The Wrongologist

What’s
Wrong Today:

Did you
know 15% of America lives in poverty and that household income after adjusting
for inflation has declined by 8.3% since 2007? That America is making 9%
less in real dollars than in 1999?  

The Census
report for 2012 shows America is still broken and poor. The report, Income, Poverty and Health Insurance Coverage in the United
States, is loaded with more bleak news. From The Nation, here are a few current
statistics about poverty:

• US
  poverty (less than $23,492 for a family of four): 46.5 million people, 15%

• African-American
  poverty rate: 27.2%

• Hispanic
  poverty rate: 25.6%

• White
  poverty rate: 9.7%

• Poverty
  rate for people with disabilities: 28%

• Poorest
  age group: 16.1 million children, 34.6% of all people in poverty

• Poverty
  rate among families with children headed by single mothers: 40.9%

• Women
  31% more likely to be poor than men.

• 106
  million people earn less than $46,042 for a family of four (twice the poverty
  level), that is approximately 1 in 3 Americans.

• Jobs
  in the US paying less than $34,000 a year: 50%

• Jobs
  in the US paying below the poverty line for a family of four, less than $23,000
  annually: 25%

This data
adds to last week’s discussion in the Wrongologist’s post
about the House voting to cut $40 billion from the SNAP (food stamp) program. For
the 11th time in 12 years, poverty has worsened or stayed the same.

Conservatives use the 15% poverty rate to label our nearly
50-year War on Poverty as a failure, since today’s poverty rate is about the
same as it was in the late-1960s. But you have to overlook critical information to reach that conclusion. The
poverty rate would be twice as high now, nearly 30%—without the totality of today’s safety
net. SNAP’s food stamp benefits aren’t included in the official poverty rate,
but they lifted a record 4 million people above the poverty line in
2012; nor are the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC),
which in 2011 moved 9.4 million people above the poverty line.
In fact, in 2011 the official poverty rate would have dropped from 15.0% to 10.9% if it included food stamps, EITC and CTC.

Incomes
for the middle class and working poor have stagnated right along with the poverty rate. Below is a graph of household
median and mean income which shows half of America is making almost 10% less
than 14 years ago. Median
means 50% of households make below this amount, 50% above, whereas mean is the
average income of all households. The Census likes to focus on
households, not individuals, despite the fact that 27% of people in the US live
alone. Households are defined as all people living at one address.
There was little statistical change in the economic plight of households
between 2012 and 2011, meaning that for most of America, the economy was just
as terrible in 2012 as it was in 2011.

What the Census
doesn’t point out is that, adjusted for inflation (real median income), median
household income hasn’t been this low since 1995. In 1995, real median
household income was $50,978. In 2012, seventeen years later, household median
income was $51,017. But, it’s even worse than that. In 1989, the median American household made $51,681 in 2012 dollars. This means that 24 years ago, a middle
class American family was making more than the a middle class family was making
one year ago.

Below is a
graph of the Census data of median household income by select income brackets,
adjusted for inflation. Notice how flat income is for the bottom 50% of
America, yet the top 10% and top 5% household income earners have gained nicely
since the 1960s. This is another illustration of just how bad income
inequality has become in the United States.  

Here is a Census
graph that shows Poverty Rates among the working age population. This is driven by wages remaining flat for those groups.
The numbers of American working poor have increased dramatically since 2000.
For these people, hard work does not pay off,
they must choose between making rent and putting food on the table. According
to the Census: In 2012, 7.3% of workers aged 18 to 64 were in poverty. The poverty
rate for those who worked full time, year round was 2.9%, while the poverty
rate for those working less than full time, year round was 16.6%:

It is important to
note that GDP is up 23% since 2000, or $3 trillion. While there is more to GDP than
the sum of family income, the broader point firmly stands: it takes much more
than a growing economy to lift the bottom half of our nation. Remember that,
trickle down advocates!

David
Shipler in his NYT review
of “The American Way of Poverty”:
(emphasis by the Wrongologist)

The author,
Sasha Abramsky, says that poverty is “not a glitch, but a feature” of the
American system, a system that believes that an oligarchy is desirable. It is
important to differentiate between policies that redistribute or transfer
income among the classes, from policies that would return social mobility to the
working poor and the rest of those in poverty. We need both.

Here
are a few ideas that address redistribution:

• We
  should tax the two main types of unearned income, inheritance and capital
  gains, at the same rate as earned income or higher. Most inherited property is
  not taxed at all, using an accounting trick called “stepped-up basis.” The idea
  that stock market profits should be taxed at about half the rate of wages and
  salaries should be abhorrent to Americans. Raise the tax on capital gains! Tax
  both inheritance and capital gains at the same rate as earned income

• Eliminate
  the cap on social security wages

Moving on
to ideas that address mobility:

• Raise
  the minimum wage to at least $11.06, the rate that takes a family of four above
  the poverty line

• Improve our public transit, ports, airports and highways

• Invest
  in public education so that all school districts, rich and poor, receive the
  same investment

Headlines about the Census income numbers tend to focus on how we have
now experienced a lost decade for the middle-class American family, with
incomes back to their late 1990s level. But, as the first chart shows, it’s
really worse than that.

This isn’t a lost decade for economic gains for Americans, it is a lost
generation. We
are becoming the land of the destitute and desperate. There
simply isn’t a way to paint a pretty picture regarding what America has become…