What is wrong with the US economy?

[Jimmy Snyder]

Not for ten years it isn't.

So here's what we have so far. A change of 1% is significant. But a change of 1% over ten years is not significant. I take it that a change of 10% over 100 years would also not be significant even though it would just about wipe out poverty.

 

[Jimmy Snyder]

are you sure about that?

I posted the census bureau's site. Here it is again.
http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

The Census Bureau has started using a system called the American Community Survey.

http://www.census.gov/pubinfo/www/photos/datacollection.html

This site hasn't been edited since 2001, so I assume that the change over occurred about then. But poverty rates are higher now than they were then. Why do you think there is under-reporting?

 

[edward]

So here's what we have so far. A change of 1% is significant. But a change of 1% over ten years is not significant. I take it that a change of 10% over 100 years would also not be significant even though it would just about wipe out poverty.

We ,at least I , was referring to a one year period which was in answer to your question As for the long term, the rate of poverty decline has never been steady. Give me 10% in ten years and I will gladly take it as significant.

BTW the greatest continuous drop in the poverty rate since records have been kept was during the Clinton years.

 

[edward]

I'd like to know what these other areas are. After all, it's an ill wind that blows no one good. Are there businesses that benefit from the subprime crisis sending enough extra work to India to take up the slack in mortgage documentation and related services? Or is the overall economy so vibrant, that finding other work for these people to do was inevitable.

India has a thriving service economy. It is the one that was supposed to be ours.

 

[turbo]

It may be great fun to boil all this poverty stuff down to a single number on a yearly basis, but it does little to describe what's going on in real terms. Let's assume that adjusted for inflation, the poverty rate stayed the same from 2006 to 2007. We may say "fine", but it isn't so great for people whose income level kept up with the average inflation index, but whose exposure to higher-priced commodities is high and who can't cut back. Here in Maine, good jobs are few and far between and it's not uncommon to see people making daily commutes of 50 miles or more to work at a job that pays $7-8/hr. There is no public transportation here, and staying home because the price of gas is too high is not an option. A person trying to raise a family on the $7-8/hr job is facing more than a little inconvenience when the price of gasoline goes up and stays up. They may be floating just above the poverty level in theory, but if you take an extra $10-15 out of their pockets every week, they're going to hurt. If the price of hamburg goes up, one can cut back on hamburg consumption or avoid buying it altogether and substitute some cheaper form of protein, if there is some available. When the price of gas goes up, and you HAVE to buy a fixed minimum amount every week just to get to work, there is no appealing that.

 

[Jimmy Snyder]

BTW the greatest continuous drop in the poverty rate since records have been kept was during the Clinton years.

According to the historical data, here are the presidents and the percentage change in poverty rates. This is different from the delta in the number of percentage points.
For instance, the rate was 22.2% in 1960, the year before Kennedy took office, and was 19.5% in 1963, the year he was assassinated. The change then is (22.2 - 19.5)/22.2 times 100 percent.
Kennedy -12% (achieved in 3 years)
Johnson -34% (achieved in 6 years)
Nixon -12% (achieved in 5 years)
Ford +5% (achieved in 3 years)
Carter +10% (achieved in 4 years)
Reagan 0% (no change, achieved in 8 years)
Bush +13% (achieved in 4 years)
Clinton -23% (achieved in 8 years)
Bush +9% (achieved in 6 years)
Johnson did better in 6 years than Clinton did in 8, but then look what he had to work with.
All told -45% (achieved in 47 years)
Significant?

 

[Jimmy Snyder]

Here's what we have so far.

This mortgage situation trickles all the way down to outsourced data processing in India.

India has a thriving service economy. It is the one that was supposed to be ours.

So even when situations trickle down, the economy continues to thrive. Works for India, works for the US. Our problem is not that we are too poor, but that we are way too rich. We are driving to the poor house in SUVs.

 

[edward]

I posted the census bureau's site. Here it is again.
http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

Sorry you did post data, I though it was just a link to the census Bureau in general. It's still not very impressive for recent years.

This site hasn't been edited since 2001, so I assume that the change over occurred about then. But poverty rates are higher now than they were then. Why do you think there is under-reporting?

http://www.census.gov/pubinfo/www/ph...ollection.html

Is about how the new system works and it does have its problems as most new systems do.

They are trying to take a number of small surveys and use computers to extrapolate that information into a picture that accurately depicts the entire country. People who are below the poverty level tend to move to different addresses more frequently than those gainfully employed. How do they send a survey to a homeless person?

http://www.gao.gov/new.items/d0582.pdf

Regardless the Census Bureau reports will not likely have a great effect on the overall economy or poverty. They just paint a picture in time.

 

[edward]

So even when situations trickle down, the economy continues to thrive. Works for India, works for the US. Our problem is not that we are too poor, but that we are way too rich. We are driving to the poor house in SUVs.

Not if what is trickling down is bad news.

There are a lot more people who are in debt than there are rich people. We are driving to the poor house in SUVs that have upside down loans.

 

[edward]

According to the historical data, here are the presidents and the percentage change in poverty rates. This is different from the delta in the number of percentage points.
For instance, the rate was 22.2% in 1960, the year before Kennedy took office, and was 19.5% in 1963, the year he was assassinated. The change then is (22.2 - 19.5)/22.2 times 100 percent.
Kennedy -12% (achieved in 3 years)
Johnson -34% (achieved in 6 years)
Nixon -12% (achieved in 5 years)
Ford +5% (achieved in 3 years)
Carter +10% (achieved in 4 years)
Reagan 0% (no change, achieved in 8 years)
Bush +13% (achieved in 4 years)
Clinton -23% (achieved in 8 years)
Bush +9% (achieved in 6 years)
Johnson did better in 6 years than Clinton did in 8, but then look what he had to work with.
All told -45% (achieved in 47 years)
Significant?

"The all told": indicates that in 1960 at least 45% of the people lived in poverty. Poverty does have its up and downs.

 

[BobG]

According to the historical data, here are the presidents and the percentage change in poverty rates. This is different from the delta in the number of percentage points.
For instance, the rate was 22.2% in 1960, the year before Kennedy took office, and was 19.5% in 1963, the year he was assassinated. The change then is (22.2 - 19.5)/22.2 times 100 percent.
Kennedy -12% (achieved in 3 years)
Johnson -34% (achieved in 6 years)
Nixon -12% (achieved in 5 years)
Ford +5% (achieved in 3 years)
Carter +10% (achieved in 4 years)
Reagan 0% (no change, achieved in 8 years)
Bush +13% (achieved in 4 years)
Clinton -23% (achieved in 8 years)
Bush +9% (achieved in 6 years)
Johnson did better in 6 years than Clinton did in 8, but then look what he had to work with.
All told -45% (achieved in 47 years)
Significant?

"The all told": indicates that in 1960 at least 45% of the people lived in poverty. Poverty does have its up and downs.

When the quantity you're measuring are percentages, there's a difference between dropping 45 percentage points and dropping 45%. If a stock drops from $10.00 to $8.00, it's dropped $2.00 and 20%. The same comparisons are true about percentages. A drop form 10% to 8% is a drop of 2 percentage points and 20%.

 

[Jimmy Snyder]

"The all told": indicates that in 1960 at least 45% of the people lived in poverty.

In my post I explained the method of calculation. From the site:
1960: 22.2%
2006: 12.3%

(22.2 - 12.3)/22.2 times 100% = 45%

 

[Jimmy Snyder]

Not if what is trickling down is bad news.

You're the one who posted the 'trickling down' post. Are you now saying that it was good news?

 

[Jimmy Snyder]

Regardless the Census Bureau reports will not likely have a great effect on the overall economy or poverty. They just paint a picture in time.

Then what makes you think that poverty is a problem?

 

[edward]

You're the one who posted the 'trickling down' post. Are you now saying that it was good news?

No, you are just thinking that everything that trickles down is good. I probably should have clarified that. I was getting at the global economy and how one countries economy is effected by another. Sorry next time I will paint a picture.

Our sub prime mortgage problem is becoming a problem for India. How is that?

 

[edward]

Then what makes you think that poverty is a problem?

Poverty is always a problem. What makes you think that it isn't?? "The poverty rate has fallen and that is good news" post was yours.

We are getting into a lot of semantics here that really have nothing to do with the topic, or the subject of poverty.

 

[Astronuc]

A Sobering Census Report: Americans’ Meager Income Gains

The economic party is winding down and most working Americans never even got near the punch bowl.

The Census Bureau reported yesterday that median household income rose 0.7 percent last year — it’s second annual increase in a row— to $48,201. The share of households living in poverty fell to 12.3 percent from 12.6 percent in 2005. This seems like welcome news, but a deeper look at the belated improvement in these numbers — more than five years after the end of the last recession — underscores how the gains from economic growth have failed to benefit most of the population.

The median household income last year was still about $1,000 less than in 2000, before the onset of the last recession. In 2006, 36.5 million Americans were living in poverty — 5 million more than six years before, when the poverty rate fell to 11.3 percent.

And what is perhaps most disturbing is that it appears this is as good as it’s going to get.

Sputtering under the weight of the credit crisis and the associated drop in the housing market, the economic expansion that started in 2001 looks like it might enter history books with the dubious distinction of being the only sustained expansion on record in which the incomes of typical American households never reached the peak of the previous cycle. It seems that ordinary working families are going to have to wait — at the very minimum — until the next cycle to make up the losses they suffered in this one. There’s no guarantee they will.

The gains against poverty last year were remarkably narrow. The poverty rate declined among the elderly, but it remained unchanged for people under 65. Analyzed by race, only Hispanics saw poverty decline on average while other groups experienced no gains.

The fortunes of middle-class, working Americans also appear less upbeat on closer consideration of the data. Indeed, earnings of men and women working full time actually fell more than 1 percent last year.

. . . .

http://www.nytimes.com/2007/08/29/opinion/29wed1.html

Subprime storm: A financial forecast
http://marketplace.publicradio.org/shows/2007/08/29/PM200708294.html

The nation's biggest banks are adjusting their strategies to deal with the supprime loan crisis, and the credit crunch could get worse for all of us. Penn State economics professor John Mason offers some perspective.

Credit markets still in turmoil. Lots of undercertainty, particularly on where prices go.

Ride Dow roller coaster, or sit it out?
http://marketplace.publicradio.org/shows/2007/08/29/PM200708293.html
One day the Dow plunges, the next day it rockets back. Emotion is loose in the stock market, and lots of regular investors are getting wary.

The markets are waiting for the Fed to move in a favorable direction. Buyers today went looking for 'bargains'.


Poor outlook
Even the rich are losing optimism over this economy

In its semiannual "Advisor Outlook" study, Schwab Institutional reports that the affluent are "anxious about retirement and their optimism about the economy is waning.

These concerns bleed into the stock market and overall confidence in the economy. Interestingly, the study comes via the standpoint of advisers, so the findings create a double worry: If affluent clients are concerned, their advisers likely are concerned too.
"Some 61% of financial advisers say that having sufficient retirement savings to maintain their desired lifestyle is a constant concern of their clients. Another 35% of advisers say their clients worry about this at least some of the time," the study reports.

Indeed, almost 60% of the affluent people surveyed say they are pursuing a new (second) career -- not out of interest but out of need.

"These affluent retirees aren't necessarily considering a second career just for fun or to pursue a passion," it says. "The need for additional income is a strong consideration."
Advisers chimed in on that point, emphasizing that it's the "concern" of clients that is driving the desire to earn more income not necessarily dire straits by the numbers. And this is an important point to make because it's the confidence factor that may lead to economy and the stock market into either rebound or recovery. {So some optimism}

 

[Jimmy Snyder]

I note that the Dow, which just lost 280 points the other day, a sure sign that something is wrong with the US economy. And it just gained 247 points the day after, a sure sign that something is wrong with the US economy. Is up 16.7% during the lifetime of this thread.

(13289 - 11392)/11392 times 100% = 16.7%

If you are a 'the glass is half empty' advocate, I should think you would avoid the Dow as supporting evidence, or at least wait for another time to display this particular broken clock.

 

[BobG]

I note that the Dow, which just lost 280 points the other day, a sure sign that something is wrong with the US economy. And it just gained 247 points the day after, a sure sign that something is wrong with the US economy. Is up 16.7% during the lifetime of this thread.

(13289 - 11392)/11392 times 100% = 16.7%

If you are a 'the glass is half empty' advocate, I should think you would avoid the Dow as supporting evidence, or at least wait for another time to display this particular broken clock.

Depends on your perspective. If part of your paycheck is going into IRAs or 401k's, then the price for investing in your retirement plan just jumped 16.7%. Worse yet, instead of investing in the same number of shares at a higher price, you're just investing in fewer shares. Since the long term growth rate is fairly steady, less shares adds up to a pretty significant loss of retirement income.

Unless, of course, the 16.7% jump was correcting too big a drop previously. You can't reap a discount forever or it's not really a discount - it's the normal rate.

Whether it's the end of a temporary discount period or a temporary high price period, the glass is less full for long term investors.

A person can always find bad news if they look for it.

 

[Jimmy Snyder]

Depends on your perspective. If part of your paycheck is going into IRAs or 401k's, then the price for investing in your retirement plan just jumped 16.7%

Of course there are individuals who suffer the downside of a good economy. That doesn't mean that a good economy is a bad economy.

 

[drankin]

There will always be impoverished people. In this country, it is squarely the fault of the individual. Some people are just bums and they have right to live like that way. Overall, the US economy is good in my opinion. In my field there is much more work than there is people. That is a good problem to have.

 

[edward]

I note that the Dow, which just lost 280 points the other day, a sure sign that something is wrong with the US economy. And it just gained 247 points the day after, a sure sign that something is wrong with the US economy. Is up 16.7% during the lifetime of this thread.

(13289 - 11392)/11392 times 100% = 16.7%

The Dow has been up and down like a roller coaster. It has seen unparalled volatility in recent months. Although what happens on a given day may appear good or bad, the instability is what has investors spooked.

If you are a 'the glass is half empty' advocate, I should think you would avoid the Dow as supporting evidence, or at least wait for another time to display this particular broken clock.

Some people see the glass as setting much to close to the edge of the table.

 

[Jimmy Snyder]

Some people see the glass as setting much to close to the edge of the table.

Do you mean by this analogy that the economy is bad, or that it is in danger of becoming bad?

 

[edward]

Do you mean by this analogy that the economy is bad, or that it is in danger of becoming bad?

I see a possibility that the economy could go down the tubes. It depends on whether or not the market gets nervous enough to jiggle the table.

 

[Art]

I see a possibility that the economy could go down the tubes. It depends on whether or not the market gets nervous enough to jiggle the table.

The thing bothering the markets is the onset of a credit squeeze as a result of the sub-prime/housing crisis.

With banks afraid to lend money to finance takeovers, mergers and equity funds etc share prices fall as there is less money going into the system. This links directly to the general economy in several direct ways as the consumer economy too is reliant on credit so again a reluctance by banks to make unsecured loans reduces consumer demand whilst the fall in house prices and share prices reduces the equity people can borrow against.

Unchecked this can lead to a self-perpetuating downward spiral which the fed are trying to counter by pumping money into the finance sector to increase liquidity and by reducing interest rates to help people avoid defaulting on loans and to encourage borrowing (assuming banks will lend the money). IMO it will be a very uncertain next few months while folk wait to see if this policy will work. Many analysts believe it is too little too late and confidence is already too damaged to recover anytime soon which could lead to a major recession.

Another serious risk to the US economy is the fall in the value of the dollar against the other major world currencies. This will hit inward investment and bond issues (which finance US debt) hard!

 

[Jimmy Snyder]

The thing bothering the markets is the onset of a credit squeeze as a result of the sub-prime/housing crisis.

There's a name for this kind of stock market analysis, I think it's "single-issue' analysis but I 'm not sure. The idea is that when the stock report is given during the general news, you hear something like "The Dow was up today on news that consumer confidence remains high" and then they go on to sports or something like that. One is left with the feeling that the market is more complex than that. In any case, I don't think that the day to day fluctuations of the stock market, or even the month to month, will help you to decide whether the US economy is a good one or a bad one. In spite of the thing bothering the markets just now, the Dow is the same as it was in early May which was itself a historical high at the time.

 

[Astronuc]

GDP growth not reaching paychecks

The economic recovery that began in 2001 has lifted productivity growth and employment of late, but has had little impact on many workers' wages.

NEW YORK (CNNMoney.com) -- The economic expansion that began six years ago has failed to benefit most workers, according to a report from the nonpartisan Economic Policy Institute, released Monday.

Productivity growth, although slower of late, has been strong since 2000. After a sluggish start in the period, employment has picked up, although at a slower pace than in past recoveries. Yet, that growth hasn't transferred to workers' paychecks, particularly for workers at the lower and middle end of the pay scale, the report found.

After rising quickly in the second half of the 1990s, most workers real wages have been stagnant in the 2000s, especially since 2003.

Housing troubles worsen for the poor
The numbers of low-income families devoting high levels of income to housing costs are soaring, according to a new study.
By Les Christie, CNNMoney.com staff writer, Sep 3 2007

NEW YORK (CNNMoney.com) -- The housing boom may have ended, but even at its peak, it left legions of low-income, working families worse off in its wake.

According to a new study from the Center for Housing Policy (CHP), an affiliation of the National Housing Conference (NHC), the percentage of low income households forced to spend more than half their earnings for housing needs exploded as housing prices boomed.

From 1997 to 2005, the study said, the number of low-income workers who rented their homes and spent more than half their income on housing more than doubled to 2.1 million from about 1 million.

http://www.epi.org/content.cfm/newsflash_070830
On the sixth Labor Day of this economic recovery, the pace of progress ranges from slow to stalled for the nation's middle- and low-wage working people. Even the modest wage gains from the beginning of this recovery period have been fading. Since 2001, real hourly wages rose only 3% for the middle-income worker, with none of this historically small progress occurring after 2003. While most working people remain stuck in the economic slow lane, the better-off among us have avoided the congestion on the ground by flying over it. Since 2001 those with wages higher than 95% of all workers have seen their wage rise by 9%. A new EPI report, Economy's Gains Fail to Reach Most Workers' Paychecks, analyzes the state of working America this Labor Day, looking behind the latest data to the forces at work in an economy that doesn't seem to be playing by the rules. (Media kit)

Bush tax changes wreck budget
Recent data show what extending the Bush tax cuts means for balancing the federal budget and compares their cost to the projected increase in costs for Social Security and Medicare/Medicaid.

New poverty, income, and health insurance analysis The annual Census Bureau data release shows real income gains for the median household and a decline in poverty, but the reality is many working Americans are just working more at lower wages.

 

[turbo]

Despite the cheerleading from the administration, there are problems. Bernie Sanders hits the hot spots here:

http://www.huffingtonpost.com/rep-bernie-sanders/no-on-nussle_b_62902.html

 

[drankin]

Well, apparently Americans work their butts off compared to the rest of the world:
http://www.foxnews.com/story/0,2933,295556,00.html

A persons wages are precisely what they settle for.

 

[edward]

Well, apparently Americans work their butts off compared to the rest of the world:
http://www.foxnews.com/story/0,2933,295556,00.html

A persons wages are precisely what they settle for.

From the link:

Americans Are World's Most Productive Workers, U.N. Report Finds

Working at what? Flipping hamburgers. We aren't exactly an industrial power house anymore. The real work is being done in China.

This is a feel good comparison. Americans, especially the younger generation don't even know how to work anymore.

http://money.cnn.com/2007/08/22/new...kers.fortune/index.htm?postversion=2007082306