Friday, May 11, 2018

The US is Nowhere Near Full Employment

The US unemployment fell to a 17-year low of 3.9 percent in April.

While, on its face, that seems like good news, the unemployment rate has been falling for years because out-of-work Americans have exited the labor force.

Unfortunately, 236,000 people left the labor force in April, adding to the 158,000 who quit in March. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.8 percent last month from 62.9 percent in March. It was the second straight monthly drop in the participation rate.

There is something deeply wrong with, and misleading about, an unemployment reading that improves because people stop looking for work. That's on top of the fact that it's absurd to count people who aren't even working as part of the labor force simply because they are looking for a job.

The so-called U-6 unemployment rate -- which is a broader measure of unemployment because it includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment -- dropped to 7.8 percent last month, the lowest level since July 2001, from 8.0 percent in March.

Yet, that's twice the official U-3 unemployment rate, which the government prefers to reference, for obvious reasons.

The labor force participation rate reached an all time high of 67.30 percent in January of 2000 and a record low of 58.10 percent in December of 1954.

The participation rate fell for many years as women entered the labor force in mass in the 1960s. That led to a much larger pool of working-age Americans.

The labor force participation rate has averaged 62.99 percent since 1950, which is almost exactly where it is now. Yet, there are a lot more women who want or need to work today, which is why that current number is so troubling.

Some Americans don't want or need to work, but millions of people who want jobs can't find one. A total of 6.4 million Americans remain unemployed, yet it's even worse than that.

A whopping 5 million people were employed part time for economic reasons in April. These are sometimes referred to as involuntary part-time workers. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or because they were unable to find full-time jobs, according to the US Bureau of Labor Statistics.

Additionally, 1.4 million people were marginally attached to the labor force. This means they "wanted and were available for work, and had looked for a job sometime in the prior 12 months." They were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.

No one who wants to be taken seriously should be uttering the term "full employment" right now. That's disingenuous and insincere, at best. At worst, it's just plain misleading.

More job training would help and a public/private partnership could get it done. Over and over, it's been widely reported that employers can't find skilled workers. The Federal Reserve backs that contention, saying that there are labor shortages all over the country.

We need a program to close the skills gap and get workers prepared for the jobs of today.

That would require political will and consensus, little of which exists in the nation's capitol.

Sunday, April 29, 2018

Public Pension Crisis Looming Across US

Across the country, state retirement systems are woefully underfunded. Yet, that’s just the tip of the iceberg — so are city retirement funds, county retirement funds and teacher retirement funds. Aside from being underfunded, one thing they all have in common is that they are all backed by taxpayers.

Already, taxes are being raised and services are being lowered, and you can expect this trend to continue in the years ahead.

Cumulatively, unfunded state and local pension liabilities now exceed $5 trillion. Take a moment to let that sink in.

Not a single US state had a fully funded pension plan as of last year. In fact, 11 states’ pension systems are funded at less than 60 percent and a whopping 43 sates saw their pension funding worsen in 2016.

Here’s how Bloomberg described the matter:

"The news continues to worsen for America’s public pensions and for the people who depend on them. The median funding ratio — the percentage of assets states have available for future payments to retirees — declined to 71.1 percent in 2016, from 74.5 percent in 2015 and 75.6 percent in 2014. Only six states and the District of Columbia have narrowed their funding gaps."
By the way, these shortfalls are occurring during the biggest and longest bull market for the Dow post-WWII, according to Leuthold Group. The Dow has quadrupled during this bull market, which turned 9 in March. The fiscal positions of all public pensions will be disastrous when this bull finally ends its run and the bear comes out of its long hibernation.

It will inevitably mean higher taxes, less services and the likelihood of defaults — even bankruptcies. Remember Detroit ($18 billion), Jefferson County, AL ($4 billion), Orange County, CA ($2 billion), Stockton, CA ($1 billion) and San Bernardino, CA ($500 million)?

When the stock market eventually tanks, which it always does, many states will face some awful choices, as well as costly legal battles. Pensioners expect to be paid, even if their pensions were unrealistic or outrageous from the outset. In most cases, public pensions are legal obligations. We’ll see how far tax payers can be pushed. After all, you can’t extract blood from a stone.

For example, Illinois — a state that is absolute financial mess -- has 63,000 public employees with salaries of at least $100,000. This includes truck drivers, tree trimmers, and streetlight-repair workers. These tens of thousands of workers are in line for some rather large pensions, based on their high salaries.

The California Public Employee Retirement System (CalPERS) is the USA’s largest pension fund, with $301 billion in assets. CalPERS has 21,862 public employee retirees who receive a pension of $100,000 or more. This costs California taxpayers $2.8 billion annually.

Steve Westly, a former voting member of the CalPers board and a former state Controller, recently tweeted the following:

"The pension crisis is inching closer by the day. CalPERS just voted to increase the amount cities must pay to the agency. Cities point to possible insolvency if payments keep rising but CalPERS is near insolvency itself. It may be reform or bailout soon.”

Here’s the biggest concern: Illinois and California are not alone and they are not unique. Similar funding crises are starting to bubble up in numerous states, counties and cities, and the taxpayers are all on the hook.

This affects nearly all of us, whether you receive a public pension or not.

Friday, April 20, 2018

Our Debt is Slowly Crushing Us

If you’re not highly concerned about our nation's debt problem, you should be.

The Great Recession and 2008 financial crisis were sparked by an excess of debt in an overly connected global financial system.

Today, the total amount of debt is even greater at the federal, corporate and consumer levels, while state and local debt is enough to be catastrophic in the next recession. In essence, the solution to the debt crisis was to create even more debt.

Next time will be different, because it will be worse.

This most obvious concern is the national debt, which has surpassed $21 trillion. This whopping debt is serviced by borrowing even more money, creating a sort of black hole of debt that can never be escaped.

According to a Congressional Budget Office report released this month, trillion dollar deficits are now the norm. Congress recently voted to both reduce revenues by cutting taxes and to increase spending. Those can only be described as acts of insanity.

As the debt has steadily grown, an annual deficit of 3 percent (which was long viewed as a stable) results in ever-expanding debt payments. For example, 3 percent of a $100 billion deficit is $3 billion. However, 3 percent of a $1 trillion deficit is $30 billion. As a result, the growth in federal debt has become exponential.

People often measure the national debt in relation to the size of the economy — the so-called debt-to-GDP ratio. However, the government doesn’t service its debt with the entire economy; it services it with tax collections, which are now smaller and actually adding to the debt.

Yet, our troubles aren’t confined to the federal government.

At the end of 2017, the 50 US states had a cumulative debt of $1.176 trillion. When local debt is added, the figure leaps to more than $3 trillion. Most states have constitutional requirements stipulating that they maintain balanced budgets, yet none of them manage to do that.

Even the most financiallly healthy states face substantial long-term challenges related to their pension and healthcare benefits systems.

Additionally, total corporate debt has reached an unprecedented level and is currently at three-and-a-half times GDP. Even a moderate drop in the value of corporate bonds would result in wealth losses equivalent to a large fraction of GDP. For example, a 10 percent decline in the value of corporate debt would wipe out an amount of wealth equal to 35 percent of GDP. That would mean absolutely massive losses for bond holders, such as pensions and 401ks. That should make you queasy.

The chart below shows the additional economic output (GDP) generated by each additional dollar of business debt in the US. As you can see, debt has become steadily less stimulative over the last several decades. Despite low interest rates and a massive debt binge, the stimulative affect of debt is back down where it was during the lows of the Great Recession. That’s troubling.

Furthermore, total household debt rose to an all-time high of $13.15 trillion at year-end 2017, according to the Federal Reserve Bank of New York. It was fifth consecutive year of annual household debt growth, with increases in the mortgage, student, auto and credit card categories.

Our economy is addicted to debt for growth; it can't function without it. But, like any addict, our addiction is slowly killing us. We need more and more of the drug (debt) to get a continually weakening effect. Without our government’s deficit spending, our economy would likely be in a depression.

This policy of debt-induced economic expansion is baked into the cake; it is the very essence of our economic system. However, spending a dollar to get anything less than a dollar of return is not productive.

As Chris Martenson at Peak Prosperity notes, debt has been growing twice as fast as GDP for nearly five decades. That’s not sustainable. Debt expansion only works if it is exceeded by GDP growth.

Eventually, this will end very badly and it will be terribly disruptive to our economy, our national security and our way of life. There is no cure or recourse, other than a massive deflation.

Yet, that’s exactly what our financial masters at the Fed and on Wall St. are desperately trying to avoid… until they no longer can.

Saturday, March 31, 2018

Federal Budget Crisis Speeding Ahead Like Runway Train

The national debt now exceeds $21 trillion. Consequently, the interest payments on that debt are rather massive.

Case in point, the Treasury Dept. this week had to borrow nearly $300 billion, the most for any single week since the financial crisis in 2008. It’s worth noting that as recently at 2007, the federal deficit was just $161 billion. Consider that: the government is now borrowing nearly twice that amount in just one week.

Federal revenues are declining due to the Republican tax bill. All by itself, aside from any new spending, the law will add $2.3 trillion to the debt over the next 10 years, according to the Treasury Dept. Of course, the Trump Administration argues that the cuts will spur the economy and thereby pay for themselves. That’s a spurious argument since it has been tried repeatedly and has never worked, except in the short term.

Despite this, spending goes on, unabated.

Just last week, the House and Senate passed a massive 2,232-page, $1.3 trillion spending bill that significantly increased federal spending. The bill boosts domestic spending by $128 billion and defense spending by $160 billion over two years.

Where are the Tea Party Republicans when you need them? Congress and the White House are controlled by the GOP. Remember when they used to call themselves "fiscal conservatives" and "fiscally responsible," and some people took them seriously?

So, the government is simultaneously reducing revenues while increasing spending. It is a terribly reckless policy.

Remember, this is being done willfully, as opposed to during an economic crisis, when the government can’t control the collapse in revenue. The prescription in those times, in the absence of consumer and corporate/business spending, is typically a temporary increase in federal spending to uphold the economy.

It’s as if the government is trying to hasten an economic and fiscal crisis.

This all comes at a time when Donald Trump is threatening a trade war with China, which holds $1.17 trillion of US debt, In fact, China owns of more Treasury bonds than any other foreign country.

Meanwhile, the Federal Reserve is finally ending the bond-buying program it initiated during the financial crisis. Yet, somebody has to finance America’s deficit spending, which is only increasing. The United States ran a $215 billion deficit in February, the biggest in six years.

The federal government is on track to borrow nearly $1 trillion this fiscal year, the highest amount of borrowing in six years and almost double what it borrowed in fiscal 2017.

According to the Congressional Budget Office, trillion dollar deficits are now the norm and stretch into the future as far as the eye can see.

The Committee for a Responsible Federal Budget, a fiscal watchdog group, recently warned that interest payments on US debt could quadruple to $1.05 trillion by 2028 if the current course is maintained.

This is like one of those Hollywood thrillers, in which a speeding train is on course for a massive collision. All of the rail and public safety officials know it, and everyone is rushing to avert a tragedy.

However, our current predicament isn’t a fictionalized Hollywood tale and there isn’t a hero who will save us in the end. This speeding fiscal train is heading for a cataclysmic disaster and, just like the Hollywood version, all the officials know it.

The difference is that this inept, selfish group of officials (Congress and the White House) is doing nothing to stop it. To the contrary, they’re speeding up the train.

Wednesday, January 17, 2018

A Government Shutdown is a Government Failure

Government funding shouldn't be treated as a hostage negotiation.

The extraordinary level of dysfunction on Capitol Hill is on display once again. Congress has just days to act before a government shutdown takes place. It never should have come to this; Congress had far too much time to agree on a budget for their backs to now be against the wall.

The federal government's fiscal year -- its accounting period -- runs from Oct. 1 to Sept. 30 of the following year. So, fiscal 2018 began on Oct. 1, 2017.

Passing an annual budget is the fundamental job of Congress. There are twelve standard appropriations bills that fund the federal government's discretionary programs each fiscal year. They are supposed to be enacted into law by Oct. 1.

Yet, 3 1/2 months into this fiscal year, Congress has failed to pass a budget... again.

When Congress and the president fail to agree on and pass appropriations bills, a continuing resolution must instead be passed. This has already been done three times since Oct. 1. Congress must continually turn to these stopgap measures because they can’t even agree on their basic function — how to fund the government.

Without passing a budget or, at the least, another continuing resolution, the federal government will shut down at midnight on Friday, January 19.

The government has only shut down once in this century, in 2013. Prior to that, the last shutdown was from Dec. 1995 to Jan. 1996.

Republicans want to lift spending caps on defense, while Democrats want to lift the caps for domestic programs. Those caps are the remnants of the 2013 sequester, which was supposed to enact some constraints on federal spending. It would trigger an automatic $6 billion in cuts this fiscal year. But no one in Congress truly wants to cut spending; they just want to increase it.

That’s on top of the fact that the new GOP tax law will increase the nation’s debt by more than $1.4 trillion over the next decade, according to an analysis by the Joint Committee on Taxation, a congressional scorekeeper. It is wildly hypocritical for Republicans to have consistently sounded alarms about deficits in recent years and then vote for their deficit-inducing tax proposal.

The federal government is already more than $20 trillion in debt. Yet, no one seems to care in the slightest.

Republicans say they will have to pass another continuing resolution, which would probably last until mid-February, because there is no budget deal currently in place. Even if there was, they wouldn’t have enough time to draft a bill.

This is government at its most dysfunctional. Congress can’t even perform its most basic duty. Republicans love to complain about “unelected bureaucrats” in government, but they are not the problem; the elected bureaucrats are.

It cannot be overlooked that Republicans currently control the White House, the Senate and the House. The government has never been shut down when it is controlled by one party. Such a shutdown would be unprecedented and the Republicans surely know that.

In May, 2015, the GOP-led Congress passed a full budget for the first time in six years. In other words, this kind of obstinance and narrow-mindedness has a long history in the capitol.

The Senate did not pass a budget resolution for FY2011, FY2012, or FY2013 and it passed the FY2014 budget resolution on March 23, 2013, 23 days before the April 15 deadline set by the No Budget, No Pay Act of 2013. Yes, it took the threat of temporary salary restrictions to get Congress to act.

Government funding now seems to be tied to DACA (Deferred Action for Childhood Arrivals), which affects nearly 800,000 undocumented immigrants illegally brought to the US, as children, by their parents. It’s fair to say that these people were simply along for the ride and are living with the consequences of their parent’s actions.

No matter your view on DACA, government funding should not be tied to this or any other non-spending issue. If Congress is going to engage in customary horse trading, as it has for hundreds of years, it should pertain only to budget/spending matters. Bi-partisan legislation regarding the so-called “dreamers” should be an entirely separate proceeding.

The cost of another government shutdown would be significant.

In December, S&P Global analysts said a shutdown would cost the economy about $6.5 billion per week. S&P predicts a shutdown would increase the deficit because of the added cost required to stop and start federal programs. In essence, it is more expensive to shut the doors of government than to keep them open.

The 2013 shutdown cost $24 billion in lost economic output, or 0.6 percent of projected annualized GDP growth, according to the Standard and Poor’s ratings agency. Similarly, Moody’s Analytics estimated the impact at $23 billion.

The White House Council of Economic Advisers estimated that during that shutdown, the economy created 120,000 fewer private-sector jobs than it otherwise might have that October.

In other words, another shutdown would have real and potentially lasting effects.

Yet, here we are... again. The only thing standing between yet another shutdown is yet another continuing resolution, which would temporarily keep the government operating.

A continuing resolution basically keeps government agencies funded at the same level as the previous year, even if the needs of a given agency have changed. Under this arrangement, Congress cannot reduce or eliminate programs that have run their course.

Yet, the federal government has been operating under continuing resolutions more than one-third of the time for the past nine years.

This is no way to run a government; it is terribly inefficient. Agencies have no certainty about how much money they’ll have.

Congress seems to enjoy this game of brinksmanship, but there are enormous expenses associated with their foolishness. Another shutdown could cost tens of billions of dollars and tens of thousands of jobs.

Congress proved that it never cared about these things in the past and it’s unlikely that they care about them now.

Congress only cares about the rich donors who put them, and keep them, in office.

Monday, November 20, 2017

Simplifying the Tax Code is Long Overdue, but the GOP Tax Plan is a Travesty

The GOP — allegedly the party of fiscal responsibility — has proposed a tax cut that they claim will cost $1.5 trillion. However, a preliminary debt calculation by the non-partisan Congressional Budget Office concludes that the plan would add $1.7 trillion to the national debt over the next decade.

That $200 billion difference is critical since it exceeds the limit Republicans agreed to for their reconciliation bill. They must restrain the cost of the bill to $1.5 trillion in order to retain the special “reconciliation” status of their tax proposal in the Senate, which would allow them to pass it with only 51 votes instead of 60. That means they could pass the massive deficit increase without a single Democrat’s vote.

This has set the stage for all manner of machinations, manipulation and massaging to get the bill below that threshold. You could call it smoke and mirrors or sleight of hand. In other words, don’t believe the $1.5 trillion figure for a minute.

The Republicans have railed against the deficit and the debt for decades but, as customary, when a fellow Republican occupies the White House, they have selective amnesia.

The GOP claims to loathe deficit spending — though the GOP-controlled Congress approves deficit spending each year, right along with the Dems — yet they have no issue with deficit-inducing tax cuts. Ultimately, they have the same result; spending takes money from the Treasury at the back end, while tax cuts take money at the front end.

We’ve got plenty of recent experience with the onerous cost of tax cuts and just how much they weigh on the deficit and debt.

The non-partisan Congressional Research Service estimated the 10-year revenue loss from extending the 2001 and 2003 Bush tax cuts beyond 2010 at $2.9 trillion, with an additional $606 billion in debt service costs (interest), for a combined total of $3.5 trillion.

A commensurate $3.5 trillion in deficit spending would result in a lot of howling by the GOP, but the same impact to the deficit from tax cuts is met with cheering and applause. It’s dubious, if not delusional.

This enthusiasm for exploding the deficit comes at a time when the national debt stands at $20.5 trillion and rising. The fiscal 2017 budget deficit was $666 billion and the fiscal 2018 deficit is $440 billion (that’s before the tax cut), meaning that our “leadership” in Washington has added more than $1 trillion to the debt in just the past two years.

Meanwhile, bipartisan pressure for additional money for defense, infrastructure and other domestic demands could add nearly $100 billion in additional spending next year alone.

The Congressional Budget Office forecasts that deficits will total $10.1 trillion over the next decade.

No less a conservative authority than Forbes has called the Republican party a “deficit fraud.”

To that point, there are other estimates that the GOP tax cut plan will cost a whole lot more than advertised.

The plan outlined by the White House and Republican leaders in the House and Senate could cost more than $2 trillion over the next decade, according to a preliminary estimate by the Committee for a Responsible Federal Budget, a nonpartisan advocacy group.

During his presidential campaign, Donald Trump insisted that he could eliminate the national debt in eight years. That would be laughable if the danger of our ever-expanding wasn’t so frightening.

This whole tax cut plan is being sold on the premise that it will spur economic growth. We’ve heard those rosy projections many times in the past and they haven’t panned put. This time will be no different.

George W. Bush and his fellow Republicans pledged that tax cuts would spur economic growth and ultimately pay for themselves. It’s an old canard that goes back to at least the Reagan Administration. So, what happened in the aftermath of the 2001 and 2003 Bush tax cuts?

Let’s take a look at economic growth by year, since 2001 (source: World Bank):

2001: 1.0%
2002: 1.8%
2003: 2.8%
2004: 3.8%
2005: 3.3%
2006: 2.7%
2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

If only we could cut taxes and release the animal spirits of the economy! Just take the shackles off!

The above GDP numbers should be viewed through the following lens: Historically, from 1947 through 2016, the annual GDP growth rate in the US averaged 3.23 percent. Yet there have been just two years since 2001 in which economic growth reached even 3 percent. Furthermore, over the past 16 years, economic growth has averaged a paltry 1.79 percent.

Are you feeling conned yet? The whole notion that tax cuts spur economic growth — much less “tremendous” economic growth, as Trump would say — is pure snake oil.

Voters seem to have caught on to this ruse. Overall, the GOP tax plan is not popular with Americans. Even Republican voters worry about what this tax cut will do to the deficit, according to recent polling.

An NBC News/Wall Street Journal poll released this month found that just 25 percent of Americans think President Trump’s tax plan is a good idea.

A subsequent Quinnipiac University survey had the same result: just 25 percent of voters approve of the Republican tax plan.

We all dislike paying taxes and we’d all like to pay less. But this tax plan will only accelerate our insolvency — the moment of reckoning where we have to accept that the government can’t pay for the promises it has made. Then we will have to suffer the dual pain and indignity of less government services and much higher taxes.

For nearly five decades, our government has consistently spent more than it has taken in. Since 1970, the Federal Government has run deficits in all but four years (1998–2001). Without a doubt, Washington has a spending problem.

That’s why creating an even deeper revenue problem amounts to madness.

The idea of simplifying the tax code and eliminating the dizzying array of deductions, exemptions and credits would be a great start and one that is long overdue. There are a whole host of special interests that have inserted their pet deductions or exemptions into the code and they will fight like hell to maintain the status quo.

Businesses aside, no individual taxpayer should have to spend numerous hours and hundreds to thousands of dollars just to pay Uncle Sam — it amounts to rubbing salt in a wound.

Additionally, the tax code should not be used to reward or punish tax payers or to incentivize or dis-incentivize certain behaviors/activities. If you have kids or buy a house, for example, the rest of society that doesn’t have either of them shouldn’t be subsidizing your decisions. The government shouldn’t be favoring certain groups or activities above others, nor should it be penalizing childless people or apartment dwellers.

The one thing that Republicans pushing tax reform have right is that all deductions, exemptions and credits should be permanently eliminated — all of them. Poor people should helped out by paying a lower rate. That’s why the tax code has been progressive, with multiple tiers, for many decades and it’s why it needs to remain so.

A flat tax would be punitive to the poor. Here’s why: According to the Social Security Administration, 50 percent of wage earners make less than $30,000 annually, and a lot of them come from single-income households.

Taking 20 percent, for example, from someone who makes just $30,000 a year is much more painful than taking that same percentage from someone who makes $1 million, or even $500,000 annually. Though the dollar amount is higher for latter group, their lifestyle isn’t altered by a 20 percent income tax.

Whether the tax code should have three, four or five brackets is up for debate, but I won’t argue for one of them here. Suffice to say that the progressive tax code must remain… without ANY exemptions, deductions or credits.

Once Congress does that, it will simultaneously wipe out most lobbying and lobbyists.

Wouldn’t that be nice?

Saturday, September 16, 2017

Some Perspective on the Rise in Median Household Income

The Census Bureau reported this week that median household income rose to $59,039 in 2016, a 3.2 percent increase from the previous year and the second consecutive year of healthy gains.

To be clear, household income is the amount of income earned by an entire household, whether it’s a single occupant, a couple, or roommates.

Let's explore the term 'median', which denotes the midpoint. The median is the "middle" value in a list of numbers.

When it comes to median income, this means that half of earners have incomes above that amount, and half have incomes below that amount.

The fact that median household income rose last year is obviously good news, but before we pop the champagne, let’s have a little perspective.

Middle-class households are only now seeing their income eclipse 1999 levels. The Census Bureau reports that in 1999, median household income, adjusted for inflation, was $58,655.

Yes, it took us 17 years just to get back to where we started. Are we really supposed to celebrate that?

According to the Social Security Administration, 50 percent of wage earners make less than $30,000 annually, 61.5 percent make less than $40,000 and 70.5 percent make less than $50,000.

Again, 50 percent of all wage earners make less than $30,000 per year, and a lot of them come from single-income households.

The proportion of Americans who live alone rose to 27 percent in 2013, according to the latest Current Population Survey from the Census Bureau; that’s more than one-in-four people. Obviously, these are single-income households and a lot of them are surely earning less than the median.

As of 2012, 60 percent of married couples with kids had dual income households. Among the households with just one income earner; the father was the sole earner in 31 percent and the mother was the sole earner in 6 percent.

The average American household consisted of 2.53 people in 2016.

So, the median household income is generally a byproduct of two earners. That suddenly makes $59,000 seem a lot less impressive.

The incomes of the richest households are much further apart from those at the median than those at the median are from the bottom households. In other words, the difference between the households at the top and those in the middle is much more vast than the difference from those in the middle to those at the bottom.

Consider how different the earnings are among those above and below the median income.

According to the Internal Revenue Service (IRS), the top 1 percent had an adjusted gross income of $465,626 or higher for the 2014 tax year.

Clearly, the top 1 percent are not all billionaires.

Remember, a significant majority of earners take home less than $40,000 per year. Thirty-seven percent of earners take home less than $20,000. However, the lifestyles of those two groups aren’t as radically different from each other as they are from those who make at least $465,000 a year.

Roughly 534,000 Americans made more than a million dollars in 2013, according to the latest IRS data available.

The mega wealthy — a fraction the top 1 percent — now earn an average of $1.3 million a year. That’s more than three times as much as the 1980s, when the super rich "only" made $428,000, on average, according to economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.

The top fifth of earners are taking home more than half of all overall income, a record.

The top 1 percent take home more than 20 percent of all income.

However, the bottom 50 percent collect about 12 percent percent of national income.

This is why the savings rate was just 3.5 percent in July. People simply don’t have enough left-over income to save. Most Americans are spending everything they make just to get by and are using credit cards to make up the difference, even for basics like groceries and gas.

Credit-card debt in the U.S. recently surpassed the peak set just before the 2008 financial crisis. Outstanding revolving credit, which includes credit-card debt, rose to $1.02 trillion in June, according to a monthly report from the Federal Reserve.

Low incomes and slow income growth are having some rather glaring effects, especially on younger Americans.

Last year, the Pew Research Center reported that 32.1 percent of 18- to 34-year-olds lived at their parents’ homes in 2014, exceeding the 31.6 percent of young adults who were married or living with a partner in their own household.

Yes, one third of young adults — people up to the age of 34 — are still living with their parents. Yet, the findings were even worse the following year.

Almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia.

It should be noted that 1940 was the end of the Great Depression, so the current state of affairs is quite troubling.

This huge percentage of adult children living with their parents has added at least one additional working adult to millions of households. Assuming the adult child lives with both parents and is working, it results in at least three income earners in millions of households.

Once again, that $59,000 median doesn’t seem so impressive.

Yes, it’s nice that median household income went up last year, but we’re still only back to 1999 levels and it’s clear that the masses are still struggling.

Remember, the bottom 50 percent collect just 12 percent percent of national income.

That’s important to consider, if you’re celebrating the rise in median household income.