Welcome to the land of the poor and rich – Trading the middle class for economic extremes.

The extremes in the US have gotten more pronounced in this economic crisis.  It is hard to imagine a country where 46 million people are living with the assistance of food stamps while 6 of the 400 top income earners pay no federal tax.  I’m sure that just like most Americans you pay your fair share of taxes.  Of course the real burden has fallen on the middle class since the recession hit in 2007.  Most of the ultra-wealthy have their money vested in the stock market and since the lows in 2009, the market is up well over 100 percent.  The number one asset of the middle class in housing is still down over 30 percent from the peak and is trying to squeeze out a gain in 2012.  So you ask who in reality is paying for all these bailouts and transfer payments?  A massive amount of the burden is falling on the middle class and debt.

How are we paying for all this?

As we have mentioned, we are running trillion dollar deficits since we don’t have the money to pay for all of our expenses in defense spending, interest payments, Medicare, Social Security, food stamps, banking bailouts, and all other large ticket items.  In interesting data released by the IRS, it was noted that more than a quarter of people that earned an average of $200 million or more in 2009 paid less than 15 percent of their adjusted gross income in taxes.  The odds are you pay a much higher rate once you include payroll taxes and all the other taxes you pump out through daily expenses (i.e., sales tax, etc).

One thing is rather apparent and that is in the US the extremes are getting even more exaggerated.  Take a look at the number of folks on food stamps:

Foodstamps People May

You are not looking at the 100 percent stock market rally since 2009 but the massive increase in people on the verge of poverty.  Is this really a recovery?  This group of course does not have the organizational power or money to fund media campaigns but they do exist.  There are even industries that have boomed because of this trend.  At the same time income inequality has reached incredible levels:
income inequality

Source:  Mother Jones

The very wealthy have grabbed the bulk of the income gains in the last three decades.  A large part of the “new” economy has come from the finance, insurance, and real estate side of the economy that has largely operated as a spigot to siphon off funds from the productive side of the economy.  The major bailouts to the financial institutions cost taxpayers trillions of dollars in direct and indirect costs.  The direct cost was the trillions of dollars in lost home equity as the bubble popped but this did little to alter the financial bonuses many on Wall Street received even as their banks imploded in front of our eyes.  Those bonuses and paychecks kept flowing thanks to the bailouts while many middle class Americans lost their jobs.

Worker productivity has risen but little of the gains have gone to workers.  Most have used the economic crisis and high unemployment to become more competitive by creating a culture of low wage capitalism.  That is, the vast majority of Americans need to compete through fierce competition taking what they can in a system of predatory capitalism while those in the connected financial sector merely use politicians as a line item expense on their crony business models.  It is no coincidence that we now have a rise of millionaire Congressmen.  In other words, the very poor have food stamps while the ultra rich have welfare bailouts.  The only difference is the price tag.

We largely created a stifled system.  The Federal Reserve is shifting the cost of the financial crisis on the backs of the middle class.  Do you really think the wealthy bankers that created many of the products that destroyed the system will be paying for the bailouts?  Of course not.  The growing pool of poor Americans by definition rely on transfer payments so the money has to come from somewhere else.  Even with the current system, we are unable to meet all these payments so we simply run massive deficits.  Does this sound sustainable?

Interestingly enough most Americans when surveyed from both political parties would rather have a more balanced system:

Most Americans realize that wealth will be divided unequally.  In a recent survey many Americans stated an ideal situation would be where the top 20 percent owned over 30 percent of all the wealth.  The estimate was that this group held nearly 60 percent of the wealth.  In reality over 84 percent of the wealth is held here.  As you see from the chart above, the bottom 20 percent don’t even register (and likely show up on the food stamp chart).

Is this really the kind of recovery we want?  Low wage jobs, rising college costs, expensive healthcare, costlier food, and uncertainty for Social Security.  This is what happens when you have extremes at both ends of your economic system.  Americans overall are strongly in favor of having a strong middle class yet the message is distorted by those trying to keep the status quo going.  A good rule to go by is follow the money.

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8 Comments on this post

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  1. mile said:

    crap, crap, crap and more crap predatory crapitalism

    August 14th, 2012 at 7:32 pm
  2. DC Carlton said:

    Spot on. It is now painfully obvious the rich are the only ones benefiting from government giveaways at the expense of our middle class. The middle class has not figured out that their networth invested on Wall Street is not reason enough to allow such a dangerous marriage uniting Wall Street and government. Great job exposing what every American must know.

    August 15th, 2012 at 4:47 am
  3. RUSS SMITH said:

    Hi!, Patrons Of My Budget 360 Et Al:

    Follow the money huh? Well, according to the American Institute For Economic Research out of Great Barringtn, Mass., Americans have absolute no money in circulation which revolves around debt and so the Middle Class of America is stuck on indebtedness they can never repay, because the borrowed puchasing media when created by the Fed. NEVER includes the interest it takes to repay it. If all the purchasing media in the world is $100 which is borrowed @ 10% how can that $100 ever be paid back plus the $10 in interest due, when all the purchasin media in existence is only $100? Do you have a chart fo that? The Purchasing Media problem usurps the Constitution which calls for only specie gold and silver coins in cirvulation in lieu of payment of debts, as fund in Article 1; Section 10 but nobody pays any attention to this Constitutional mandate including Dr. Ron Paul. So, get ready for a continuing multigenerational rerun of the ecnomy as is geting worse, because you usually get exactly what you pay for don’t you?

    RUSS SMITH, CALIFORNIA
    resmith@wcisp.com

    August 15th, 2012 at 7:45 am
  4. anonymouse said:

    The Wealthy Elite own the big banks–The Council on Foreign Relations members that killed our protections in Glass-Steagall and raped the economy are members of the Wealthy Elite who own the Big Banks–Which own the FEDERAL Reserve which isnt federal at all—

    small wonder—-Got money left??

    August 15th, 2012 at 10:45 am
  5. chow said:

    If you really think about it logically we are all dependent on the graciousness of the rich whether you work in private sector (taxpayers) or public sector (parasites) unless you yourself is rich. To explain this you have to think how do make a living (wages)? You have to work for a business or have the business yourself in which case you are rich. Who owns the business? The rich owns the business. He put out his capital and started a business for profit and pay his taxes from the profit. He also hired you (the middle class) and pay you wages out of his profit and you also pay taxes out of that (you notice he paid tax on his profit and you also pay tax from his profit?). The government takes those taxes and spends it (remember the government doesn’t produce anything for profit; therefore, not taxed). The government spends the taxes mostly in social welfare subsidies (medicare, medicaid, SS, education, lazies, etc.). Even if you say you paid into the medicare, SS, etc., still the money you used came from your wages courtesy of the rich.

    So don’t hate the rich and blame them for your situation. You wouldn’t be complaining about them if it wasn’t because of their generosity. Anyone who complains about the rich are just envious of what they have.

    The only situation where people are not dependent on the rich is if we’re all hunter gatherers but even if you’re a gatherer somebody owns the land.

    August 15th, 2012 at 12:58 pm
  6. KENNY G said:

    GET GOD ?

    August 15th, 2012 at 3:08 pm
  7. RUSS SMITH said:

    Hi!, Patrons Of My Budget 360 Et Al:

    Low wage capitalism, huh? That must be related right next to the jobless recovery catagory? Either way you cut it, the working poor aren’t going to be enabled to help this economy recover either now or ever! So, now we are officially a 3rd world Nation always strugglin but never meant to get there economically? Haven’t these tricks been already tried and found wanting years/decades ago?

    RUSS SMITH, CALIFORNIA
    resmith@wcisp.com

    August 15th, 2012 at 4:52 pm
  8. JRW said:

    We can blame the unequal division of wealth on the “golden rule.”

    If the boards of directors were limited to those with incomes of
    +/- 10 % of the mean then salaries, bonuses and other perks
    would be based on performance not on cronies in high places.

    August 16th, 2012 at 1:04 am

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