Tag Archives: income inequality

DIY Economic News for 2018: Some Suggestions and Sources

The gripe noting the emphasis (or narrow focus) on stock market “news” is a recurring one on this blog, but perhaps it’s high time to suggest some sources which will provide a more comprehensive picture than merely stock market numbers and unemployment figures.  Here are a few for your viewing pleasure:

Labor Information:  What we get on television broadcasts and from most print media are national numbers, however this obfuscates the point that not all parts of the country are experiencing employment (and unemployment) in the same way.   To find out more about state and local employment there’s information available from the Bureau of Labor Statistics at this page. Nevada, for example, is in the western region in the BLS categorization of various statistics, and more specifically as the national unemployment rate is 3.9% nationally (October 2017) the Clark County rate is 5.1%.(pdf)  Although employment in the construction sector is up in Clark County, NV, the rate is altogether to close to that of Cleveland, OH  which was 5.2% (pdf)  Unlike Clark County, which saw a decrease in unemployment, Cleveland actually ticked up from 2016’s 5.1% to 5.2%.   Using the handy interactive from the BLS link give will allow a person to see differences within a state, such as the 5.1% unemployment rate in Las Vegas and the 3.9% unemployment rate in the Reno area. (pdf)

A summary of state unemployment rates is available from the Bureau of Labor Statistics. As of November 2017 the lowest unemployment rate in the country is in Hawaii (2.0%) and the highest unemployment rate belongs to Alaska which has a rate of 7.2%.

The BLS also provides employment projections (for the next 10 years) complete with a graphic illustrating the fastest growing occupations.  Presidential climate change denial notwithstanding, we should observe that the two fastest growing occupations are solar photovoltaic  installers (105.3% increase) and wind turbine technicians (96.1% increase).

A few recommended bookmarks:  AFL-CIO website;  UAW website; SEIU website;  Nevadans will want to keep up with Culinary Worker’s news;  the Communications Workers of America is also highly informative.   Labor Notes is also recommended.

Income Information:  For those who don’t have FRED bookmarked — please do, you’ll be pleased with yourself for doing so.  One of the many topics covered and charted is median household income.   A person can also find information about the Income GINI Ratio for Households (by race), and Real Mean Personal Income.   It would be difficult to imagine what information Isn’t available from FRED.

Once in a blue moon the media reports on the release of the Beige Book from the Board of Governors of the Federal Reserve.  It is a compilation of anecdotal reports from each of the Federal Reserve districts, and is useful for those wanting to drill down into regional economic conditions.  It’s published eight times per year, with the next release due out on January 17, 2018.

The St. Louis Fed provides FRED, and the New York Federal Reserve is the go-to place for information about debt, from student to household.  See their Center for Microeconomic Data.  The NY Fed has its own blog, also informative on a variety of topics.   Readers might like to start with the NY Fed’s report on political polarization and consumer expectations.

There’s FRED, the Beige Book, and the NY Fed, and then there’s the Census Bureau, which tracks income inequality.

There are thousands of more sources and links which will prove helpful to those interested in economic trends, and this is by NO means a comprehensive list.  However, I do hope these links will indicate to any reader that there is a wide variety of sources describing our economy going well beyond the narrow focus on stock market numbers and unemployment statistics!

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Filed under Economy, Nevada, Nevada economy, Politics

We talk about talking about race, but won’t talk about race

I made the mistake of watching some cable news coverage of the DNC this morning.  Several of the reporters were concerned – how I truly am beginning to loathe that word! – that Secretary Clinton’s polling numbers among white males weren’t as high as those of Donald Trump.  A couple of the presenters got close to the mark and then appeared to divert the channel into safer, softer, soil – they, meaning white males, are “angered,” or “feel outside the system..” or whatever.  No one mentioned R-A-C-E. Now, please consider the following three items:

“There’s a good deal of evidence that white resentment of minorities is linked to support for Republican candidates, their policies and conservative ideology in America,” said Robb Willer, a political psychologist at Stanford University. [WaPo]

“As the country has become more diverse, the Democratic Party has, too. But the demographics of the Republican Party have not changed much in recent years, according to Gallup. As of 2012, 89 percent of Republicans were non-Hispanic whites, compared to 60 percent of Democrats.” [WaPo]

“Across time points, racial prejudice was indirectly associated with movement identification through Whites’ assertions of national decline. Although initial levels of White identity did not predict change in Tea Party identification, initial levels of Tea Party identification predicted increases in White identity over the study period. Across the three assessments, support for the Tea Party fell among libertarians, but rose among social conservatives.” [PLOS journals]

The shorter version is the common summary: Republicans are not necessarily racist, but more racists tend to identify with Republicans; and, Tea Party identification was closely associated with “white identity.” Which goes a long way toward explaining this sighting at the recent RNC:

Trump Supporter Check List

No, Secretary Clinton is not likely to poll well with people who tend to focus on their white identity, white grievances, and white dissatisfaction.

If the cable broadcasters would like to fill up some vacant air time, there are deeper, more systemic questions that should be discussed.

Why are disaffected white males supporting a candidate who is not essentially Republican and not primarily a true conservative in the Everett Dirksen, Barry Goldwater, Sandra Day O’Connor, or William F. Buckley mold?

Perhaps interviewing Ezra Klein or Jonathan Chait might offer some insight:

“[Trump] … has exposed a Republican Party many in the GOP will wish had stayed hidden. The core truth he has laid bare is that Republican voters are powered by a resentful nationalism more than a principled conservatism. “Republican politics boils down to ethno-nationalistic passions ungoverned by reason,” writes Jonathan Chait. “Once a figure has been accepted as a friendly member of their tribe, there is no level of absurdity to which he can stoop that would discredit him.” [Vox]

Chait continued:

“…since reason cannot penetrate the crude tribalism that animates Republicans, it follows that nothing President Obama could have proposed on economic stimulus, health care, or deficits could have avoided the paroxysms of rage that faced him.” [NYMag]

If 89% of a political party in America is non-Hispanic white, and if women lean toward the Democratic Party by a split of 52% to 36%, then how do we describe the Republican Party other than a political party of white men? Or, as the Pew Research study found in 2014, a party of older white men:

Age GOP/lean Dem / lean
18-33 35% 51%
34-49 38% 49%
50-68 41% 43%
69-85 47% 43%

A better cable roundtable discussion might focus not on how Secretary Clinton is not capturing the votes of white males, but on why the Republican Party can’t seem to attract more women, minority group members, and younger people?

Pundits tell us solemnly that we “need” a national discussion about race relations in this country, however that is very difficult to do when broadcasters themselves shy away from the topic.  Simply having a few “specials” with “both sides” isn’t the solution.

Whether the corporate media likes it or not, race and ethnic divisions have significance when we converse about any major social, economic, and political questions.  It’s part of the mix, and can’t be separated out like an egg yolk from national conversations.

Someone, somewhere must have perceived the ludicrousness of the proposition that merely talking about racial relations is “racism.”  What this too often boils down to is the assertion that anything which makes white people uncomfortable is “racist.”  Witness Fox News commentator Bill O’Reilly’s recent over the top whine about those who criticized his attempt to “soften” the plight of slaves in 19th century America.

Speaking about the unequal and deleterious incarceration rate of young African American men isn’t racist, it’s an acknowledgement of a problem, and therefore an opening to use the discourse as a way to solve or at least mitigate the issue.

Speaking about income inequality isn’t racist. It’s an acknowledgement that working people in this county, especially people of color, aren’t able to scale the social and economic ladder as easily as in times past.  We could help with this but we have to talk about it.

Speaking about police reform isn’t racist. It’s an acknowledgement that too often for our liking there are law enforcement personnel who are not helping resolve issues between the police and the communities in which they are assigned. There are some police forces which have made great strides, Pittsburgh and Dallas for example, and those can be models. But, we have to talk about it.

Speaking about climate change isn’t racist, but we have to acknowledge that people of color are more likely to be residents of communities and neighborhoods which are the most afflicted with pollution, water problems, and devastation from climate events which become more serious each decade, if not each year.  Again, all the stakeholders need to be at the table for this national discussion.  It’s not enough to worry about the beach front property in Miami, we also need to be aware of the 9th Ward in New Orleans.

Race certainly isn’t the only issue facing this country, but it does tend to permeate most of the major challenges we face.  NOT talking about it is actually hurtful – it allows the tribalism to grow and fester, it allows the problems to remain unresolved, and it feeds the polarization which leads to political gridlock. 

However, the most egregious part of the Great Silence is that it allows us to cling to our tribe, ever more unwilling or unable to discuss, converse, or debate our issues or to practice the great art of any democracy – compromise.

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Filed under media, Politics, racism, Republicans

Income Inequality Matters for Nevada’s Children

child poverty

We ought to be embarrassed.  The Kids Count Data Book 2015 edition is out, and the numbers aren’t pretty.

“Nevada ranks 47th among states in overall child well-being, up one spot from last year. The study found that Nevada ranks 43rd in family and community development indicators, like children living in high-poverty areas; 46th in health statistics, like low birthweight babies; 46th in economic well-being, including parents lacking secure employment; and 50th in educational achievement, including 69% of Nevada’s children not attending pre-school.” [LVSun]

Yes, there we are, ranked down there with Louisiana, Mississippi, and New Mexico.   Overall, things aren’t looking up for children, and there’s an explanation:

“Although we are several years past the end of the recession, millions of families still have not benefited from the economic recovery,” Patrick McCarthy, president and CEO of the Casey Foundation, said in a statement. “While we’ve seen an increase in employment in recent years, many of these jobs are low-wage and cannot support even basic family expenses.” [LVSun]

And why might this be a correct assessment of the situation? There has been income growth since the end of the Great Recession, but the recovery has benefited those at the top –thus much for anything trickling down:

“The states in which all income growth between 2009 and 2012 accrued to the top 1 percent include Delaware, Florida, Missouri, South Carolina, North Carolina, Connecticut, Washington, Louisiana, California, Virginia, Pennsylvania, Idaho, Massachusetts, Colorado, New York, Rhode Island, and Nevada.” [EPI]

Nevada has made some improvements – if bouncing off the bottom is an indication of progress – in health, for example, 5% fewer children are without health insurance, and education in which 69% of our kids aren’t attending pre-schools, up from a previous 72%.  But, the economic picture is bleak at best.  23% of the youngsters live in poverty, 34% are in families experiencing what’s euphemistically called “employment insecurity,” and 39% of the kids live in a situation in which housing costs are eating up the family budget.  [AECfnd]

If we tread deeper into the income inequality waters we can see why the numbers for Nevada youngsters didn’t improve. Here’s the answer: “In four states — Alaska, Michigan, Nevada and Wyoming — average income increased exclusively for the top 1% and declined for the bottom 99%.” [247Wallst]  So, in the Silver State, not only did all the income growth get sucked up by the top 1% during the recovery, but the bottom 99% actually saw their incomes decline.

Most analyses get the first part right.  In the last downturn the bottom fell out of the construction sector in Nevada; the housing bubble burst, and employees were laid off.  Laid off employees have less discretionary income to spend, and less income equates to fewer purchases.  Fewer purchases yield less economic activity in the community, and everyone starts to go down hill.  When we get to the middle part of the explanation some analysts start getting fuzzy.

First Law of Staffing

The question in the middle is how to encourage more employment.  For the umpteenth time here’s the answer:  There is no rational reason to hire anyone to do anything unless the DEMAND for goods and services is greater than the capacity of current staffing levels to provide an acceptable level of customer service.  Amen. Again.

The Small Business Chronicle offers some very sound advice which expands on this generalization.  Their five step process asks: (1) Are your projects or other business activities getting done on time? If yes, then you probably don’t need any additional employees. If no, or the business is thinking of more marketing to drive up revenues then ask (2)  if you were to increase your marketing efforts could your present staff handle the additional work load? The next step (3) is to look at your overtime records. One sure sign that the business is understaffed is increased overtime from current employees.  In the first step the business owner gauged the project or work time, in the next (4) step it’s important to look at the issue from the customer or client’s perspective – if the business is monitoring customer wait time and it seems (or is reported to be) excessive, then the business is understaffed. Finally, in Step (5) a savvy business owner will determine if the increases in demand are continual or seasonal. If seasonal, then temporary employee hiring may be the solution.

What’s not under consideration here?  The advice offered above didn’t include a question about whether Nephew Lester needs a job. Familial ties are wonderful, but they don’t constitute a reason to hire an employee.  Hiring veterans is a healthy business practice – but again, no matter the benefits, if his or her skills aren’t necessary to get things done or made on time, and if a barrel of overtime isn’t on the current books, there’s no rational reason to make a new hire.  Tax breaks for hiring the unemployed are fine – but just as in familial or socially beneficial cases, there’s NO reason to hire anyone for any tax break if there is insufficient good old fashioned demand for the products and services.   It’s at this point that the conservative, trickle down, no new taxes, barrage of talking points becomes almost ludicrous.

tax incentives accounting There is a wonderful leap of logic, stretching that term to its extrapolated limits, in asserting that more tax incentives, tax breaks, tax forbearance, tax limits, tax deductions, and tax treatments will magically yield more employment.   What is required is to believe that if a company is more profitable it will automatically hire more people.   Yes, a more profitable firm is capable of hiring more but NOT if there is no increased demand for the goods or services.  A more profitable firm has the potential for more hiring – but not if it is corporate policy to put more effort into mergers and acquisitions than into actual plant expansion. A more profitable company may hire additional workers but not if the firm has decided that it will put its revenue into stock buy-backs, dividends, or management compensation. Potential may be a powerful argument, but unless it is translated into a realistic appraisal of company or corporate intentions and vision it’s as ephemeral as a fruit fly.  And it’s not really useful for putting food on the table for the kids.

And, now we return to the economic problems of children. If the jobs available for their parents are seasonal, temporary, or permanent but low wage then all the job “expansion” in the nation isn’t going to improve their prospects.

Seasonal employment is relatively easy to understand.  It’s everything from harvest time to Christmas sales.  The sector of the labor market into which more parents are finding themselves is the temporary work force.  About 75% of Fortune 500 firms are relying on third party logistics companies to handle their warehousing, and employment in transportation and materials moving and production now accounts for some 42% of temporary hiring. [NELP]   The advocates of temporary hiring note that only about 3% of the workforce is on temporary status, which is true but doesn’t include the fact that temporary employment grew from just a bit over 0.5% in 1983 to over 2.5% as of 1999. [BLS] Further, the trend is increasing as this graphic from Staffing Industry illustrates in YOY growth from 2013 to 2015:

temp jobs trendsAs this sector of the labor market increases the “employment security” of parents becomes more tenuous.  As long as this trend continues we’ll likely find more youngsters in that “parents lack secure employment category.” 

There’s no reason to believe that corporations in Nevada are functioning any differently than those in the rest of the country in terms of staunch adherence to the Shareholder Value Theory of Management, the interest in mergers and acquisitions rather than plant expansion in general, and the interest in utilizing temporary labor for logistics, warehousing, and service jobs.

In sum, there’s no rational explanation for hiring (temporary or permanent) which doesn’t relate directly to demand – and there’s no reason to expect demand to increase if the jobs created are temporary, low wage service or retail sector, and with reduced hours or misclassification of employees. Meanwhile the kids need housing, clothing, food, medical attention, and school supplies.

We ought to be embarrassed, but we probably won’t be until we can shake the 1% awake to the fact that profitability doesn’t necessarily equate to employment. To the fact that potential employment isn’t actual employment. To the fact that temporary employment isn’t secure employment, and to the fact that taxation has precious little to do with hiring the parents of Nevada’s children.

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Filed under Economy, family issues, Nevada economy, Nevada news, Nevada politics, poverty, Taxation

Happy Fourth of July: A More Perfect Union

Flag July 4th

It’s a good 4th of July weekend.  The benefits of citizenship have been affirmed for members of the LGBT community, but as the founders told us we’re on a path to create “a more perfect union.”  Therefore, there’s more work to be done to insure that housing, employment, and other areas of American life aren’t stumbling blocks of discrimination. We will have to keep up efforts toward building that “more perfect” union.

Ravenal Bridge

There may be some dead-enders, some battle flag flying remnants of blatant racism, but no matter how hard the Klan and their allies try, their proposed demonstration will be nothing compared to the thousands who walked along the Ravenal Bridge in Charleston, South Carolina.  We’re closer to being a nation of people who are taking Dr. Martin Luther King Jr.’s message to heart:

“When evil men plot, good men must plan.  When evil men burn and bomb, good men must build and bind.  When evil men shout ugly words of hatred, good men must commit themselves to the glories of love. “

At least two churches in the south have been the target of recent arson attacks, so in order to form that more perfect union it’s time for people of good will to build and bind.   It’s been a long walk from the bridge in Selma to the bridge in Charleston, but we’re getting there.  We still have to acknowledge the often painful accuracy of Winston Churchill’s backhanded compliment, “You can always count on the Americans to do the right thing, after they’ve tried everything else.”  

In a more perfect union, we’d not have maps showing that a person earning minimum wages cannot achieve a point at which only 30% of his income can pay for a one bedroom apartment.

Rent map

The darker the blue the worse the problem.  We’ll have a more perfect union when we address the complications of living on inadequate wages.  It does no good to march behind banners proclaiming that hard working Americans should “save for the future,” – when simply meeting basic needs for food, housing, and adequate clothing consume all the family’s income. It takes us no closer to a more perfect union to proclaim, “if the poor would just work harder they’d get ahead,” when elements of our judicial system, parts of our educational system, and the myopia of commerce combine to force workers into multiple jobs at minimal wages.  We are no closer to forming a more perfect union when we reward those who prosper at the expense of those who produce.

Unassisted graph

In a more perfect union this graph would be significantly lower.  How do we care for the least able among us? The learning disabled young man with nerve damage, but not quite enough to meet disability standards?  Unmarried, with no dependent children, unemployed except for odd jobs paying about $10 per hour?  A victim of child abuse, and now a victim of a system in which he doesn’t qualify for benefits because he’s never been able to find employment which sustains them. [Reuters]

We’ll be a more perfect union when we are more aware that the able-bodied are not necessarily able to fully function in our modern economy.  In a more perfect union there is more educational, job, housing, and food support for those who live on the margins of despair.

I look to the diffusion of light and education as the resource most to be relied on for ameliorating the condition, promoting the virtue and advancing the happiness of man.” Thomas Jefferson to Cornelius Blatchly, October 1822

And yet:

“About seven in 10 (69%) college seniors who graduated from public and private nonprofit colleges in 2013 had student loan debt. These borrowers owed an average of $28,400, up two percent compared to $27,850 for public and nonprofit graduates in 2012.   About one-fifth (19%) of the  Class of 2013’s debt was comprised of private loans, which are typically more costly and provide fewer consumer protections and repayment options than safer federal loans.”  [TICAS]

In a more perfect union, education advances the “happiness of man,” not merely the bottom line of banking institutions, and certainly not the unrestrained avarice of some for-profit operations who once having the federal funds in hand look to more recruitment without much concern for those already recruited.

And, then – predictably – there’s the Wall Street Casino, which has created SLABS (Student Loan Asset Based Securities).  While certainly not in the mortgage meltdown class, these are problematic because:

“What I find most disturbing about SLABS is that they create a system where an increase in tuition (and the debt-burden on the borrower) equals an increased profit for the investor. When you consider the role that unscrupulous speculators played in the mortgage crisis, one can’t help but wonder if a similar over-valuation of college tuition is taking place for the benefit of SLABS investors. With the cost of attending college increasing nearly 80% between 2003-2013 while wages have decreased, it’s no wonder that so many people are having difficulty paying off their student loans.” [MDA]

This situation is NOT the way to “diffuse light and education.”

There are countless other topics and issues on which we might dwell, assistance for the elderly, transportation, trade, economic security, police and community relations, infrastructure issues, voting rights,  domestic terrorism, domestic violence, gun violence, climate change … the list is  as long as the population rolls, as we try to create that more perfect union of imperfect human beings.

What we need is Churchill’s optimism – that eventually, after avoiding problems, exacerbating problems, tinkering with problems – we’ll do the right thing.

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Filed under banking, civil liberties, education, financial regulation, Global warming, homelessness, income inequality, Minimum Wage, poverty, racism

It’s The Income Inequality Gap, and it’s stupid

Nevada Income Gap Map We’ve had the following information in hand since last February:

“The average income in Nevada rose just 8.6% between 1979 and 2007, among the lowest increases in the nation. However, most of the state’s residents actually lost money during that time, as average real income dropped by 11.6% for the bottom 99% of earners. For the remaining top percentile of earners, average incomes rose by 164% between 1979 and 2007. As of 2007, the top 1% accounted for 28% of state residents’ total income, the fifth highest percentage in the United States. The gap between the top percentile and other earners has further increased in recent years. Incomes for the top 1% rose by 4% between 2009 and 2011, while incomes for the bottom 99% of earners slipped by a nation-leading 6.7%. Nevada has struggled with high unemployment in recent years, including an average unemployment rate of 11.1% in 2012, the highest in the nation that year.” [24/7WallSt]

Need more? The share of growth captured by the top 1% = 218.5%. The real income growth from 1979 to 2007 was the second lowest in the nation, at 8.6%  The income growth for the bottom 99% of Nevada residents was –11.6%, the 2nd least in the country, and the income growth for the top 1% was 164%, the 24th highest in the country. [24/7WallSt]

If this were a “one off” situation we might dismiss it more causally, but it isn’t.  The change in Nevada household income from the late 1970s to the mid 2000’s shows a 16.8% increase for the bottom 20%, a 19.7% increase for the middle 20%, and the top 20% saw income growth of approximately 58.6%. [CBPP pdf]  So, how much annual income does it take to make it into the top 1% of Nevada’s income earners?

Nevada top 1% From the map shown above, it takes about $306,000 per year to be in the top 1% of Nevada income earners.  And, what is the income inequality ratio in Nevada?

Nevada Income Inquality ratio map The answer is 44.1%, one of the highest in the United States.  The next obvious question is: Why does a widening gap in income by households create a problem?  Hint: You don’t need a degree in finance or economics to figure this one out.  What tends to happen is that in the long run the lower income families tend to stay in the lower income brackets, the top 1% move steadily upward, and it’s the middle class that gets caught in the squeeze.  Economists Saez and Zucman explain:

“Among the fascinating findings of Saez and Zucman is how thoroughly the top 0.1% have shouldered their way past all other households. While their wealth share was soaring, that of the next 0.9% was barely growing, while that of the “merely rich” — those ranking in the top 10% but below the top 1% — actually shrank.

But the real victims of the trend are in the middle class. Saez and Zucman show that the wealth share of the bottom 90% grew from the 1920s through the mid-1980s, from 15% to 36%. Mostly the gain was due to the growth of pensions and of homeownership. Since the mid-1980s, however, middle-class wealth has evaporated, falling to 23% in 2012, about the same level as 1940.” [LATimes]

So what? What if middle income range families are getting the squeeze? To demonstrate that they ARE getting shouldered out of their share of increasing wealth doesn’t necessarily prove the situation is essentially economically negative?  Or does it? The answer is “yes, it does” if we’re talking about the real economy and not the shadow economy of the investment bankers and financialist allies.  For what now may be a record number of times in a single blog, let’s review the calculation of the Gross Domestic Product:

Gross Domestic Product Formula

Once More! The C is for consumer spending. The I is for investment. The G is for government spending. The (X-M) part is the difference between imports and exports. Who has disposable income to spend on goods and services? Who has income to save or invest?  If you guessed that there are more lower and middle income households you’d be right.

As of the 2012 IRS report, there were 144,928,472 household income tax filings. Of these filings 705,029 came from homes in which the annual adjusted gross income was between $500,000 and $1 million. Incomes between $1.5 million and $2  million accounted for 71,874 households, and there were 106,711 filings from households reporting income between $2 million and $5 million. 27,167 homes reported AGI of between $5 million and $10 million, and 17,685 reported AGI over $10 million. [IRS download]

Those 2012 filings of AGI ($500K-$1M) were 4.68% of the total; the next category up were 1.68% of the total filings; the next category composed 0.49% of the total; and the next 0.74%; at the very top the AGI ($5M-10M) comprised o.0187%, and the over $10 million were 0.0122% of the total filings. Now for the practical question: Who is buying more washing machines, television sets, and automobiles?  Who is buying more clothing, gasoline, and groceries?

We can narrow this down to Nevada’s statistics. [IRS download]   There were a total of 1,289,360 filings in 2012. Of these 4,420 were for adjusted gross incomes over $500,000 and 3,300 came from households with over $1 million.  The top bracket filings constituted 0.34% of the total and 0.25% respectively.  Again, who is purchasing consumer goods and services in Nevada?  Facing reality – a household could own one home in Las Vegas, one at Lake Tahoe, and another in Elko County – that’s still only three washing machines, three dryers – we could even toss in a car elevator and the total consumer spending wouldn’t create the DEMAND for goods and services which might be generated from the remaining 99% of Nevada income earners.

This is precisely WHY the Supply Side “Trickle Down” hoax is so pernicious. Continuing to monkey with the tax code by giving tax breaks, tax ‘incentives,’ and tax avoidance tactics to the upper 1% simply means we’ve skewed the numbers by which we measure our own economic growth. It has been, and continues to be, nothing less than a recipe for disaster.

Now, let’s take a look at the I part of the equation. Where is the investment going?  In good old fashioned garden variety capitalism, the “savings” or excess income is Invested in stocks or bonds which corporations can use to expand production, add employees, and use to build facilities or put into research and development – so, what are investment advisors telling their clients in the upper income brackets now?

The “hottest” investments for 2014 were in non-wrap mutual funds (82%) and exchange traded funds (79%). [OnePA]  “The exchange traded funds are like index funds but they can be bought and sold just like shares of common stock.  Whenever an investor purchases an ETF, he or she is basically investing in the performance of an underlying bundle of securities — usually those representing a particular index or sector. Unit Investment Trusts (UITs) are often organized in the same manner. However, the unusual legal structure of an ETF makes the product somewhat unique.” [Invest]  They can be bought and sold like common stocks but the crucial part is that they are NOT common stocks, and the “somewhat unique” structure comes with some tax advantages.  Who could have guessed?  A non-wrap mutual fund is one in which there isn’t a mutual fund advisory program giving the investor access to a big pool at a set annual fee.   Not to put too fine a point to it, but what we have here is a Financialists Day Dream – lots of ‘financial products’ to trade based on “an underlying bundle of securities.” Not reality.  If you were thinking that the I stood for the good old capitalistic categories of fixed investment and changes in business inventories – think again?

And this is the way the income gap expands.  Wage and salary workers face issues of globalization, technological changes, educational and training gaps, and increasing levels of indebtedness, while the top 1% bets on the capacity of the 99% to pay off the debts which have been warehoused, sliced, diced, slung into the Wall Street version of the financial Cuisinart, and traded in the financial markets.

There are no Silver Bullets but there are some things that might help.

  • Tax capital gains at the same rate as any other form of income. People work and get taxed, if ‘money works’ then tax it as well.
  • Close the special tax advantage loopholes which allow ‘investors’ to play with Dark Pools, exotic funds, and other Wall Street creations which serve to minimize Wall Street risk and place the general economy in a volatile financial environment.
  • Don’t fall for simplistic solutions like the Flat Tax, which is simply one more way for the top 1% to get a break while the wage and salary owners continue to pay the freight.
  • Increase the federal and state minimum wages.
  • Increase investment in education and training programs.
  • Encourage union and worker organizations.
  • Encourage American manufacturing with a long term national plan to improve U.S. manufacturing, including the government procurement of items made in America.
  • Avoid trade treaties which impinge on U.S. production, labor, environment, and U.S. sovereignty.

Nor can we assume that any one of these elements will bring Peace and Prosperity – there must be a conscious desire to return to that good old garden variety Capitalism – with an acknowledgement that “financial products” are here to stay – coupled with the encouragement of investment in infrastructure (public and private), production improvements, and research and development.  It’s possible if we can get our noses out of our checkbooks long enough to get a better view of our economic horizons.

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Filed under Economy, Nevada economy

Nevada Economic Sands in the Hour-Glass Economy

Nevada Income When the chatter begins about income inequality after the State of the Union address, remember Nevada is one of the states with the widening gap:

“In four states — Alaska, Michigan, Nevada and Wyoming — average income increased exclusively for the top 1% and declined for the bottom 99%. In another six states, the top 1% accounted for more than two-thirds of all income growth between 1979 and 2007, while the income of the bottom 99% grew at a much slower pace.” [Time]

So what does this mean?  Let’s start with the usual premise, “Capitalism works.”  Or, it should function better than any other economic system devised by man if the transactions for goods and services are accomplished in traditional ways.  If the “rising tide” isn’t lifting all boats, then something is plugging up the works, and plugging up the pipes has some serious consequences.

Shorter Booms.  There is empirical data from the International Monetary Fund showing that periods of economic growth and prosperity are shorter the larger the income inequality gap. [IMF pdf 2014]

Less interest from retail investors.  If people get the notion into their heads that the investment game is rigged in favor of the institutional or professional investors, there is less retail investment.  It took from 1929 to 1954 for the Dow Jones Industrial Average to climb back to September ‘29 levels.  For all intents and purposes that’s a generation of lost investors. [Time]

Greater Personal Indebtedness.  As the top 1% maintain their quality of life using their increase in average annual income, the remaining 99% use credit to make up the gaps to maintain their quality of life. This is great news for those whose job it is to package, securitize, and trade debt (mortgage, auto, credit cards, student loans…), but it is not good news for families who increasingly rely on credit to make it from one year (or one month) to the next.   The New York Federal Reserve report for 2014 tells us:

“Aggregate household debt balances increased slightly in the third quarter of 2014. As of September 30, 2014, total household indebtedness was $11.71 trillion, up by 0.7 percent from its level in the second quarter of 2014, an increase of $78 billion. Overall household debt still remains 7.6 percent below its 2008 Q3 peak of $12.68 trillion.”

We slightly better off than in Q3 2008 – when everything was falling apart, but the debt level still indicates people using credit to maintain the family lifestyle.  Non-housing debt now stands at $3.07 Trillion.

Questionable economic growth.  There is research positing that higher levels of income inequality lead to restrained economic growth, and studies indicating income inequality (depending on whose income is measured and how) may not be the crucial determining factor in economic growth.  What IS reasonably clear is that no sentient person should ignore this phenomena, and caution should be applied to any suggestions that don’t mitigate the issue. [NYT]  Perhaps some of this caution comes from the points made by the San Francisco Federal Reserve’s research which reveals that (1) the American consumer market is polarizing at both ends with erosion in the middle, (2) widening income inequality is most obvious at the local and community level, (3) analysis of the U.S. job market over the past three decades shows a labor market also polarizing into low and high paying employment with fewer opportunities for middle range income employment.

If we drill down to Nevada numbers the picture of widening income inequality shows we’re certainly not immune to the general factors listed above.  Median wages and salaries have declined over the past twenty years, median earnings for the bottom 2/3rds of the work force fell, while median earnings for the top 1/3rd increased.  The median wage for a CEO increased 63% in the decade from 1989 to 1999, up to 107% times the median wages of the average worker.  In 1970 the GINI ratio was .394, as of 2010 it was .469. In the instance of the GINI ratio, the lower the number the better. [CDCLV unlv]  When the number moves up that’s not a good sign.

It looks as though Nevada is securely fixed in what’s being called the “hour-glass economy.”  Or, as the situation was once described nationally:

“It’s not hard to understand what is happening here. The middle class, squeezed by globalization and advances in technology, is sinking backward, while the rich benefit disproportionately from gains in trade and excessively accommodative tax policy. Politically speaking, the obvious prescription would be to raise taxes on the rich and create jobs for the middle class.” [Salon]

There’s more to the squeeze that simply globalization and technology.  The loss of manufacturing jobs, the decline in union membership, and the increasing costs of education and training, should be added to the mixture.  Nor is the polarization going away of its own accord, as INC.com explains:

“Whatever you do, keep in mind that the hourglass economy isn’t going anywhere. “It’s a continuing and growing phenomenon,” McGrath says. “We’re seeing a shift in power toward owners of capital and away from owners of labor. And so many institutions would all have to change at once to reverse this trend.”

We probably don’t need to be quite this pessimistic.  Modifying the “excessively  accommodating tax policy” might be a good place to start.  This isn’t an impossible task if we focus on reality and avoid imprudent and extravagant ideological rhetoric.

Tax policy should be pinned to the Golden Mean, or Aristotle’s old maxim of doing the greatest good for the greatest number.  This requires a realistic definition of a Small Business.  The Small Business Administration has a set of size standards by industry sector; in this set of standards the number 500 stands out as qualifying in many sectors as a “small business,” and a fund, trust and financial vehicle with an average of $32.5 million in average annual receipts qualifies as a “small business.” 

And in the real world, there are approximately 28 million small businesses, and over 22 million are self employed with no additional payroll or employees. 52% of all small businesses are home-based, and there are 22.5 million “nonemployer” firms in 2011 – a figure which increased by 2% from 2010.  19.4 million nonemployer firms are sole proprietorships, 1.6 million are partnerships, and 1.4 million are corporations. The fastest growing sector in 2011 included auto repair shops, beauty salons, and dry cleaners. Nonemployer firms had average revenues of $44,000.  [Forbes]

The new Senate Finance Committee Chairman Orrin Hatch (R-UT) presents a tidy illustration of what’s been problematic about tax reform (“he’s all for it”) and the definition of a small business.

“This plan that we’ll hear about tonight appears to be more about redistribution, with added complexity, and class warfare, directed at job-creating small businesses, than about tax reform, which is unfortunate, because we’re going to need real leadership from the White House —not just liberal talking points — if tax reform is going to be successful,” Hatch said.” [TheHill]

Lets assume that Nevada, like its 49 other cohorts, is in the hour-glass economic phase, and like in all the other states those repair shops, dry cleaners, salons, etc. do create more jobs than the Big Boys.  So, in this context here are problems with the analysis from the Senate Finance Committee Chair.

1. In this context, “redistribution” is not a dirty word.  Given the polarization of the labor market, any effort which yields more income for the middle income earners will help smooth out the Low/High graph, and put more disposable income into the hands of those more likely to spend it.  Likewise, any effort which places more income into the middle income earner’s pocket will increase the possibility that the person will be less inclined to resort to personal debt to finance his or her quality of life – like going to the auto repair shop or the dry-cleaners.

2. “Added complexity” isn’t something most small business owners in Nevada have ever advocated, nor have their cohorts in other states. Those tax breaks, tax loopholes, tax havens, and tax avoidance schemes are the province of those who can afford to hire a battery of high priced accountants and tax attorneys whose task it is to find ways to alleviate, mitigate, or otherwise avoid paying corporate taxes. Advocating tax breaks for those earning less than, say, $250,000 or less isn’t adding all that much complexity to the system – it’s merely adding a break which may come at the expense of the corporations who are truly gaming the system.

3. “Class warfare,” is a term hauled out when a person carrying water for the top 1% thinks the other 99% might get something – for example that truly small business owner taking in the national average of  $44,000 per year in receipts, or the median household in Nevada in which the income is $52,800. [Census]

4.Directed at the job-creating small businesses,” is aimed in the wrong direction.  The job-creating small businesses are the ones taking in that average $44,000 – they are not the hedge funds and private equity firms, which at tops may employ 200 people after they are well established, nor are they those same private equity managers who excel  in carving up firms and outsourcing the jobs.  It’s true, those very real small businesses described above are the source of job creation.  It’s not true that private equity firms, hedge funds, and lobby shops play a huge role in that employment.

Before Nevada gets squeezed much further into the hour-glass shaped economy, it would be well if we acknowledged the position we are in, dropped the ideological and vague rhetoric protecting the interests of the top 0.1%, and advocated for the REAL small business owners in the state.

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Filed under Economy, Nevada economy, tax revenue, Taxation

Loaded Language and Other Matters

two centsHere we go again. This time in Nevada, and this time in regard to the expansion of background checks for private gun sales.   The “gun enthusiasts” are pummeling the Governor’s office with vehement Veto It messages — what else is new? [LasVegasSun]  The Nevada Progressive has been following the course of SB 221 and reports that Governor Sandoval has categorized the bill as “overly broad.”

What might “overly broad” mean?  Here’s yet another reminder that we have only a few classes of individuals who are prohibited from gun ownership in this state — felons, fugitives, dangerously mentally ill, children, undocumented aliens,  and a few who are temporarily  restricted as a result of spousal abuse incidents.   Is the Governor contending that restricting individuals in these classes constitutes an “overly broad” definition of prohibited purchasers in private sales over the Internet or at gun shows?

Senator Heller (R-American Bankers Association) has started to file his amendments to the Senate version of the Immigration Reform bill — The Ralston Report has his initial venture.   Senator Rand “Aqua Buddha” Paul (R-Tea Party Patio) has his own idea about amendments to the bill, such as one to make it all but impossible to declare the borders secure enough to allow immigration reform measures.  [WaPo]  It seems as though immigration reform opponents won’t be satisfied until the U.S. Border Patrol adopts the infrastructure and personnel policies of the old East German regime?

Meanwhile, Senator Schumer (D-NY) has declared an amendment to the bill by Senator John Cornyn (R-TX) a “non-starter” and declines any suggestion that the majority would want to negotiate with the Texas Senator. [TPM]

Another Republican Ladies Day Moment:  Pregnancy as the result of rape shouldn’t be a consideration because it’s really rare… Or, in the words of Arizona Representative Trent Franks:

“Before, when my friends on the left side of the aisle here tried to make rape and incest the subject — because, you know, the incidence of rape resulting in pregnancy are very low,” Franks said.

Franks continued: “But when you make that exception, there’s usually a requirement to report the rape within 48 hours. And in this case that’s impossible because this is in the sixth month of gestation. And that’s what completely negates and vitiates the purpose for such an amendment.”  [WaPo]

What should be negated and vitiated is the troglodyte perspective of throwbacks like Representative Franks?  A bit more at Think Progress. Another day, another splendid example of Republican Outreach to women and ethnic minorities.  Click over to Perrspectives for a lively column on how “Arrested Development” explains today’s GOP.

Representative Franks isn’t the only one channeling his Inner Akin, the Governor of Wisconsin would like to enact requirements for transvaginal ultrasounds and to shut down Wisconsin’s health providers who offer abortion services. [Think Progress] The link back includes this bit of information about the progress of the Wisconsin bill:

Senate debate of the ultrasound proposal came a week after Sen. Mary Lazich, R-New Berlin, introduced it.

“Sara Finger, executive director of the Wisconsin Alliance for Women’s Health, said that gave her less than 24 hours to analyze the bill and prepare her testimony for hearings.

“This speed of passage sends a clear signal that these legislators want to deny any efforts to ensure due process and are refusing to allow sufficient time for medical providers, advocates, women and their partners to truly weigh in on the anticipated damaging effects of this legislation.” Finger said in a statement.” [Twin Cities]

Yes, most anti-abortion bills do tend to move quickly in GOP controlled legislatures.   See also: Ed Kilgore’s post “Back to the Poisoned Well.”

Under-reported:  With all the press attending to the “surprise” revelation that the NSA collects phone numbers, duration of calls, and destinations … is Anyone Really Surprised? — an unheralded report from HUD is receiving scant attention:

Earlier this year, we highlighted how the racial wealth gap tripled from 1984-2009, mainly due to structural barriers to wealth accumulation for households of color, including rampant housing discrimination that constrained where African-American families could live and restricted access to affordable home loans. A new report from HUD shows the extent of housing discrimination against people of color. The report found that people of color looking for homes are told about and shown fewer homes and apartments than their white counterparts. This type of discrimination raises the costs of the housing search for people of color and restricts their housing options.  [Demos Policy]

This wasn’t really all that surprising either.

Why DB hasn’t discussed the NSA flap?  I will when I stop yawning.  Congress approved the FISA Amendments Act of 2008, and the Protect America Act of 2007 — Mr. Snowden’s scenery chewing performance notwithstanding, he simply “revealed” the authorized programs exist. Did anyone think they wouldn’t?

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Filed under Gun Issues, Immigration, Sandoval, Women's Issues