenever an individual household is able to increase its disposable income, its purchasing power will either increase, decrease, or not change at all depending on what has happened to the disposable incomes of all other households.  If your disposable income remains the same next year but everyone else's income declines you will actually see the purchasing power of your stagnant income increase.  Suppliers would be forced to drop their prices and you would discover that you have acquired a bidding advantage over others.  Even if your income were to drop next year, you would still be better off if everyone else's income dropped even more.

      Understanding how markets respond to widespread changes in disposable dollar incomes makes it easier to see why The Progressive Income Tax does not impose any real sacrifice on taxpayers in terms of lost purchasing power.  If there are no loopholes or special allowances written into the tax code, those who earn more pre-tax income than you end up with more disposable income than you after everyone pays their taxes.

      The only reason why the progressive income tax seems to impose some kind of excessive penalty [in the minds of some] on rich people is because nobody ever bothered to tell them the whole story.

  •  Agree (1+ / 0-)
    Recommended by:
    Melanchthon

    Except I'd replace "slow growth" with "slow contraction."  

  •  great blog-- just two more points (3+ / 0-)
    Recommended by:
    Melanchthon, NY brit expat, DRo

    First, the government will be releasing figures in the next week or so on poverty and income growth in the US for last year. These figures ignore all the consumer debt of households and the interest that people are paying on their debt. They thus paint a much too rosy picture of how the typical household is doing (and how it has done during the Bush years).

    To take one example, my colleague Robert Scott and I have estimated that there are more than 4 million Americans who are poor and cannot buy basic necessities due to the interest payments on their consumer debt. The government, however, fails to count these people as poor.

    Second, a lot of the problem stems from the failure of the government to regulate the credit card industry. The recent reform bill is just not enough; much more needs to be done. In addition, the government needs to roll back the Bush tax cuts and put the money into things that benefit low and middle income households.

    "The mind that cannot philosophize, ossifies"- John Barth

    by steven pressman on Thu Aug 20, 2009 at 06:28:15 AM PDT

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