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Half of U.S. Households Are Just Hanging On

The days an average American could expect to work,
save and leave his kids a bit of wealth have gone into history; middle class Americans have little to pass on but their debts. Neither will the American Dream return for their children nor for their grandchildren. America has voted F.A.
Hayek’s Road to Serfdom
for itself and that’s a one-way road.

Here’s the picture:

  1. Government taxes away 28% of the average taxpayer’s income.
  2. Federal regulation costs consumers $1.187 trillion per year on top of taxes.
  3. Real inflation costs us about 6% of our purchasing power annually.

Add: All of those numbers are rising steadily.

4.  Household income, flat for a decade, has recently been declining.

What do these mean to the U.S. (2009) median household with income of $49,777 ?

Reduce the income by the 28% for all the taxes: ($13,938)

Reduce it by regulatory costs for each of the 117,181,000
households: ($10,130)

Reduce the income by 1 year of 6% inflation: ($2,987)

Remaining household income available for living
expenses; $22,722

Compare discretionary income to the 2010
Federal poverty level
: $22,314

You might assume that half of all households are living in poverty except that the poverty level income still includes the government’s take that was removed from the median household income. A proportionate adjustment to the poverty income leaves $10,186 to live on after the government takes its cut. So the difference
between the median household and the poverty level discretionary incomes is about $12,000 a year. That’s no big difference, these days.

Federal statistics include both bureaucratic and political effects, taking them without the grain of salt isn’t wise. Adjusting the Census folks’ median household income with the Tax Foundation’s average taxpayer’s taxes isn’t precise and people argue about the real cost of Federal regulation. The poverty level is debated too; for one example, it doesn’t consider the Federal benefits from Medicare, food stamps and other programs. But it seems fair to conclude that the lower half of American households is economically marginal to some degree.
That’s a weaker society than Americans realize, or are prepared to face. It lacks reserves to get past tough times.

Recalling that much of even the lower half of the
middle class relied upon a single earner into the 1970’s says that U.S. households have been losing ground for decades.

Standing on that, let’s review how government is
dealing with it:

Under Presidents Bush and Obama, Republicans and
Democrats have been adding increasingly costly healthcare programs: Bush’s Medicare prescriptions and ObamaCare. Both programs take more resources from the economy. Both parties have initiated costly, protracted foreign wars lacking either an obvious payoff or a clear end point. And both parties have expanded spending beyond available revenue, first borrowing and when that
became insufficient, manufacturing credit and money out of nothing. That’s at least, irresponsible governance and in the cooler light of future history, likely criminal.

President Obama and his Democrats flashed into power
flushing the Republicans out; the new leaders could have stepped up, faced the economic wreckage, rolled up their sleeves and started the lengthy process of clearing it away. Instead, President Obama has donned imperial robes, starting costly wars without Congress, handing out extra-legal waivers against Federal law
(ObamaCare) and claiming in federal court the right to kill, without review, anyone his administration decides is a threat. And with all that increased power the President, instead of taking on the correction of Republican economics, has led his Democrats in an enormous expansion of his predecessor’s policies even while he has continued to complain of them.

As a result of this, every American family now owes around
$212,000 of government debt and interest, plus whatever its mortgage, car loans and credit card balances may be, and while families are responsibly (though slowly) paying down their
own debts, the Democrats in charge are increasing the government debts that the families will ultimately pay. What they will use to pay them is not obvious.
Averaging total U.S. debt, government plus personal, comes to about $676,000 per family and the country’s savings per family are $6,860.
Where are the resources to repay the debt? Without the interest, to repay all that debt in 20 years requires $33,800 per year from every family.

The Obama government is not just increasing the chains of debt around the ankles of increasingly marginal U.S. families; it’s
raising taxes and increasing regulation (especially in food and energy), leaving families with decreasing resources to handle those debts. And if those policies were not destructive enough, the government is further driving up the cost of living by the inflation its money and credit manufacturing produce.

Government’s regulatory regime does more than absorb
dollars from families by increasing the cost of goods and services. It’s also a prime contributor to the emigration of high-cost industries to cheaper foreign locations, depriving U.S. workers of jobs. That and the failing economy have produced a U.S. civilian workforceparticipation rate in decline since 2000 with those
hit hardest by unemployment being men and the young. Those newly non-working demographics have to be supported by someone; that pushes harder on family resources.

Government policy has been pushing Americans along Nobel
Laureate Hayek’s road for several generations now but even when previously at-home spouses had to go to work during the 1970’s, there were few complaints. The Progressives succeeded in converting that economic hardship into something socially desirable; it was somehow noble to move from domestic motherhood into economic serfdom. The same process now urges the Luddite government’s further economic retrogression onto families in the name of the environment.

It used to be American to wish to be rich; that ambition produced the “can do” attitude that made the U.S. far and away the wealthiest
place in history. Today, piping soothingly to smooth away the frightening reality and accompanied by his journalists (also on wind instruments), our imperial pied piper in Washington is leading us in a retreat from our own history, back into the economic servitude our ancestors struggled so hard to escape. So far, no little boy has awakened us to the nakedness of his program.

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Categories: World Events

5 replies

  1. Great stuff. I picture the government as a python that strangles the economy and the people bit by bit. Every new regulation, every new tax, every new service fee, every new entitlement, every new adventure overseas, is just another death coil around the victim as the python squeezes the life out of the American dream.

    Where the analogy fails is that this snake has no head to chop off, no easy answer to this problem. We just have to claw our way out of this thing and unwind the coils one by one until we can breath again.

  2. The rich get richer while the middle class enters poverty. Good info and glad to see you included that Texan in your remarks. I’m seeing more folks riding bicycles to work.

  3. Crossposted at FR

    I think you said what a lot of people are feeling.

  4. great blog would love to be added to your blog roll

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