The Dow Jones has recovered all of its losses since the financial crisis and made a new all time high this week. Unfortunately, most of you reading this will have benefitted very little from its dramatic comeback. However, there are a very few who have benefitted greatly. Professor G. William Domhoff of the University of California demonstrated that the richest 10% own 98.5% of all financial securities. Furthermore the wealth gap between the top 20% and the rest of the population has never been larger. Finally, the growth in income disparity has accelerated under President Obama.
Matt Stoller, of the Roosevelt Institute analyzed IRS data to determine who captured the lion’s share of real average income growth between 1993 and 2010 and found that under President Bush, the top one percent captured 65% of the real average income growth while under President Obama, the top 1% has captured 93% of the real average income growth. The point here is not to choose political sides; after all, income was most evenly distributed under President Clinton. The point is that regardless of what side the politicians are on or whom they pretend to be looking out for, their number one concern is lining the pockets of those that paid for their election. Left or right is irrelevant.
The political system repays two types of voters. It enacts legislation at the highest levels to foster growth in the pharmaceutical, military, raw material and financial industries, thus repaying their campaign contributors. Secondly, the popular vote is increasingly purchased through extended government subsidies on everything from an extension of unemployment benefits and disability claims to housing subsidies and mortgage forgiveness. Every additional dollar doled out through legislation or direct voucher subsidy is a dollar paid to ensure the perpetuation of a system that is withdrawing cash from the middle of our economy and redistributing it between the massive and growing welfare class and the elitist top 10%.
This not intended to slam the unemployed. Frankly, the numbers reported for unemployment like the current measure of 7.9% is woefully under reported when compared to what real unemployment feels like. The Bureau of Labor Statistics reports that there are 8 million people who are unsatisfied workers. These are people who can’t find enough work. They also report that there are another 10 million workers who have given up looking for work. When these 18 million dissatisfied and exasperated workers are added back into the working population a truer picture of unemployment approaches 14.5%. Finally, these numbers don’t reflect another 5 million people who gave up looking for work and are now drawing social security disability.
While many of us haven’t participated in the stock market rally I think one place we’ve shared the climb is at the gas pump. The price of gas has risen steadily over the last month and the Energy Information Administration says that 2012 was nearly the most expensive year on record for American drivers, second only to 2008. They said gas prices accounted for 5.8% of a $50,000 median income. This year’s price increases could push this to nearly 18% of median income and drag another $400 out of the middle’s pockets.
High gas prices stink but at least they’re not the triple economic threat of the Affordable Health Care Act, which will reduce total hiring and hours worked as employers attempt to remain below the hourly and total employment thresholds. The Affordable Health Care Act will also shift more of the deductible payment to the worker as employers seek higher deductible plans to manage the expense of administrating the plan. The Kaiser Family Foundation says this will cost employees about $3,000 in 2013 in added premiums and higher deductibles.
Gas, groceries and health care are issues we all face but the percentage of our budget we use to pay these declines as income grows. A family of four that spends $800 per month on groceries with a $50,000 annual income isn’t going to spend $8,000 a month on groceries if they make $500,000 per year. Therefore the top earners are affected very little by the rising costs of living. Meanwhile, the social safety net continues to pick up a larger portion of the population as job growth and income stagnates at the bottom threshold.
This is the pattern that we face as a country. Bureaucrats acting in their own self-interest with horizons just past the next election are too short sighted to enact long-term legislation. This is how sequestration came into being, as leverage to force Congress into action yet, in spite of their OWN poison pill, the deficit continues to grow unchecked, the voters continue to cast their ballots and the top 10% continue to cover each others’ backs.
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