The Double Dip. Income disparity is so severe that its actually putting a brake on demand

FogerRox

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Tue Aug-02-11 01:49 PM
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The Double Dip. Income disparity is so severe that its actually putting a brake on demand

Republished from Daily Kos, INCOME INEQUALITY KOS

At the height of the Clinton dot com boom America experienced actual real wage growth for consecutive years for the first time since 1968, median individual income peaked at below $39,000 per year. in the current recession median individual income is slightly above $26,000 a year. Yup, more than a 12k drop, about 30%.

And just to make sure you are thoroughly distressed, todays recession median individual income of 26k, has not kept up with inflation for over 40 yrs. Follow this link and look for 1970

http://en.wikipedia.org/wiki/Personal_income_in_the_United_States

Did you find the chart that says $28,000 yet?

Maybe you're feeling a wee bit steamed. Do you have a feeling of impending doom? Is your heart rate up a bit? Are you pissed off yet?

Warning, if you dip below the squiggle, you may become very fooking pissed off.

Working and middle classes have been taxed out of the economy, income disparity (worst since 1928) is so severe that consumer demand is incapable of stimulating the economy. At this point in time income disparity is a brake on economic growth. GDP growth has been on the decline for 18 months, the last 6 quarters.

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Look at 2010 and the first 2 quarters of 2011, and witness the front half of the classic double dip recession.

Yes, that sucks, its a bad sign, and politically there is no solution on the horizon.

I believe its vital to illuminate the scale of the problem.

By 1936 things were looking good, America was in recovery, GNP growth in 1934 was 11%, 1935-9%, 1936-13.9%. GNP in 1929 compared to 1936, 96 billion to 103 billion.

In 1937 FDR cut CCC & WPA spending by 60%, Fed policy was tightened, pop, a recession. 3 and a half years of stimulus spending was not enough. FDR quickly repealed the spending cuts and ordered 200 new surface ships for the US Navy. AIrcraft development programs for fighter aircraft were expanded, this is the era where the P-51, the P-38, the Hellcat, and the Corsair were designed, tested and flown. Design specifications for the Sherman tank were written up. It took an additional 3 yrs for labor shortages to start, at Grumman aircraft in Long Island NY, in October of 1941 skilled labor was impossible to find, Grumman instituted a training program, and went on to set a record for a single aircraft plant in fighter production during the war, that was the Hellcat, the fighter that could go toe to toe with Japanese Zero. The Hellcat went on to a 15 to 1 shootdown ratio in the Pacific theater.

I digress, it took 6 yrs of stimulus spending to get us out of the Depression.

How's your heartburn?

How long will it take, under the best of conditions, to get to recovery? How many years of stimulus spending do we need now? 2? 3? 4?. Remember a dollar spent in 1936, stayed in America. Today, thats not true, many of our our stimulus dollars would end up stimulating the world economy. 5 Yrs? Maybe 6 Yrs?

Historically we are in a period of few loopholes for top income earners. I would raise taxes on the rich to 70%, add at least 5 more brackets and offer them tax breaks to invest in factories to build solar panels and wind turbines and other areas of emerging tech and markets , reducing the top bracket to an effective rate of 35%.

Its called industrial policy and we used to great effect from the Depression thru the '70's.

Talking about letting the Bush tax cuts expire is not going to engage the working and middle classes in the economy, Clinton Era tax rates (39.6%) will be too little, too late. Shifting tax burden off these families is essential. Moving significant volumes of capital to where its needed is essential. We know what works, our ideas are better and

When push comes to shove, Americans aren't that stupid, and often can make good choices.

After raising taxes, loopholes in income and corporate taxes, will move significant amounts of capital away from commodities, options, futures, derivatives and into emerging markets we need looking forward to 2050. Good smart behavior needs to be rewarded. The Uber Wealthy have a choice, commodities speculation and returns of 15-20-25%, or building a factory that makes solar panels and creates jobs in the US and returns 5-10%. If we dont change that choice, that money wont move very fast, or with any significant volume to the smart choices that are so important.

Capital is not flowing to emerging markets and technology at a time when we need to replace all of our electrical generating and grid infrastructure. By the end of the decade most of our nuclear fission power plants will be 40 to 50 yrs old.

And even if I was made King of the US tomorrow, it would take me 5 years to dig us out of the hole we're in.