Uprooting Inequality, Jan 22, 2016

Uprooting Inequality

       Uprooting Inequality     

This essay was published at The Real News Network, see here.

Their "Economy" section provides quality interviews from some of my favorite economists. The INET does so also, The Institute for New Economic Thinking.
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Inequality of income and wealth has set in like a deep rot undermining the foundation of our society and economy. Uprooting it will not be simple. 

I enjoy numbers and think they explain better than anything the problem, so bear with me. “If wages had kept up with productivity over the last three decades your pay would be closer to:” states the Economic Policy Institute web page, and then one types in an income amount.
An income of $20,000 would be $32,576, a 63% increase;
an income of $40,000 would be $61,055, up 53%;
an income of $60,000 would increase 40% to $83,728,
and an income of $80,000 would be $101,782, up 27%.
The median worker income for 2014 was $28,851 states the Social Security Administration (SSA), that would be $44,357 states the EPI. The Congressional Budget Office issued a report on income distribution in 2011, revealing that $93,900 was the average household income, and adjusting for inflation it is now $99,000. And adjusting to find average worker income, each worker contributes $80,379 to the national  income — mean average. The SSA report shows the lower-earning 45% of U.S. workers earn less than $25,000, and the average income for this 45% is $10,523. The lower-earning 45% of workers earn in wage income about 6% of the total national income. Even though this seems unbelievable, you can do the simple math by following the steps in footnote below. 

It’s depressing, isn’t it? The United Nations issued its Human Development Index and found the U.S. ranked 5th among all 187 nations of the world. The U.N. also issued an index adjusted for inequality in which the U.S. drops to the 28th rank. Who would know that 31% of the U.S. population live in households with "zero or negative non-home wealth", or that 50% lived in homes with less than $10,000 in "non-home wealth"? (see Table 1 on page 56)  Especially when the net worth of all households is about $687,000. (See Flow of Funds report, page 2, and divide by 124 million households.) Or that 44% of the adults live in “liquid asset poverty”, or that 44% of U.S. children are being raised in families that are low income or poor? 

As a result, millions of lives are damaged, and a few unfortunate ones are destroyed.

Reversing this baked-in, nearly invisible condition will not be easy, but it is the political imperative of our time. Money is power and our political institutions have been corrupted. It will take education and a collective determination to readjust the flow of monetary resources. 

                      Remedies to Tame Inequality                 

Of the remedies put forth, those that raise wage income are the most promising: 1) create public jobs directly or through infrastructure improvement projects; 2) stronger and clearer labor union rights; 3) increasing the minimum wage and the earned income tax credit. In the late 1990s, during Clinton’s last term, the employment to population ratio reached its historical high, workers became scarce and employers raised wages. The employment to population ratio (E/P ratio) for all workers is at a 31 year low, and for prime working age workers it is at a 29 year low (see here and here). Using this scale, the E/P ratio, indicates a truer picture of the labor market than the usual unemployment rate which varies drastically because of labor non-participation, and the figure misleads the public into thinking the labor market is recovering. It is far from recovered. If we take the norm ratio for E/P to be the 20 year average, from 1986 to 2006, and calculate how far today we are from this norm, then we need perhaps 10 million jobs to come to the normal 20 year average E/P ratio. See below, in this essay, about the labor market. Bernie Sanders' proposal to spend $3.8 trillion over ten years is the only political solution that comes close to restoring and employing our workers. See this article, What Would Bernie Sanders Do?, at Dollars and Sense magazine. 

The Economic Policy Institute (EPI.org) has over the decades become the nation’s strongest advocate for workers, and they present eleven proposals that will raise wages. The renown economist Joseph Stieglitz has just released the book Rewriting the Rules of the American Economy. He details the institutional changes needed to uproot inequality. These deal with corporate governance, tax laws, labor laws, trade, and other concerns. Ellen Dannin has written about reforming the labor laws in Taking Back the Workers’ Law. The American Prospect has a book review of Thomas Geoghegan's book Only One Thing Can Save Us, see here. Geoghegan advocates for renewed labor rights to organize. And Salvator Babones has presented sixteen solutions for 2016 in his book Sixteen for ’16. And my favorite solution is found in Phillip Harvey’s report Back to Work, proposing a government direct employment program. For an investment of $180 billion a year we could raise the employment to population ratio for prime working age workers, age 25 to 54, back to its high of 2000. This  would raise wage income for 80% of workers (who are nonsupervisory workers) in the U.S. 

I do not wish to snow readers under a blizzard of numbers, but two more examples are very telling. The first deals with wealth. The average private household savings now is $691,000, and only 10% of households reach or surpass this level. The second deals with income. The total combined market income of the top-earning 1% of taxpayers is greater (16.7% of all market income) than the market income of 54% of taxpayers (16.4% of all market income). Market income is income before taxes and before government transfers. The 54% who make less than $50,000 a year earn a combined total less than the 1% who earn over $500,000 a year. The average income of the top 1% is 65 times greater than that of the average income of the lower-earning 54%. This is data from the Congressional Joint Committee on Taxation, 2014, see here, page 30. 

The Bureau of Labor statistics says the “median weekly earnings of the nation's 110.4 million full-time wage and salary workers were $803 in the third quarter of 2015,” and that equals $41,756 a year. The EPI web page would convert that amount to $63,259, except that inequality distorted the economy.

I packed a lot of information into this short article. The take-away is: Progress at this point is not necessarily growth of total output, the GDP, but is a fairer distribution of resources. This excessive inequality is a blemish on the nation.

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Notes: calculating 6% of national income.

Determine $12.7 trillion as total national income, at Congressional Joint Committee on Taxation report, page 30.   

Multiply by .06. Answer $762 billion. 

For workers earning below $25,000 a year, see the SSA report. 

Add the “net compensation” figures for the below $25,000 groups. 

It comes to $748,994,000,000. 

Divide national income, $12.7 trillion into $749 billion.  

Answer 6%.  

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I think the essay called Overview, July 2015 is the best summary of this blog. 

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Here is a graphic of Labor's Share of Income. It comes from the University of Texas Inequality Project, see here, page 34.
Note that the lower, dark share represents the lower-earning 90% of workers. The 90% received, between 1943 and 1980, in the range of 56% of total income. In 2013 its share appears at 38%, a drop of 18%. The 2014 total income was $12.7 trillion according to the Congressional Joint Tax Committee, and 18% of that is $2.286 trillion, divided among 112 million households (90% of total households) equals $20,483 per household. All this confirms the first paragraph above, the Economic Policy Institute's estimate of what incomes would be had they matched growth in productivity as they had for 30 years, 1946 to 1976.

                       

To take this a little further, a look at State of Working America's table, Income 2.4, (SWA) shows that 80% of households earned 27.2% of all income in wages, $3.455 trillion. That is an average wage of $34,828 for the 99 million households in the lower-earning 80%. (One must multiply 54.3% by 50.1%, wage share of total income by the share of wage income to the lower-earning 80%.) In an economy with mean average household income at $99,300, when the lower-earning 80% are earning 35% of the average for all, you have gross, excessive inequality, and it's damaging to all. 

    What if Income Were Distributed More                                          
                         Equally?                                  

What if our economy distributed 60% of its income among the middle 60% of households instead of today's 40.5%?

The SWA report distributes 40.5% of income to the middle 60%. 

The CBO report distributes 41.3% as market income distribution. 

The CBO report distributes 44.9% as after-tax income distribution.

The  ideal  per quintile distribution might be
7%, 15%, 20%, 25%, 33%.

-- 60% to the middle 60%. 

But we have in reality the following distribution: 

4%, 8%, 13%, 19%, 56%. 
 -- 40.5% to the middle 60% --
(this array from SWA Income, Table 2.4)
2.2%, 7.3%, 13.0%, 21.0%, 58.1%
-- 41.3% to the middle 60% -- from CBO market income 2011
9.4%, 10.8%, 14.2%, 19.9%, 47.3%
-- 44.9% to the middle 60% -- from CBO after-tax income 2011 (these two last arrays come from this CBO report on after-tax income distribution, Table 7, see "data underlying figures, xls, Table 7)

I think the CBO after-tax income distribution is most meaningful and accurate. I am suggesting that 44.9% to the middle 60% of households should be enlarged to 60% of total income. A 15.1% gain for these households would increase their incomes across the board by $1.9 trillion or $25,775 per household for all 74 million households. The median income for all households would be near $78,000. The EPI web page "How much should you be making?" shows that with an income of $53,000, close to the median, "your pay would be closer to" $77,007.
  This was the norm between 1946 and 1976. 

     A Paradigm Shift   Robert Kuttner has a recent article, "The New Inequality Debate" that offers a paradigm shifting view of the role of inequality. He says, "THIS REVISIONISM HAS HUGE implications for economic theory, for possible remedies, and for politics. If greater inequality does not reflect market efficiencies, then market distributions of income are not efficient. And policies that produce greater equality will, at worst, do no damage to economic growth—and quite possibly will improve it." 

Translation: inequality hinders an economy from reaching full potential. Everyone, especially low-paid workers, are hurt. The policy of full employment, government as the employer of last resort, would "quite possibly improve" economic efficiency. Not to mention providing meaningful work to willing workers whom the private sector has no use for. Kuttner's article offers much food for thought, and if the reader has a burning desire to probe the most advanced thinking on inequality, this is a good beginning. 

Labor Share screen shot, Giovannoni, U. Texas Inequality Project

Overview of Inequality, Household Budgets, Proposals to Reverse Inequality

I will speak tomorrow, August 1, 2015, to the local Democrats in Oakhurst, California. My topic:
               Inequality as a Threat to the American Middle Class

Here's my outline with the comments I will make. 
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WEALTH DISTRIBUTION

                   half own 1.1%                                 own 12%               own 17%     own 30%
                                                                                                                                                    top 1%
                                                                                                                                                    own 40%      
0% --------------------25%---------------------50%-----------------------80%---------90%---------100%

         no savings                under $80,000            average                  average     percentile
                                                                             $225,000               $500,000     90 - 94   95 to 99
                                                                                                                                    $1.3 mn    $3.3 mn
                                                                                                        Average for top 1%  ---  $27 million


Reference: Survey of Consumer Finances, Congressional Research Service
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There are pie graphs of this at various places, here, here, here.
The most interesting variant is one that tries to include Social Security payouts, here.
Total private wealth in the past seven years has grown by 32%, adjusting for inflation and population.
In seven years $28 trillion was added to private wealth. This is a 50% increase in seven year not adjusting for inflation, up from $56 trillion in 2008 to $84.9 trillion. Quite an amazing performance during the worst economic catastrophe in 75 years! If the top 5% own 75% of all financial assets, and financial assets is where most of this new wealth originated, then the top 5% or 6 million wealthiest gained about $450,000 per year in wealth, a total of $3.125 million. This is not taxable income, but it is unrealized capital gains, not taxable until converted to cash. See the Flow of Funds report to confirm the gain of $28 trillion. It is $87,500 per person, or $226,000 per household. Unfortunately for most citizens, the gain went to a small minority of Americans.


The average household net worth in 2015 is $685,000, but only half of all households own more than $80,000. Therefore it's not surprising (or is it?) that only 10% of households own the  average or above. In the same seven years the median household net worth has fallen from $135,000 to around $80,000, a fall of 40%, a loss of about 20 to 30 years of savings. Also median income has dropped 8%, and some 9 million jobs were permanently eliminated with the 1.5 year recession, the worst slump in 75 years.

In Australia median household net worth is about 5 times higher than in the U.S. In Japan, France, Italy, and Germany it is about three times higher. The World Wealth Report is the guide for these data.
The World Wealth Report, by Credit Suisse Bank, the datebook, shows that in 2000 the debt to wealth ratio was 18%. In 2008 the ratio grew to 30%, and in 2013 it had returned to 19%. This would be household debt outstanding relative to total wealth. The Federal Reserve, Table D.3 shows household debt growing by 95% (nearly doubling) from 1996 to 2008, from 67% of GDP in 1996 to 97% in 2008, and today it stands at 85%. This indicates that the return of the debt to wealth ratio is a phenomenon of financial wealth growth, not a decline relative to annual GDP -- for what that may be worth to the typical reader who reads this much of my blog essays.

The U.N. Human Development Index ranks the U.S. at the 5th place among about 170 nations of the world. When adjusted for inequality the U.S. slips down 23 places to #28. This loss of 28 places is exceeded by only one nation, Iran. See the U.N. table here.

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INCOME DISTRIBUTION

Income distribution is not as brutal as wealth. The top earning 1% of taxpayers, among 166 million tax returns not 120 million households, earn about the same amount as the total income of the lower-earning 50%. The ratio holds true as well for households as for taxpayers. Both parties earn around 16%, and together they pull in 1/3rd of all income. About 60% of all pre-tax income goes to the higher earning 20% of households. About 50% pre-tax income goes to the top 10%. After-tax income shows the top 20% receiving 50% of all income.


                16.4% of total income                              23.7% of income                     59.9% of income

0%--------------------------------------------------50%--------------------------------80%--------------100%            
            average $35,000                                                  $125,000                           $324,000

The average at the top goes up drastically because the top one percent take in $1.7 million on average.

Source: Congressional Joint Committee on Taxation, page 30, 2014
This page also shows that the top 5% of taxpayers pay 47% of federal taxes, and 70% of all income taxes. The top one percent pays 45% of all income taxes with about 17% of total income. The Citizens for Tax Justice shows Who Pays Taxes In America, indicating that the effective overall tax rate for the top 1% is about 33% of their total income. In the 1950s, under Eisenhower, the top marginal tax rate on income above $500,000 was 91%, not today's 44%. See this chart.

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Inequality in the past 50 years

My favorite Federal Reserve graph shows that 82% of all workers today receive 4% less each week in wages than 51 years ago. Their income has dropped while the nation's "disposable personal income has risen by 175%. If this does not convince you of stark unequal treatment of income, then nothing will convince you.
You can go here, then convert 1964's income of $95.50 a week into today's dollars, here, and it will convert to $735.16, the pay in 1964. Then compare it today's pay of $705.26 a week, on average. Annually, that is $36,660 in wage income for full-time and year-round workers.
The U.S. Census, here, shows that the "per capita income"  "in 2013 dollars" has increased since 1967 by 92%, from $15,026 to $28,829.
The BEA.gov, personal income, here, shows that "disposable per capita income" (meaning after-tax income) has grown since 1964, in chained or inflation adjusted dollars, by 175%, nearly tripling, from $13,485 to $37,084.
And while income either doubled or tripled for "per capita" it fell by 4% for 80% of the workers.
Is this inequality?         

Wrong! -- Now I'll argue the opposite
The U.S. Census report Income and Poverty, September 2014, page 23, shows that between 1967 and 2013, the portion of households that earn over $100,000 a year has increased from 7.7% to 22.5%. Now between one in five and one in four households are earning over $100,000. That is definite a step forward. And those earning below $35,000 has fallen from 39% to 34%. Everyone, the rich and the poor, are making more income! That is shared prosperity!


But Wait a Minute!

The top one percent received 88.5% of all growth between 1979 and 2012, according to this report.
And they increased their (already oversized) income by 180%, while the lower-earning 99% increased their income be less than 3%.  Here's an "info-graphic", a snap-shot of the report:




One of the authors holds two PhD.s in economics.
Now who do you believe?

Another look at figures shows the same thing.
A look at State of Working America, Income, here, shows that of all the income growth between 1979and 2007, 80.9% of it went to the top 5%, and 19.1% went to the lower 95%. And nearly 60% went to the top 1%.
Hardly an equal sharing of the gains of growth.
Who are the authors of this report? Saez and Picketty?  Saez, a professor at University of California, Berkeley, can be found here, see his report Striking It Richer, and Thomas Picketty is the author of the best selling book of 2014, Capital in the 21st Century.

The reports from the Economic Policy Institute are the best.  Send them a thank you is my suggestion.


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American Middle Class Budgets, 
                      Incomes and Expenses


First look at the changes, 2000 to 2012, in the expenses of the family with two children.
See page 8 of this report, The Middle Class Squeeze.

I was able to print this graphic on paper, but it doesn't seem to transfer to this Google blog.

Page 8 shows that the median income for a 2 child and 2 parent family is $84,000, very high. According to a web site, this is the 74th percentile. But reasonable for adults of this age, mid forties with dependent children.

In 12 years the income has moved a bare $600 more, virtually no growth. Expenses have offset each other: taxes down $4,400, consumer goods down $5,500. But 4 key or "pillar" expenses have jumped $10,600, these expenses are housing, college savings, health care, child care, and retirement savings.

I quibble with their health care expenses. The Kaiser Family Foundation (here) states that these expenses have doubled between 2002 to 2013. "Family premiums have increased 80% since 2003 and have more than doubled since 2002." (page 12)  (This KFF report has a summary graphic.) 


The average premium costs $16,351 of which the out of pocket cost to employee is $5,884 or 36% (this from the first report cited, page 12). This is a raise in total compensation of $10,467. This raise in compensation is not accounted for in the Middle Class Squeeze report.  
The actual cost may be $8,600 to the Middle Class family of the example, but their total compensation is under-reported. 

Let's turn to another source, the Economic Policy Institute "Basic Family Budget Calculator". 
I turn to Topeka, Kansas, because this locale has the median costs in the nation for 2013. Here we see the expense of health care is $1,342 a month or $16,104 a year. Consistent with the K.F.F. survey results.  
 

Monthly costs

for a family with

2 parents and 2 children

in Topeka, Kansas

Housing	$692
Food	$754
Child Care	$1,181
Transportation	$603
Health Care	$1,342
Other Necessities	$370
Taxes	$339
Monthly Total	$5,280
Annual Total	$63,364

A look at the family's expenses shows that about a quarter are for child care and a quarter are for health care.

Now we look a little further, to the table showing working age family incomes, courtesy of State of Working America, an Economic Policy Institute project.


I'll be!  The graph seems to
come across onto this blog.























I think I have to continue to type inside this box.  Yikes!


Median expenses: $63,634
Median income:  $65,577
That means that about half the families of working age will have expenses greater than income,
and half will not.
What does that say for the "middle class", typical or iconic family in America?
Half are struggling.
Recently the Pew Surveys stated that 40% of Americans self-described as low-income, 44% as middle class, and 16% as upper.





























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Proposals and Solutions 

Sixteen for '16, by Salvatore Babones  --- a book

Mr. Babones  works at the Institute for Policy Studies, a think-tank that sponsors the monthly newsletter TooMuchonline.org.

The 16 solutions:

Government-led job creation
    (this is my #1 choice, and if you look through this blog where I report on Philip Harvey's plan "Back to Work", or the Congressional Progressive Caucus budget proposal for a program of 3 years costing $350 billion a year, with additional support for later years, you will find references to plans and specifications that would return the nation to high employment and rising wages.

National infrastructure renewal

A rededication to public education
  (and I encourage readers to check out Diane Ravitches book Reign of Error)

Universal single-payer healthcare, often known as Medicare for All.
Senator Bernie Sanders is sponsoring such a measure.

Higher taxes on higher incomes
(Mr. Picketty, whom I note above, supports a highest marginal income tax of 80% on only the income that exceeds $457,000. The current rate on this high income is almost 44%.)

Refinancing Social Security

Stronger bank regulation

The right to join a union

 living minimum wage

10 sick days, 10 holidays, and 10 vacation days

An end to the prison state

Secure reproductive rights

Making it easier to vote

Closing down the NSA

More humane treatment of refugees

Addressing global warming


To this list I add, instituting higher Earned Income Tax Credit, creating Individual Development Accounts, supporting the proposals found in the book on finance The Bankers' New Clothes by Admati and Hellwig, and reducing the size of the U.S. military, and maybe the most important public funding of elections, criminalizing campaign finance contributions.

Thank you Oakhurst Dems for inviting me to speak.  

Comment on Robert Reich article

Robert Reich penned an article in the American Prospect titled "The Political Roots of Widening Inequality". Link to it here.
I mention the long report "The Middle Class Squeeze", and here is it's link.
The Conclusion of this 145 page report is only 3 pages, it is worth a quick pass over.
I haven't read the entire report. It's contents page include six major topics: Jobs, Early Childhood Education, Higher Education, Health Care, Housing, Retirement.

Here's my comment:

The Center for American Progress report "The Middle Class Squeeze" goes into this topic, even more than Reich's article. It's 145 pages long, for one thing. It shows a graph, page 9, of income and expenses for a two-parent-two-child family, comparing 2000 with 2012. Median income and its expenses remained roughly equal over the 12 year period. Income for this group is surprisingly high, $84,700. State of Working America shows a graph of income for "working age families" showing median income of $65,577 for 2013, which is up only 8% since 1979. The GDP per capita, 1979 to 2013, increased by 75% for a comparison of unequal growth. That "working age families" median income dropped by 8% since 2000, unlike the 2-parent-2-child family income which did not drop but gained $600. My point here though is to look at the expense side of the picture. Expenses for middle-class security (housing, health care, childcare, college savings and retirement savings) increased $10,600, by a third, from $33,000 to $44,000. Their taxes decreased $4,400 from $15,600 to $11,700, and basic needs (groceries, telephone, clothing) budget decreased $5,400 from from $19,200 to $13,600. The expense for two autos stayed about the same. Some expenses have gone up (health care doubled and child care and college up by 35% or so in 12 years) while other costs have dropped (taxes, groceries). The costs shifts have balanced each other, and the same amount of income is needed to cover total expenses. This Reich article fails to state another fact, non-supervisory workers, about 80% of the workforce, have seen only a 3% increase in wage income since 1964, while during the same period disposable (after-tax) income has risen per capita by 177%, nearly tripling, making for extreme inequality. It is a complicated picture, but the jobs market has suppressed wage growth, and political policy has suppressed it. Fixing the market would require a direct public jobs program to tighten the labor market. A tight labor market raises wages for the lower-earning 80%, as it did 1995 to 200. Politically, a labor and union rights policy and a pro-labor foreign trade policy would change the political dynamics. EPI.org has the program, as does the Progressive Caucus budget. My blog, http://benL8.blogspot.com

What Caused the Recession and Are We Still In It?

          What Caused the Recession                   
         and Are We Still In It in 2015?                

Debt caused the Recession. 
From 1996 to 2008 outstanding financial debt increased by 162%, 
and the economy's growth per capita grew by 24%. 
Creating debt at a rate almost 7 times faster than real growth is disastrous. I calculated from the Federal Reserve's Flow of Fund report, Table D3, and then adjusted for inflation. This Federal Reserve Graph shows the growth of the financial system outstanding debt, numbers unadjusted for inflation. And this one shows the growth of household debt.
Here's another comparing financial debt with non-financial corporate debt.
I also used the Measuring Worth web page where they calculate GDP per capita growth between 1996 and 2008.

There's a chart tucked away in Bailout Nation by Barry Ritholtz showing that GDP growth during the pre-crash 2000s was generated by home loan mortgage borrowing, called 2nd mortgages. 

Here's a graph of total private debt as a percentage of GDP. We are still around double the historical average. Between 1946 and 1976 the economy grew at a rate of 

Here's a video about the drag of private global debt from the Guardian newspaper. 

The U.S. economy grew at half its normal rate between 2000 and 2010. From Wikipedia and BEA.gov:  

"US real GDP grew by an average of 1.7% from 2000 to the first half of 2014, a rate around half the historical average up to 2000.<sup>[84]"

Here's an article about the failure of the Obama Administration effort to save homeowners (from a recent American Prospect issue). This is an example paragraph from the article:</sup>

                 "The most direct and effective policy solution to stop foreclosures is to allow bankruptcy judges to modify the terms of primary-residence mortgages, just as they can modify other debt contracts. This is known in the trade as “cramdown,” because the judge has the ability to force down the value of the debt. The logic of bankruptcy law reduces debts that cannot be repaid in order to serve a broader economic interest, in this case enabling an underwater homeowner to keep the house. Liberal lawmakers believed the threat of cramdown would force lenders to the table, giving homeowners real opportunities for debt relief. Wall Street banks were so certain they would have to accept cramdown as a condition for the bailouts that they held meetings and conference calls to prepare for it."


Here are the Ten Myths from Jennifer Taub's book Other People's Houses from the last chapter :

1. There has been no official bipartisan consensus on the causes of the financial crisis.

2. The financial crisis was an accident without human causes.

3. The financial crisis was brought about because he Community Reinvestment Act of 1977 forced banks to lend to people with low incomes who could not afford to pay back their mortgages. 

4. The giant government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, caused the financial crisis because he government pushed them to guarantee mortgage loans to people with low incomes as part of their public housing mission.

5. Mistakes were made, but there was not widespread fraud and abuse throughout the financial system.

6. The financial crisis was caused by too much government regulation.

7. Nobody saw it coming.

8. The financial crisis ws unavoidable.And financial crises of this magnitude are inevitable.

9. The Dodd-Frank Act has ended "too big to fail". 

10. The bankers are the victims of greedy homeowners who borrowed money and did not pay it back. 

It is a masterful book. It is also very complicated and detailed. 

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Paul Buchheit has been writing the best journalism I've encountered. He explains in this February 2015 article the endemic poverty in the wealthiest nation. He cites a study showing that "almost two-thirds of Americans didn't have savings available to cover a $500 repair bill or a $1,000 emergency room visit."
The average household income, pre-tax and pre-transfer, is $93,000 a year. The average savings per household is around $650,000 -- and almost 2 in 3 live in households that cannot pay a $1,000 emergency room visit. !!!

This post contains two letters, both urging a NO vote against McClintock for Congress. 
First a Letter to the Editor at Sierra Star, October 7, 2014, 
Next a Letter to the Editor at Mariposa Gazette, October 7. 
Both have links to references for relevant facts. 

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I urge a vote against McClintock for Congress. Our economy suffers from extreme inequality. We need a public jobs program, as proposed by the Congressional Progressive Caucus. They  propose to spend $450 billion each year for a three year period on infrastructure projects, energy efficiency retrofitting, home health aides, and teaching aides. Many prominent economists support this proposal as well as 70 House Representatives, members of the CPC. (and see here and here and here where the former Secretary of Treasury advocates such a plan)

This would create 14 million new jobs (see here, page 11). With 102 million full-time and year-round jobs, this would add 14% more FTYR jobs. During the Great Depression FDR’s deficit spending created public jobs, and the unemployment rate dropped from 25% in 1933 to 9.6% in 1937 (see here). During WWII public jobs for the war mobilization increased employment by 40%, a colossal increase in 5 years. The economy expanded by 75% in six years the fastest rate ever, albeit for the unfortunate purpose of waging war. (This information taken from Samuel Rosenberg's book American Economic Development Since 1945, page 20)

Creating 14 million new jobs would press upwards wage rates across the economy and that would benefit 81% of  all workers who are employees (see here, General Questions, #11 and here)-- higher wages means higher income for more families. It’s that simple. A public jobs program is temporary until purchasing power recovers and a self-sustaining expansion recovers the economy. Labor’s share of the national income today is at a historical low. Corporate profits are at a historical high (see here among many sites). 

Today the collective income of the highest-earning 1% of households is greater than the collective income of 60% of households (see here), and their wealth is greater than 92% of all households -- extreme inequality. 

But McClintock would abolish the minimum wage and eliminate mandated over-time pay;  he would squeeze government spending to its minimum, and literally gut the government's social benefit programs (see here for a detailed critique) . McClintock’s policies will worsen conditions for everyone. 

Ben Leet, 

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to the Gazette:

Letter to Editor,     

I urge people to vote against McClintock for Congress. We suffer from extreme inequality and his program will only make matters worse. Today the income of the highest-earning 1% of households, collectively, is greater than the collective income of 60% of households, and their wealth is greater than 92% of all households. About half of the nation's households and families cannot afford a modest life style, the bare necessities of life, and this is borne out by research in normal family expenses and income. Recently a Pew Research survey found that 40% of Americans say they are "lower class" citizens, while 44% say they are "middle class" (see here). Almost a majority of the nation feels pinched. Yet the averages of income and wealth  tell us we are very well off. The Bureau of Economic Analysis tells us the "disposable personal income" for every citizen, all 320 million of us, after paying taxes, has reached $40,786 (see BEA.gov, personal income). Therefore each household of four has a post-tax income of over $160,000 per year -- on average. And the Federal Reserve reports that the average savings for all households, all 120 million of them, is $665,000 (see here, page 2). But we know this is not an accurate portrayal of most, the average family's, finances. We could create conditions that raise wages and family incomes, but that would require government to step forward with an employment program.  

Many prominent economists have for years been promoting a public job creation policy to alleviate the poor economy. 

But McClintock's approach is to abolish the minimum wage and to eliminate legally mandated over-time pay, to squeeze government spending to its minimum thereby further exacerbating the reduction in consumer spending, and to literally gut the government's social benefit programs. 

A little reported but important fact is that the nation's private wealth in the past six years has increased by 47%, a stupendous increase in a short time, a $25 trillion increase in the value of financial assets (see here again, page 2). Most of this gain has gone to the already wealthy 5% of household who own 75% of all financial assets. A financial transaction tax would touch only a minority of households, and like a sales tax on ordinary sales, it would go directly into the general fund to finance a $450 billion per year public jobs program that some economists predict would create 10 million public jobs and an additional 4,140,000 private sector jobs, a total of 14 million new job openings. Since 2007 the labor force participation rate has fallen to a low not seen since 1978, and if the workers who dropped out of the labor market since 2007 were included in the unemployment rate, the rate today would be 10.9%, not the official 5.9%. With an additional 14 million jobs the rate would drop to 2.4% (see BLS.gov, from this Table A1 one can make all the calculations). The self-sustaining expansion of the economy that everyone desires would be achieved. The jobs program would disappear as the economy reflated its consumer purchasing demand. (That's economics talk for "things would get a lot better".) 

The agenda of McClintock and the Ryan Budget is opposed to any such plan, and a vote for him will just make matters worse. 

Yours,           Ben Leet 

I write a blog, Economics Without Greed, and I will post this letter and a longer version with references to the facts.