Saturday, June 20, 2009

America Gets Poorer (Part I)

I can remember working for the minimum wage while I was classified I-A by my local draft board and was waiting to see if I was to be sent to Vietnam. It took eight hours for me to earn enough money to pay my rent for one week in San Francisco. Today the cheapest room at minimum wage would take a young worker 25 hours to pay for. A worker’s after tax and rent wage has fallen from 32 hours to 15 hours of disposable income in a generation.

My focus in this essay will be on the American middle class as that is where most of us see ourselves. In part one of this series on what I believe is the deliberate impoverishment of the middle and working classes in America I will summarize a long video presentation by Elizabeth Warren who was astounded at what she discovered to be true and not true about the changes in the American middle class in just one generation.

The video is 54 minutes long and can be seen here.

In her lecture at Berkeley the Harvard professor of consumer contract law said she found a co-operative employee at the Commerce Department who was willing to run the numbers comparing a family of four from 1971 to a family of four in 2003. Ms Warren said she did not believe the results until the man at Commerce had run different statistics eight times for her.

She knew that the median family in 1971 saved 11% of its income and spent only 1.4% of that income to cover credit card debt. Today savings are negative. In 2005 her median family of four had a negative savings of 8/10ths of one per cent and had credit card debt equal to 15% of their income. So if Americans stopped saving and went into deep credit card debt in one generation, she wanted to find out where all that money went.

Her first request was to ask how much more Americans were spending on clothes today than 30 years ago. In 1970 a married woman with one sixteen year-old child was more likely to be at home than was a woman with one six month child in 2003. The increased participation of women in the workforce has increased the median family income from $32,000 to $73,000 after adjusting for inflation. Incomes for men have declined but family incomes have risen so she was expecting the middle class to be spending a lot more on clothes.

Wrong. We spend 32% less on clothing. She didn’t believe the results so she asked her man at Commerce to run the figures on food. Surely we were spending more on food including meals out especially with mom working. Wrong again. We are spending 18% less on food.

Well, maybe we were spending more on appliances. Also wrong. We are spending 52% less. We had to be spending a lot more on cars. We were spending 24% less per car. We held onto our cars longer and spent less to repair them. However, she did find that we were spending 52% more on total car expenditures because with mom working fulltime we have to operate more cars.

She found we were spending $300 a year more on electronics. We also spent more on dog food but less on dry cleaning and baby food. However these items were negligible and not big enough to affect the totals.

So where did all of our money go? One big ticket item to go up dramatically was the home mortgage. It went up 76% even though interest rates are lower. Home prices have increased a lot. Actually,the price of housing for unmarried couples only went up 52%. Married couples who have to worry about the quality of schools have to pay a lot more for shelter.

She found that the average house today has 6.1 rooms versus 5.8 in 1971. The reason is that new homes have been priced out of the reach of most young couples. The construction industry does not bother to build starter homes anymore like they did in the 1960s. Nothing is being built for the bottom 80% of society.

Another big ticket item to go up was daycare. Ms Warren arbitrarily put the increase in spending on daycare at 100% because we spent nearly zero in 1971 and division by zero is undefined. She found that we were spending more for college as well. I checked and the figures are unbelievable. The average fulltime student at a four year public college pays over $6,000 a year in tuition and fees . A two year college will still run over $2,000. All of this required education both at pre-school and at college are seen as needed to prepare the next generation for work. And most of these new and therefor additional expenses are carried by the family.

Ms Warren pointed out that the city of Chicago decided to offer subsidized day care to the public. The tuition for three year-olds was more than for students at the University of Illinois. Parents today pay for 1/3rd of all education costs versus the 1971 family that had most of their costs publicly funded.

Taxes also went up as the wife’s income was taxed at a progressively higher rate. Taxes are about 24% more.

The cost to the median family of four for employer sponsored health care has risen 74%. And it is inferior care in respect to the amount of time we are expected to spend at home recuperating while a family member takes care of us. In 1971 a woman who gave birth could stay in the hospital for five days for natural birth and up to ten days for Caesarian. She could elect to go home earlier if she chose. Today she is lucky she gets one day in hospital and that is only because many state legislatures decided to protect mothers from being prematurely pushed out of her recovery room.

Hospital policy is to send them home quicker and sicker. We now have 80 year-old relatives being told by the nurses how to give themselves injections. This is not the same care as a generation ago when nurses gave the shots. We also face the burden of having one parent, usually the mother, to stay home from work to care for a parent, a child or a spouse who might need help for several months.

Health care, job loss and family break up are the three leading causes of families filing for bankruptcy. Professor Warren found that a family with two parents and two children in 2005 was more likely to file for bankruptcy than to file for divorce. And that was before the current down turn in the economy.

If you look at the big ticket fixed costs the family faces today, you will see that we need to receive 104 checks a year versus the 52 checks a year family of 1971. Back then if a man lost his job and went on unemployment his wife could go to work and even though she did not make much it was sufficient to cover their monthly costs. Unemployment insurance used to pay a much higher per centage of your income.

To cover the mortgage, health care, taxes, credit card debt and cars, the 2003 family needs to spend 75% of their income to cover these basic fixed costs. In 1971 the average family only had to spend 50% of its income to cover its fixed costs. In fact the disposable after basics income for 2003 families was actually less than that of their parents’ generation.

Professor Warren thinks we are in danger of losing the middle class to poverty. She also says the middle class is so hard pressed to make its financial commitments that it has nothing left over to give to the poor.

Since Professor Warren is a liberal and teaches at Harvard, she cannot say what I will. One reason for cars costing more to operate is the high price of gasoline. We have over 306,000,000 people in this country. We have added 100,000,000 people to our population due to legal and illegal immigration and the greater numbers of children immigrants have. This means we have to import more oil and it is the demand for imported oil that has driven the price of oil much higher. In 1971 a 42 gallon barrel of oil imported from Saudi Arabia cost less than a single gallon of gasoline in Chicago does today. That increased cost was all due to immigration.

In 1972 a new three bedroom home in San Jose California was $40,000 and now should cost $259,000. But does cost twice that. Sales taxes went from 6% to 9 ½ % due to illegal immigration and the higher birth rate. A businessman might gloat about the cheap wages but we all have to pay taxes to support the families that cannot be supported or educated for near minimum wage workers.

Note. This is part I of a multi-part series on the plans by those who think they own the federal government to impoverish Americans. I promise to explain how and also why and what these insane men are doing their best to destroy America.


Post a Comment

<< Home