Spencer at Angry Bear has a great graph that re-affirms the obvious; the American worker has been getting a smaller and smaller slice of a growing pie since 1982 and that decrease in pie proportion is independent of cyclical trends.
The 'strong' dollar or more accurately, the "high" dollar policy that has been neccessary to run long term non-cyclical structural deficits without hurting the American elite has meant that everyone else has gotten kicked in the gut and taken a 2x4 to the base of their skull instead. I suspect a strong portion of the explanation is the recognition by Americna business that they have massive negoatiating leverage over any individual employee because unions are a hollow shell of what they were when wages kept a steady trend as a proportion of the total non-farm economy during the great expansion of the 50s, 60s, and 70s. Productivity gains meant wage gains then. Productivity gains now mean profit gains instead of wage gains.
If any policy (such as higher marginal tax rates and treating capital gains as undifferentiated earned income) changes could reverse this trend, it would be a long term political winner as the vast majority of this country would be better off over the long term.
Outstanding.
ReplyDeleteI sometimes wonder how much longer the trend will continue before everyday people finally wake up.
Two big developments are coming that cannot be averted or ignored.
The population cutely called Baby Boomers will soon outnumber the population appointed to bear the burden of their extended, extravagant lifespans and lifestyles.
And...
With or without new legislation the cost of health care is certain to eclipse all the rest of the America's economic challenges. Health care inflation has been running ahead of "ordinary" inflation for years and even policy changes will do little to bend that trend in the near future, if at all.
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We are facing something like "peak oil" except it is more like "peak labor" since tax revenue streams mostly derive from labor in the form of payroll, income or inheritance taxes, all of which favor the wealthiest citizens despite a smokey haze that passes for progressive taxation that leaves the richest largely unaffected.
The current band-aid of "unemployment benefits" is very interesting. That $350 a week may seem like a pittance to the lines of well-dressed "job seekers" I see on TV (cell phones and laptops in tow) but I worked my whole career with people doing honorable work who would be delighted to have that much weekly income. We are watching a charade intended to keep a few people calm who would otherwise make a lot of noise.
Interest rates are being kept artificially low for some reason. I think it's an artificial ploy to protect a final crop of ARM's from triggering another wave of bankruptcies when they hit the five-year adjustment point. Once the bulk of those are history I expect interest rates to jump high and quickly.
At that point Roubini's predicted "currency carry trades" bubble will burst resulting in hyperinflation which can occur faster than the fed can pull money out of an overnight explosion. The inflation factor that no one has figured out how to predict or control is "velocity."
Historically, national deficits have been incurred only to be repaid with inflated dollars. It is not unlikely that we are about to execute that same maneuver again. Which, of course, will once again put those at the bottom through a transitional economic hell. But like setting a broken leg in the absence of proper medical attention, the bones will heal and walking will eventually be possible with a limp.
And we will forget what happened as we await the next crisis.
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One of the satisfactions of blogging is that you can deliver all kinds of opinions. If you turn out to be right you can always document "See, I told you!"
And if you're wrong your mistake vanishes in an obscure comments thread.
ronnie raygun administration started the slide downhill for 99% of amerikan sheeple.
ReplyDeletewe knew it then right as it happened.
why is everybody so surprised now ???