Sunday, April 10, 2011
The Crunch Is On
While incomes have been stagnant or falling, Americans' most valuable assets — their homes — have been plummeting.
Given the rise in food and fuel costs, which are now about 23% of the average person’s income, you get an idea how much the average American is struggling. Medical and tuition costs are also outstripping the general rate of inflation.
Most Americans are falling further behind, not getting ahead. The American dream is dead and over for huge swaths of our fellow countrymen.
According to a study commissioned by Wider Opportunities for Women, a nonprofit group, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour.
The recession / economic downturn have pushed millions of Americans into poverty and are leaving millions more hanging by a thread, with the potential for slipping over the precipice.
Despite recent unemployment data, which at first blush seems optimistic, according to the Bureau of Labor Statistics, 13.5 million people remain unemployed in the US. But that number doesn't accurately reflect the true number of unemployed Americans.
The unemployment rate is improving only because it doesn't count a lot of people — including those who have stopped looking for jobs and dropped out of the labor force. The employment-to-population ratio, which measures the share of the U.S. population that has a job, has hardly budged over the past year. And that means the percentage of people working in this country hasn't changed even though the unemployment rate has ticked down.
This is particularly bad news since our population is continually growing, having increased by 30 million people over the last decade. Meanwhile, job growth in that period was negative.
However, the economy needs to add about 150,000 jobs a month just to absorb the annual population increase and the entrance of new people into the workforce, such as college grads.
The government says that 1.3 million jobs needed to be created every year from 2006-2016 just to keep up with the growing labor force. Obviously, that isn't happening.
Yet, that sort of growth would only benefit new workers, not the already unemployed.
While 240,000 new jobs were created in the private sector (216,000 non-farm jobs) last month, that will be a tough pace to sustain. Yet, this kind of job growth must be maintained for the nation to dig itself out of the hole it's in.
Beginning last year, the US needed to add 2.15 million private-sector jobs per year and maintain that pace for more than 7 consecutive years (7.63 years), or until August 2017, just to eliminate the jobs deficit.
If you're doing the math, you know that's 179,000 new jobs each and every month. That's not likely to happen either.
Over the last decade, our GDP was driven by government spending. Obviously, that has to end. However, cutting government spending will mean lower GDP numbers in the short term, though it will allow our survival in the longer term.
The private sector is incapable of stepping in, as the government steps out, to maintain the already fragile economy. We will just muddle along, unable to grow our way out of this problem. Cutting government spending will be both a blessing and a curse.
There is a growing conversation about cutting entitlements, yet very little about defense and security spending, which account for the biggest chunks of federal spending. Huge defense corporations are hell-bent on maintaining wars and the federal-funds pipeline that feeds them.
Right now, the US is in the unprecedented position of fighting three concurrent wars. The Afghan war, alone, costs more than $9 billion a month.
Eisenhower warned us to be wary of the military-industrial complex. He was right. We're a nation constantly at war, spending trillions on defense, while we give millionaires, billionaires and corporations massive tax breaks.
While the nation fights these unwise, unfunded, unwinnable wars, there is passionate discussion of the need to cut Social Security benefits to save the republic.
Perhaps those arguing for such cuts should be reminded that there is a $2.5 trillion dollar Social Security surplus that is owed to the American people. And Social Security cannot legally add to the deficit; It is one of the few expenditures (like unemployment insurance) expressly paid for through worker's paychecks each and every week.
While Republicans and Democrats were patting themselves on the back for agreeing to $38.5 billion in budget cuts, the national debt jumped $54.1 billion in just the preceding eight days.
As politicians bicker and engage in absurd partisan battles, the Titanic is sinking. Many will be lost with it.
Even before all the massive and requisite budget cuts are initiated, millions of Americans are already sliding backwards. And there is no backstop to support them.