Category Archives: Social Security

American Middle-Class Now Second Class — Take Two

It’s nice to have successful friends of diverse opinion. When a couple of them are capitalists in the truest sense of the word — i.e., they increase their wealth and incomes by moving their funds around the globe chasing rates of return and potential asset value — are sought after for their investment advise, and have their own financial and economic publications, they also get to disagree with you in the open. In response to “American Middle-Class Now Second-Class To Canada — It Didn’t Have To Be This Way,” I was treated to two alternate views of why I am wrong on specific points.

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BENEFITS “RE-COUPLE” THE DECOUPLED PAY & PRODUCTIVITY

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First, one such individual referenced a couple of British economic analysts who had addressed the observation I pointed out in my article when writing:

They show that when you add in benefits to pay and use the same measure of inflation for both pay and productivity, the disconnect between worker pay and productivity goes away, both in the US and Britain.

Their conclusion? “Middle-class stagnation and the ‘decoupling’ of pay and productivity are illusions. Yes, the U.S. economy is in the doldrums, thanks to a variety of factors… But by any sensible measure, most Americans are today better paid and more prosperous than in the past.”

Yes, but this is only a sleight-of-hand trick that these partisans pontificate to advance their own agenda, not because it is meaningfully accurate — it is just technically accurate.

Notably, using the “same measure of inflation for both pay and productivity” is a non-starter as that is not how productivity increases over time, nor is this how it’s measured in real terms. It’s just a mathematical trick to reduce or deflate actual productivity growth to bring it closer in line with stagnant incomes. Monetary inflation and production productivity are not connected in this fashion and doing so is disingenuous.

Truth is that what used to not show up on workers’ ledgers now shows up on their ledgers, and truth is that the component now has less value in real terms than it did prior to reassignment to the workers’ ledgers. The analysts also conflate wealth and incomes inappropriately.

What we are both referencing is the change from defined benefits for workers to defined contributions.

For example, as average life spans increased, the financial pressures exerted on organizational pension systems grew overwhelming and a shift occurred across the private and public sectors from traditional pension programs where one received a defined amount per year after retirement for the balance of their lives to one predicated upon 401k and IRA programs and the like where one received a defined contribution from their organization with no guarantee of what that looked like at retirement.

Several things occurred in this transition. What used to show up as an asset of the organizational pension now was moved to the ledger of the worker as an asset in the form of 401k’s etc. But, that move did not make the worker wealthier in reality nor improve their incomes — both are simply mechanisms through which retirement incomes derived. It just changed where things resided accounting-wise and controlled organizations’ costs.

All things equal, the worker is no better off and no worse… as long as the final retirement income remains unchanged. But all things are not equal, and final incomes are not guaranteed, thus we see today retirees not having the same incomes as those previously based upon traditional retirement pensions. So, there is a net loss of income to the worker overall, even while it appears their wealth increased.

Moreover, these 401k programs require more significant worker contributions to obtain the largest matching employer contributions. This reduces the net-net income of a worker and is not reflected in the aggregate numbers used by these analysts. So their view assigns an asset value to workers that is just an accounting move and inappropriately shows increased wealth while also not including the decreased net-net incomes from the move.

Finally, the “benefits” to which they refer are inclusive of health benefits. As we all know, these costs have increased dramatically over the decades. This alone adds an illusory increased benefit to workers when, in fact, they, too, are paying larger premiums for that health benefit, and worker costs are up dramatically more in deductibles, co-pays, and out-of-pocket maximums… Thus, all contributing to reduced net-net incomes — not the improved financial standing these analysts would have us believe.

The “benefit” appears more significant because of cost inflation yet the worker is no better off and receives the same basic benefit of health care provision they received when the “benefit” appeared at lower cost. Now the worker is made poorer on a net basis by the increased direct costs from the benefit’s cost-sharing mechanism. Moreover, just because the benefit cost grew larger on the employer’s ledger does not mean the income of the worker increased accordingly or that the benefit had more “income value.”

Oy vey!

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“TIME COSTS” OF APPLIANCES HEALS ALL WOUNDS

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Second, another individual posited that my position ignores the relative increase in incomes and wealth of workers because improved productivity and globalized production have reduced the “time costs” of attaining and maintaining a middle-class lifestyle. The writer maintains that costs of clothing, major appliances, cars etc. (the lifestyle asset cost of middle-class life) cost less today in terms of how many hours one must work to attain them… and the middle-class person is better off today.

Therefore, if it cost 3000 hours to purchase a standard car back in the 1960’s and now costs 1200 hours to purchase today’s standard car, then the real incomes of average middle-class persons have increased relative to the past. His point is that while this situation may not show up on balance sheets cost-adjusted for inflation, it is a very real phenomenon that means the middle-class is larger and more robust than we believe it to be.

Thus was written:

Bottom Line: The comparison of the “time cost” of appliances over time above confirms what Aparna finds in her analysis – average (and low-income) Americans are much better off today than they were 20, 30, 40 or 50 years ago, thanks in large part to the significant reductions in the cost of common household appliances like refrigerators, washers and dryers, and TVs. The reasons for the significant reductions in the cost of appliances include innovation, technology improvements, supply chain efficiencies, increases in productivity and other market-driven efficiencies that drive prices lower and lower year by year, measured in what is most important: our time, and the amount of labor it takes to earn the money to purchase household appliances and other goods and services. As much as we hear about declines in median income, economic stagnation, the disappearance of the middle class, falling real wages, increasing income inequality, the data tell a much different story: The rich are getting richer and the poor are getting richer.

“The poor are getting richer” — Argh!

To be certain, technology has improved such that the “standard” has shifted and provided a lifestyle unimaginable or unattainable in the past; i.e., today, nearly all persons of age have a personal cell phone and internet access (hence access to instant communications); access to music proliferates on numerous mobile devises (not just families able to afford large stereo systems, or further back, their own music chambers); and the list goes on.

As they say, though, all things are relative. And, thus, to say that one has access to “absolutely” more of something now, or to something that never previously existed, or to say that it takes less working time to purchase a particular staple item of the middle-class lifestyle is not to say that they have access to more or better… relative to what their predecessors had relative to their own time. Standards change.

The average middle-class lifestyle requires more and different inputs than that same lifestyle from 1940. It’s not just a car, a refrigerator, and a radio. It is also a middle-class lifestyle relative to itself over time and those levels above it and below in any given year. As society evolves one would hope that the absolute standard improves (i.e., having only 1940 middle-class assets or household items today may mean you are “poor” today and not [or no longer] middle-class), and that is reality.

The middle-class standard and what it costs to maintain that standard have moved upward. This is called progress and something that we should desire for society. The lifestyle of today’s middle-class may appear to have obtained things impossible for the middle-class in times past, but that same cultural standard is relative to its position of the other classes.

If the death rate from cancer devolved back to that from 1960, would it be correct to say that’s acceptable because even then it was better than the survival rate from the 18th century? Of course not. Standards improve, and if the average person in a period can’t maintain their relative position over time in that moving standard, then we have declined as a society. Here is where America rests today. Fewer American families are able to stay in the current standard of the “middle-class.” Moreover, they are not able to stay in the same income percentile on a global basis — reference again this table of percentiles.

Now, in the second decade of the twenty-first century, it requires well more than two earners working to equal the wages of a one-income household of 40 years ago. In fact, wages have plummeted so low that a two-income household is now (on average) 15% poorer than a one-income household of 40 years ago.

With the year 2000 as a base, real wages peaked in 1970 at around $20/hour. The average worker today earns $8.50/hour — more than 57% less than real earnings in 1970. Moreover, as the average wage directly determines society’s standard of living, it may accurately be said that the average standard of living in the U.S. has plummeted by more than half over the last 40 years.

Inflation for the last 40 years has hidden the 57% collapse in the standard of living for the average person. Nonetheless, if you’re fortunate enough to be at or successful enough to have earned a place at the top of the income charts, the situation is significantly reversed in your favor. While average American workers have seen their real wages plummet by 57% over the past 40 years, in just 15 years (1992-2007) the 400 wealthiest Americans saw their incomes rise by 700%.

Now we have the complete picture: real wages crumbling steadily lower year after year, decade after decade for “The 99%,” while earnings skyrocket for “The One Percent.” Is that acceptable? I don’t know… is going back to the cancer death rates of 1960 acceptable to you because that’s still better than it was in 1700?

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American Middle-Class Now Second-Class To Canada — It Didn’t Have To Be This Way

America’s middle class has been richest in the world for several generations, but we’ve lost that distinction to our northern neighbors.

Canada is officially home to the richest middle class on the planet, according to figures released from the Luxembourg Income Study Database. The flowing chart details 30 years of destruction to America’s lower and middle classes, the loss of standing internationally, and the concentration of income to the wealthy class in the U.S. (Click Chart For Larger View):

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How did we lose the lead? It’s no secret really; economists have been sounding the alarm for twenty-five years, and Americans have continued supporting the policies (both Republican and Democrat, alike) that have furthered their own economic erosion, even as they believe, individually, they are immune to the deleterious aspects of these political and economic choices (privatization, deregulation, free-trade agreements, free-floating exchange rates, globalization, dismantling of the safety net, poor school systems, conservatism, economic libertarianism).

Kevin Phillips wrote about the situation in a 1991 book I read when it came out: “The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath.”

Blame three broad factors encompassing the above issues: 1) Canada’s education attainment is outpacing the U.S. and most of the world; 2) American middle-class market wages (driven by globalization) aren’t keeping up with overall economic growth; and (3) Other governments are doing more to redistribute income to poorer families in other countries, particularly in western and northern Europe (the social safety net and progressive taxes).

As a result of America’s belief in the divinity of unfettered virginal markets and the evils of progressive government policy, after-tax middle-class incomes in Canada grew markedly higher than in the United States, while the poor in most of Europe now earn more than poor Americans.

Economic growth in the United States remains as strong or stronger than other industrialized nations, but only a small, elite percentage of American households fully benefits income-wise from that growth. The middle-class wallow in stagnation with no noticeable inflation-adjusted income progress in a decade. The plight of the U.S. poor is even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less real income than in decades past and less than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.

Make no mistake, economic statistics — per capita gross domestic product — continue to show the United States maintains the lead as the world’s richest large country. Crucially, those numbers are averages, which do not measure the distribution of income. Here is where America fails: in distribution of incomes. The U.S. is the most unequal in income of mature industrialized nations.

With the majority share of income gains in the U.S. now flowing to an extremely small percentage of high-earning households, for the next generation or more, most Americans will not keep pace with their counterparts around the world — nor will they obtain the economic levels of their parents. Implement progressive policy changes, and this situation may begin to slowly improve. Stay the course and past will be prelude to the average American’s diminished future.

I may be an economic and social liberal with a clear preference, but the facts are undeniable, as are the reasons for these changes. Read ‘em and weep:

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Silhouette Man Wonders “What” Is Wrong With Americans

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Individualism, Libertarianism, Paul Ryan & His Ayn Rand Love Affair

Oh my goodness… Republicans are attempting to rebrand themselves as compassionate conservatives (again)… shades of George W. Bush. “Compassionate conservatism” as a theme and rallying cry seem to arise after Republicans have taken rhetoric to such an extreme that the country is disgusted and the party fears citizens will push them and their nasty ideology of unbridled greed and hate aside. George W. Bush famously resorted to the term campaigning for president after Republicans disgraced themselves with anti-Clinton conspiracy theories, witch hunts, and the unpopular impeachment.

Of course, Bush is better known for wasting trillions of dollars and killing more than a hundred-thousand lives in Iraq, failing citizens injured during Katrina, and the financial collapse of the U.S. and world economies.

And now we have a budget “deal,” courtesy of Paul Ryan, that drops unemployment benefits for 1.3 million long-term unemployed. Earlier, Senator Rand Paul said helping the unemployed does them a “disservice” because it keeps them from getting jobs.

CCoftheweek.jpg~originalSo now it’s Paul Ryan’s turn to claim the mantle of “compassionate conservatism” and attempt to rehabilitate the reputation of Republicans. But really, Paul Ryan… Compassionate?

Last month the Washington Post published, “Paul Ryan, GOP’s budget architect, sets his sights on fighting poverty and winning minds,” and portrayed Ryan as attempting to steer Republicans away from the angry Tea Party and toward a “more inclusive vision.” Right. The Paul Ryan of the infamous “Ryan Budget” — also called the “Path to Prosperity” and passed by House Republicans — that privatizes Medicare, repeals Wall Street regulation, wipes out student loan programs, repeals Obamacare, guts Social Security, and dramatically reduces taxes for the “deserving” wealthy and corporations.

That Paul Ryan hardly seems “compassionate” — well not to those who actually want to see all citizens doing better, and at least not toward anyone making less than half a million a year.

One need only seek the source of Ryan’s personal philosophical motivation (his love affair) to understand his deep psychological dysfunction and the reason why he can create such absurd rationalization’s for his priorities. Ryan said it himself, “[T]he reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand.”

Who is Ayn Rand, and what is the philosophy of this person Ryan calls a “thinker?”

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Ayn Rand’s philosophy actually says it is not only bad for society, but morally wrong to help other people because it makes them “dependent” — sound like familiar rhetoric? Rand’s philosophy says that,

  • altruism is evil, and that…
  • democracy (which they call “collectivism”) is the ultimate expression of this evil because it brings about a society in which government works to make people’s lives better.

Rand’s, Ryan’s, and current Republican philosophy says that,

  • “individualism” — looking out for oneself only—is the moral principle that should rule society, not democracy…
  • a “utopia of greed” is most humanly liberating… I suppose they might better claim it’s “compassionate greed,”
  • there are but a few “producers” or “makers,” and the rest of citizens are “parasites” or “takers” who live off of the producers,
  • Collectivism, or democracy, is bad because the many underserving takers can vote to do things like make the producers pay taxes so regular people can live better.

I’m sure there must be a few ways Paul Ryan and the Republicans can form a philosophy of “compassionate conservatism” out of their core belief that altruism and democracy are not just wrong for people and society, but are actually evil. And, I’m sure some citizens will fall for the ploy. Recall that many slaves during the Civil War supported the South, and even after, refused to leave their plantations.

But here is what compassionate conservatives like Ryan intend in the pursuit of “Randian” Liberty…

  • they say that giving the big corporations more tax breaks, subsidies, no-bid contracts, etc. will load them up with so much money that they will just have to use some of it to hire people… eventually, and…
  • when they say they want to overhaul federal health and retirement programs they mean
    • cut Medicare (healthcare for the elderly),
    • cut Medicaid (healthcare for the poor),
    • eliminate Obamacare (healthcare for the rest of us) and
    • destroy Social Security (retirement)

Nice.

And compassionate.

An evergreen Republican mantra is that government is too big, so it must be cut. What they mean by this is not cutting the huge, bloated, astronomical, sky-high military budget (we spend more on weapons and preparing for destruction than all other nations combined). They mean they want to cut out the things government does to make our lives better, like assistance for the needy, sick, disabled, elderly and unemployed. And get rid of the minimum wage, child labor laws, equal pay for women, workplace safety rules, etc.

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So, “Compassionate Conservatism” is a euphemism for Libertarian Individualism that enshrines destruction of society, the commons, the middle-class, and then purchases only further means of destruction through a vast and powerful military power.

Frankly, I only see psychological dysfunction in any of this, in the Libertarian philosophy. I wonder what depravity in formative years leads to such a condition?

Quite the love affair with Ayn Rand utopianism. God help us all.

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When Does The Revolution Start? — Tea Party Terrorists & Dysfunctional Brats

When does the revolution* start? So over anti-democracy anarchists.

We had an election. You lost by 5 million votes. You are behaving like dysfunctional brats.

“You don’t get to hold the entire economy, the entire country, hostage, because you don’t like the outcome of the election,” Sen. Elizabeth Warren correctly said about Tea Party Congresspersons — henceforth known as Congressional Terrorists.

The Affordable Care Act was passed by both houses of Congress, signed into law by President Obama, was given the American People’s’ endorsement by President Obama’s resounding electoral victory and seat pick ups in the House and Senate in 2012, and was upheld by the US Supreme Court.

Every branch of the government has spoken, as have American voters.

Despite this, a dangerous and menacing wing of the Republican Party serves as puppet master over a weak and ineffective Speaker John Boehner, bringing the US Government to a grinding halt. As a result, 800,000 federal employees are placed on furlough and one million are asked to work for no pay.

This is the price the Tea Party (American Taliban) believes is acceptable for the country to pay to appease their fundamentalist beliefs that destruction is progress and that democracy only counts when it’s their opinions and options considered.

We no longer deserve democracy if citizens don’t metaphorically* storm congress and remove all Tea Party members’ power and effectively make those seats vacant. US citizens should take control now and reinforce their electoral voices by raising their voices, since elections are clearly not respected and clearly have no weight of their own. Rather than voting and expecting our representatives to civilly and respectfully do our — The People’s — business, is this our only hope of expelling the Congressional Terrorists?

No concern is in the thoughts of these congressional terrorists about the lives they are illegitimately harming. That said, worse on a larger point is that this behavior of Tea Party Terrorists is paralyzing democracy.

You know what, difference of opinion is great, so are strong and vocal opinion (that captures me), but what is wrong is when you halt the course of the nation’s business and say it’s the will of the American People. For God sake, we just had a multi-billion dollar national election. If The American People hated the American Care Act as much as the subversives hate it and Obama, then they would have spoken their voices at the election polls. What happened, instead?

Obama won a second term with a massive electoral margin. Democrats picked up more seats in the Senate. And Democrats picked up more seats in the House (this after a hugely gerrymandered redistricting around the nation based upon the latest census and favors Republicans). The American People spoke alright, and they endorsed the President and gave Dems more seats in government.

To act as they do now, radical conservatives want to nullify a ten month old national election.

The Tea Party Terrorists and the Republican Party are anti-democracy.

This point of contention has nothing to do with opinions or whether the ACA is good or bad.

It’s about supporting or subverting democracy and respecting civil order.

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Scandinavian Countries Global Leader In Social Justice/Cohesion

English-speaking countries rank above average; immigration levels statistically insignificant

Denmark, Norway, Sweden and Finland have the highest levels of social cohesion, followed by Canada, the US, Australia, and New Zealand, according to the Social Cohesion Radar, a study released July 16 by the Bertelsmann Foundation, a German-based think tank, and Jacobs University in Bremen, Germany. The study examines 34 countries in the EU and the OECD: the 27 EU member states and seven OECD countries: Australia, Canada, Israel, New Zealand, Norway, Switzerland and the US.

While many conservatives continue to bash the liberal social program paradigm as an unwieldy welfare state of dependency…

differentracesScandinavian countries have the most equitable societies in Europe, according to research by the Bertelsmann Foundation, a German-based think tank — finding the strongest social cohesion in Denmark, Norway, Finland and Sweden.

In these Nordic countries, which consistently rank at the top, a universal welfare state actively redistributes wealth and promotes equality of opportunity — the heart of Faustian urGe “Economic Morality: EQUALITY of advancement opportunity and treatment under the law and social memes — EQUITABILITY of rewards and outcomes [economic and social].” The quality of these countries’ institutions is also unusually high. These appear to be the factors behind the strong social cohesion in the Nordic pattern.

Most of Western Europe—Switzerland, Austria, Luxembourg, Germany, the United Kingdom, France and Spain—feature above-average to average social cohesion. Lithuania, Latvia and the southeast European countries of Bulgaria, Greece and Romania suffer from low social cohesion.

SOCIAL COHESION?

Social cohesion is defined as how well members of a community live and work together. A cohesive society is characterized by:

  • resilient social relationships,
  • a positive emotional connectedness between its members and the community and
  • a pronounced focus on the common good.

“Social cohesion is crucial for any society’s future and has a profound impact on a person’s perceived well-being. More cohesion equals more life satisfaction”, said Liz Mohn, vice chairwoman of the Bertelsmann Foundation’s executive board.

Thusly, an increasing amount of academic research indicates — what one might logically expect — that “socially cohesive” countries are more likely to have lower levels of crime, substance and alcohol addiction, and higher levels of social mobility.

The report attempted to identify levels of cohesion in society by assessing people’s social networks, levels of public trust in others, confidence in social and political institutions, willingness to help others, and participation in public activities.

• High living standards • Low levels of income inequality and • Technological process toward achieving a knowledge society stand apart as the three most important socio-economic factors to promoting a cohesive society.

The report, therefore, compared metrics such as • national wealth as measured by gross domestic product (GDP) • a country’s income gap as measured by the Gini coefficient, and its • level of development towards a modern information society as measured by the Knowledge Index:

  • First, greater national wealth has a correlation to greater social cohesion.
  • Second, a country’s income gap has a moderately strong and inverse correlation to social cohesion, indicating that less equal societies tend to be less cohesive. Few countries with a large income gap (e.g., the UK or Ireland) manage to avoid below-average scores on the social-cohesion index.
  • Third, a country’s level of development towards a modern information society has a more profound effect on social cohesion than national wealth. The higher a country’s ranking on the Knowledge Index, which measures the diffusion of modern communication technology, the more likely that country is to show high social cohesion.

SOLIDARITY FROM DIVERSITY & IMMIGRATION

Moreover, the study dispels the popular belief/misnomer that immigration is intrinsically harmful to social cohesion. The share of immigrants in a country’s population shows no statistically significant effect on social cohesion. Why?

Modern societies are based not on solidarity rooted in similarity, but on solidarity rooted in diversity and mutual interdependence“, said Stephan Vopel, Bertelsmann Stiftung program director. “Therefore they need an inclusive form of social cohesion that… accepts a multitude of lifestyles and identities and views them as a strength.”

This understanding sheds light upon a particular pattern found in the English-speaking countries of Australia, Canada, New Zealand and the United States, as well as Ireland… all of which generally rank right behind the Scandinavian countries. They are equal to the Nordic countries in terms of perception of fairness, and outperform them on solidarity and helpfulness.

It is interesting to note that conditions in these countries are quite different from conditions in the Nordic countries; for example, their welfare systems are less active in redistributing wealth, and their societies are characterized by a larger gap between rich and poor. But… as immigrant societies, the non-European countries are ethnically and religiously diverse; multicultural policies are in place to manage that heterogeneity.

In this group, also, are two relatively religious countries: Ireland and the United States. These countries appear to be able to achieve a level of social cohesion similar to that found in the relatively non-religious Nordic countries, under very different circumstances. Despite conservative political rants, respect for varied religious views ultimately prevails and tolerance — perhaps at times uneasy — holds sway, especially within the United States.

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What’s The Big Deal About Chained CPI? — Obama vs Social Security

Robert Reich on Chained CPI (Obama’s proposal to cut Social Security benefits)

In an effort to assuage Republicans and entice them to sign on to long-term deficit reduction with increased revenues, President Obama proposes to throw under the bus the generation he lauded in his inaugural address.

Apparently, President Obama quickly forgot his own inaugural words:

We reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future. For we remember the lessons of our past, when twilight years were spent in poverty, and parents of a child with a disability had nowhere to turn.”

Reich established this petition to the President:

Mr. President, the chained CPI is a cut to Social Security benefits that would hurt seniors—it’s an idea not befitting a Democratic president. If you want to reform Social Security, make the wealthy pay their fair share by lifting the cap on income subject to Social Security taxes.

If you agree, please sign this petition, then share with your friends.

http://signon.org/sign/mr-president-please-do-1