Also incoherent. The author doesn't even define "middle class", and yet some collection of disparate statistics is supposed to tell us the middle class is vanishing?
Excellent stats. Thanks for posting this. The picture is pretty bleak. According to CIA's World Book, 1 in 8 Americans live at or below the poverty level. Only 6.24% of the working population older than 25 make $100k+. The average income for the same demographic is around $32k. So, yes, all the data says the same thing: there is a massive economic polarisation going on in the US.
How long does this keep on going for? Is there some process or mechanism within the system that will put the brakes on this? Another measure of wealth disparity is the Gini index. We should forget GDP (or GDP with PPP) (or GNP) per capita as a metric. If I live in a country where there are only two people, one of who (not me) earns $1,000,000 per annum and the other (me) earns $10,000 and I'm told that the GDP per capita is $55,000 I'm not going to be impressed. But if the Gini index for my little two person country states that there is a massive imbalance in the distribution of wealth then I'll prefer that index.
What I'm trying to ask is: how long can this keep going on before some sort of underclass revolution kicks in. Or, are the poor in the US not _really_ absolutely poor (like rural farm-hand in China poor) but relatively poor (as in 36" LCD TV instead on 50").
You know what would be a cool hack? Solving this economic train-wreck.
Absolutely. I agree 110%, but there is so much intertia going into this that it seems irredeemable. It isn't. I keep telling myself that it isn't, but I see no way the US can pull out of this both personally and on a state level. The amount of retrenchment needed is inconceivable. I've lost the link, but someone posted on HN a few weeks back about the economy going double-dip, and the slideshow ended with a link to Niall Ferguson accepting an award. In that speech, he demonstrated that the US will soon need to spend more money to service its debt than it does on its military (which is a humongous percentage of the budget), and that is an historic sign of imperial decline. The current policies of both the US and the UK mean that by 2040, their debts will equal some 450% of their respective GDPs - they will out-Greece Greece.
They neglected the impact of property taxes, which are regressive (independent of income). Here in NJ for example, my property taxes are now at 25% of my income, and that's before other taxes and fees (income tax, sales tax, gas tax, tolls, etc.). As homeowners go bankrupt or walk away from their homes, the tax rate is raised to keep the local fiefdom's income level stable.
Regressive is the term used here for describing property taxes. While not entirely appropriate, for the sake of communication commonly agreed upon terminology is used by politicians and the media.
Yes, the taxation of property needs to be tied to market value, but it needs to be capped in some manner to prevent abuse. For example, pro-rating the tax against a sliding scale based on income.
The problem is that people get old. Bizarre concept, I know. Once people retire, their incomes tend to be fixed. As property tax rises uncontrolled (and unpredictably) year to year, the people that are the foundation of the community are forced out. Friends and neighbors leave - not because they want to - but because they have no choice. When the taxes on your home become 30%, 40% or more of your gross on the home you've lived in all your life, what do you do?
It still might not be so bad if new people moved in. However, if the taxes are too high home sales in a recession become difficult or impossible. Homes sit empty as people walk away from the properties. They become run-down, and the neighborhood degrades. To compensate for the loss of revenue, local government raises the tax rate continuing the cycle.
Wouldn't this just be an adjustment to something that occurred due to lack of free trade and globalisation/ ease of communication in the past? If someone in China or elsewhere really can do a job just as well as someone local to a company and capitalism dictates that a company should maximise profit then it makes perfect sense to outsource.
Also incoherent. The author doesn't even define "middle class", and yet some collection of disparate statistics is supposed to tell us the middle class is vanishing?