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  Falling Incomes, and Growing Numbers of Uninsured
In early September, The US Census Bureau released its new report titled, "Income, Poverty, and Health Insurance Coverage in the United States: 2008" showing disturbing data that portends much worse ahead under a president and Congress doing nothing to address it.
In 2008, poverty reached 13.2% of the population, its highest level in 11 years, the result of millions losing jobs during the first year of the gravest economic crisis since the 1930s. For blacks, the figure was nearly double at 24.7%, and 31% of all Americans were impoverished for at least two months between 2004 and 2007, years of economic expansion. At yearend 2008, even by the Bureau's conservative measures, 39.8 million people were impoverished, the highest level since 1960, and 17.1 million lived in extreme poverty at below one-half the official threshold. In addition, for the first time since the 1930s, median household income failed to increase over a 10-year period from 1999 - 2008. The Census Bureau states that it "presents annual estimates of median household income and poverty by state and other smaller geographic units based on data collected in the American Community Survey (ACS)" covering population areas of 20,000 or more. The Bureau's Small Area Income and Poverty Estimates (SAIPE) program also produces yearly figures "for states and all counties, as well as population and poverty estimates for school districts." It uses data from a variety of sources, including surveys, administrative records, inter-censal population estimates, and personal income data published by the Bureau of Economic Analysis. Critics maintain that official government figures way understate the gravity of today's crisis, and the Bureau says: "The official poverty thresholds were developed more than 40 years ago and have been criticized for not taking into account rising (or since the 1970s inflation-adjusted falling) standards of living, expenses such as child care that are necessary to hold a job, variations in medical costs across population groups (that have skyrocketed nationally and are now unaffordable for millions), and geographic differences in the cost of living." The Bureau reported that 2008 median (inflation adjusted) household income fell 3.6%, the largest single-year decline on record to the lowest level since 1997 and falling as conditions continue to worsen. The plight of the poor and impoverished shows up in numerous other reports that paint a darker picture than the Census Bureau and suggest much worse ahead: -- an unprecedented, growing disparity between the very rich and other income groups;
-- economists Thomas Piketty and Emmanuel Saez's research showing the top 1% of households got two-thirds of the national income growth during the last recovery, a larger share than at any time since the 1920s;
-- wages losing ground to inflation;
-- millions of children dependent on school lunches for a hot meal;
-- an Economic Policy Institute estimate of one-quarter of all children living in poverty by yearend 2009;
-- the continued erosion of employer and government-provided benefits, including at the state and local levels; the growing uninsured crisis is discussed below;
-- greater numbers of households unable to meet expenses, even with two working members;
-- added duress from state budget cutbacks;
-- record numbers of food stamp recipients;
-- persistent and growing hunger and homelessness; and
-- job losses and higher unemployment continuing for many more months with some analysts projecting record high numbers before peaking. "I don't think that anyone fully understands this phenomenon," he said. Will job losses mount longer than expected? At the "recession's" end, will low numbers of new ones follow, and will double-digit unemployment persist and remain common? Without saying it, Summers wondered if America's economic model was broken, and if so how to fix it. Or can it be fixed? According to the Peterson Institute's Jacob Kirkegaard, "It is entirely possible that what started as a cyclical rise in unemployment could end up as an entrenched problem." Summers earned his reputation as an employment theorist. He now believes that earlier unemployment views are "importantly wrong. I thought if you could have areas where there was long-term substantial unemployment, then that raised some questions about the functioning of markets." In 1986, he wrote an article titled, "Hysteresis and the European Unemployment Problem." Hysteresis is the Greek word for late, referring to what happens when something snaps and can't be fixed. It's an idea economists deplore applying to economies, preferring instead to cite normal business cycle ups and downs. Yet in 1986, Summers argued that Europe's unemployment might be chronic and persist in times of growth. Today's are another matter at a time of a changing economic landscape perhaps suggesting that hysteresis is confronting America, and many lost jobs aren't coming back, especially better paying ones. That's Kirkegaard's view in saying growth won't put Americans back to work, and new jobs created will be poorer quality than old ones. So what can be done going forward? Unlike in the 1930s, machines now do much of the work that people did then on infrastructure projects. And it's a lot harder converting white collar workers to blue collar ones. Moreover, Summers' own research concludes that the traditional Western economic model won't alleviate the jobs crisis, so what will? Summers won't say it, but short of a total remake of "free market" economics, likely nothing and perhaps that's America's future with growing millions consigned to a permanent underclass, while an elite few at the top grow richer, until one day "hysteresis" snaps the system in a disruptive convulsion, the old model passes from the scene, and nothing is the same again. More Evidence of Economic Duress in the Latest Federal Research Report on Consumer Credit On September 8, the Federal Reserve reported that total consumer credit fell by a record $21.6 billion in July (the sixth consecutive monthly decline) and year-over-year by $2.47 trillion or 10.4%. According to Bernard Baumohl, The Economic Outlook Group's chief global economist: "It is one more important sign that consumers are not going to be contributing very much to the economy for the balance of this year and probably for (at least) a good part of next year."
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