The Rise and Fall of Middle-class Wealth

[Lafayette]

From the Washington Center for Equitable Growth: The Rise and Fall of Middle-class Wealth Historically:

Shouldn't Wealth (which is Net Income After Taxes) be shared equitably in a nation? (Not equally, but fairly, just and rightly.)

Shouldn't we all, independent of income, have a fair share of the Economic Pie that we all work to bake?

Well, the above infographic shows that historically that has not been happening to 90% of the American population. So, one is right to question, Why?

And here's the reason given by the site linked, excerpted:

The growing indebtedness of most Americans is the main reason behind the erosion of the wealth share of the bottom 90 percent of families. Many middle class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before. For a time, rising indebtedness was compensated by the increase in the market value of the assets of middle-class families. The average wealth of bottom 90 percent of families jumped during the stock-market bubble of the late 1990s and the housing bubble of the early 2000s. But it then collapsed during and after the Great Recession of 2007-2009

And who was responsible for that collapse? You, me? Nope. We were the faultless victims, not the perpetrators.

What about "them"? Have a look here, from The Atlantic: How Wall Street’s Bankers Stayed Out of Jail. Excerpt:

Attorney general, Loretta Lynch unsealed a 47-count indictment against nine fifa officials and another five corporate executives. She was passionate about their wrongdoing. “The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” she said. “Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice.”

Lost in the hoopla surrounding the event was a depressing fact. Lynch and her predecessor, Eric Holder, appear to have turned the page on a more relevant vein of wrongdoing: the profligate and dishonest behavior of Wall Street bankers, traders, and executives in the years leading up to the 2008 financial crisis. How we arrived at a place where Wall Street misdeeds go virtually unpunished while soccer executives in Switzerland get arrested is murky at best. But the legal window for punishing Wall Street bankers for fraudulent actions that contributed to the 2008 crash has just about closed. It seems an apt time to ask: In the biggest picture, what justice has been achieved?

Since 2009, 49 financial institutions have paid various government entities and private plaintiffs nearly $190 billion in fines and settlements, according to an analysis by the investment bank Keefe, Bruyette & Woods. That may seem like a big number, but the money has come from shareholders, not individual bankers. (Settlements were levied on corporations, not specific employees, and paid out as corporate expenses—in some cases, tax-deductible ones.)

In early 2014, just weeks after Jamie Dimon, the CEO of JPMorgan Chase, settled out of court with the Justice Department, the bank’s board of directors gave him a 74 percent raise, bringing his salary to $20 million.

Yes, they bought themselves out of jail. And walked away with their millions.

PS: And I'm the fool for continually arguing for a revision of our Upper-Income Taxation in this forum, perhaps putting an ultimate cap on income taxed at 100%. And if not, where does the rot end ... ?
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[ttwtt78640]

From the Washington Center for Equitable Growth: The Rise and Fall of Middle-class Wealth Historically:

Shouldn't Wealth (which is Net Income After Taxes) be shared equitably in a nation? (Not equally, but fairly, just and rightly.)

Shouldn't we all, independent of income, have a fair share of the Economic Pie that we all work to bake?

Well, the above infographic shows that historically that has not been happening to 90% of the American population. So, one is right to question, Why?

And here's the reason given by the site linked, excerpted:

And who was responsible for that collapse? You, me? Nope. We were the faultless victims, not the perpetrators.

What about "them"? Have a look here, from The Atlantic: How Wall Street’s Bankers Stayed Out of Jail. Excerpt:


Yes, they bought themselves out of jail. And walked away with their millions.

PS: And I'm the fool for continually arguing for a revision of our Upper-Income Taxation in this forum, perhaps putting an ultimate cap on income taxed at 100%. And if not, where does the rot end ... ?
___________________________

You have a very different defnition of wealth (bolded above) than your source link presents. Wealth (aka net worth?) is assets (typicallly real estate, savings and penson) less liabilities (debt). Higher income allows one to acumulate more assets but does not guarantee that will be done since many get a raise and simply consume all of it.

 

[joG]

From the Washington Center for Equitable Growth: The Rise and Fall of Middle-class Wealth Historically:

Shouldn't Wealth (which is Net Income After Taxes) be shared equitably in a nation? (Not equally, but fairly, just and rightly.)

Shouldn't we all, independent of income, have a fair share of the Economic Pie that we all work to bake?

Well, the above infographic shows that historically that has not been happening to 90% of the American population. So, one is right to question, Why?

And here's the reason given by the site linked, excerpted:

And who was responsible for that collapse? You, me? Nope. We were the faultless victims, not the perpetrators.

What about "them"? Have a look here, from The Atlantic: How Wall Street’s Bankers Stayed Out of Jail. Excerpt:


Yes, they bought themselves out of jail. And walked away with their millions.

PS: And I'm the fool for continually arguing for a revision of our Upper-Income Taxation in this forum, perhaps putting an ultimate cap on income taxed at 100%. And if not, where does the rot end ... ?
___________________________

Again one of those opinionated ideological populisms. I realize that there are people that think unthinkingly that the development is unfair. But then, that is because they look at graphs like your's and do not understand the reasons behind the clever lines. Itis so sad.

 

[Dittohead not!]

From the Washington Center for Equitable Growth: The Rise and Fall of Middle-class Wealth Historically:

Shouldn't Wealth (which is Net Income After Taxes) be shared equitably in a nation? (Not equally, but fairly, just and rightly.)

Shouldn't we all, independent of income, have a fair share of the Economic Pie that we all work to bake?

Well, the above infographic shows that historically that has not been happening to 90% of the American population. So, one is right to question, Why?

And here's the reason given by the site linked, excerpted:

And who was responsible for that collapse? You, me? Nope. We were the faultless victims, not the perpetrators.

What about "them"? Have a look here, from The Atlantic: How Wall Street’s Bankers Stayed Out of Jail. Excerpt:


Yes, they bought themselves out of jail. And walked away with their millions.

PS: And I'm the fool for continually arguing for a revision of our Upper-Income Taxation in this forum, perhaps putting an ultimate cap on income taxed at 100%. And if not, where does the rot end ... ?
___________________________

If we could somehow explain that upturn during the great depression, maybe we could figure out how to bend the curve upward once again.

 

[DifferentDrummr]

You have a very different defnition of wealth (bolded above) than your source link presents. Wealth (aka net worth?) is assets (typicallly real estate, savings and penson) less liabilities (debt). Higher income allows one to acumulate more assets but does not guarantee that will be done since many get a raise and simply consume all of it.

Nonsense: wealth is a combination of both pairs (income/expenses paired with assets/liabilities).

And as you unintentionally implied, depressing income for 90% of the population destroys their ability to build wealth.

 

[Ahlevah]

If we could somehow explain that upturn during the great depression, maybe we could figure out how to bend the curve upward once again.

The graph pretty much traces the rise and fall of the stock market over decades in real terms. Notice how the graph slopes down during much of the 1920s as stocks rose and the bottom 90%'s share of assets dropped. Then stocks dropped and and didn't get back to 1929 levels until the early 1950s, with the graph sloping upwards. Then stocks rose steadily until the mid 1960s, then they stayed stagnant again until the early '80s. Maybe it's coincidence, but the correlation would make the odds of that slim, I would think. Thus during periods when shares rose, the people who owned them took a larger share of the pie. When they dropped or stayed stagnant in real terms over an extended period, the share of assets owned by the wealthy dropped.

Most Americans accumulate wealth by owning a home and paying off their mortgage, but a large component of that is an illusion based on inflation; in real terms, the value of homes over time has not risen to the extent that an investment in stocks has. Thus people who own stocks tend to accumulate more wealth over time than those who don't. To be frank, the wealthy don't work for wages and they don't accumulate their wealth that way.

 

[Ahlevah]

Nonsense: wealth is a combination of both pairs (income/expenses paired with assets/liabilities).

And as you unintentionally implied, depressing income for 90% of the population destroys their ability to build wealth.

Joe Sixpack's income could double or even triple, but if he's in a race with Elon Musk to accumulate wealth he's going to lose, especially since Joe is always trying to pay down his credit card balance and thus never manages to save or invest a dime.

 

[DifferentDrummr]

Joe Sixpack's income could double or even triple, but if he's in a race with Elon Musk to accumulate wealth he's going to lose, especially since Joe is always trying to pay down his credit card balance and thus never manages to save or invest a dime.

Kind of a circular scenario. How does Joe Sixpack pay down his liabilities if his income can't grow?

 

[gdgyva]

like most of us did

live within our means....not above it

save a minimum of 10% of what you earn....and let it grow

i had 35k saved coming out of the air force after 6+ years of active duty as an enlisted man in the early 80's (E1-E5)

saving is a lifestyle....ANY INCOME CAN DO IT

now some of that was earned as a second job....and some more was because i play poker fairly well

 

[DifferentDrummr]

like most of us did

live within our means....not above it

save a minimum of 10% of what you earn....and let it grow

i had 35k saved coming out of the air force after 6+ years of active duty as an enlisted man in the early 80's (E1-E5)

saving is a lifestyle....ANY INCOME CAN DO IT

now some of that was earned as a second job....and some more was because i play poker fairly well

If your income never grows, saving nearly all of it while living in poverty is still going to take you several lifetimes to reach the 1%. No doubt you can do the math.

(By the way, did you report your gambling earnings to the IRS?)

 

[gdgyva]

If your income never grows, saving nearly all of it while living in poverty is still going to take you several lifetimes to reach the 1%. No doubt you can do the math.

(By the way, did you report your gambling earnings to the IRS?)

I have saved since a teenager

And I now have a nice nest egg that will cover our retirement

I am not the 1%....in wealth or earnings

I am top 5% in both.....

And if your income never grows, you aren't a very good employee

Getting skills, and improving them are choices.....

Some people make bad ones.....

Or don't you believe in personal responsibility?

 

[Dittohead not!]

The graph pretty much traces the rise and fall of the stock market over decades in real terms. Notice how the graph slopes down during much of the 1920s as stocks rose and the bottom 90%'s share of assets dropped. Then stocks dropped and and didn't get back to 1929 levels until the early 1950s, with the graph sloping upwards. Then stocks rose steadily until the mid 1960s, then they stayed stagnant again until the early '80s. Maybe it's coincidence, but the correlation would make the odds of that slim, I would think. Thus during periods when shares rose, the people who owned them took a larger share of the pie. When they dropped or stayed stagnant in real terms over an extended period, the share of assets owned by the wealthy dropped.

Most Americans accumulate wealth by owning a home and paying off their mortgage, but a large component of that is an illusion based on inflation; in real terms, the value of homes over time has not risen to the extent that an investment in stocks has. Thus people who own stocks tend to accumulate more wealth over time than those who don't. To be frank, the wealthy don't work for wages and they don't accumulate their wealth that way.

That makes sense.
Now, it looks like the market is dropping about as fast as it did back in the '20s, which is pretty scary. The thing is, though, the Dow has been rising lately.

 

[Dittohead not!]

Joe Sixpack's income could double or even triple, but if he's in a race with Elon Musk to accumulate wealth he's going to lose, especially since Joe is always trying to pay down his credit card balance and thus never manages to save or invest a dime.

Joe needs to listen to Dave Ramsey.

Start by cutting up the credit cards. If he's carrying a balance, he's just throwing money away.

 

[Lafayette]

If we could somehow explain that upturn during the great depression, maybe we could figure out how to bend the curve upward once again.

Start a war!

That upturn Middle-class Wealth came initially in 1933 when Roosevelt finally started (upon the prompting of John Maynard Keynes) Stimulus Spending. Then wealth increased substantially during WW2 beginning in 1940. Wars are great for business.

Looking at the Middle-class Wealth History, one notes that it peaked in 1945 with the end of WW2, then started upward again in 1947/8 and peaked again 4 years later in 1952/3:

Middle-class Wealth is now back to where it was in 1940/41 at around 25% of total.

Where did all the wealth go? See the 0.1Percent of the population Wealth History:

Note on the above infographic that from 1980 on (when Reckless Ronnie changed the upper-income tax-rates into a flat-rate 30%) the curve swings upwards steeply to the 25% level where it likely is today.

Who's getting screwed? We, the sheeple and thanks to Ronnie ...
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[Lafayette]

Again one of those opinionated ideological populisms. I realize that there are people that think unthinkingly that the development is unfair. But then, that is because they look at graphs like your's and do not understand the reasons behind the clever lines. Itis so sad.

One displays the statistical facts regarding Wealth and you refuse them as "opinionated" and "ideological".

I'm through with you. You are "sad" and beyond redemption ...

 

[Lafayette]

If we could somehow explain that upturn during the great depression, maybe we could figure out how to bend the curve upward once again.

Roosevelt was finally convinced by the economist JM Keynes in 1933 to embark upon Stimulus Spending during the remainder of the decade, after which came war spending till 1945.

That same concept of Stimulus Spending that the Replicants refused to employ once they took control from the Dems of the HofR in 2010. So, the US was condemned to job-creation stagnation at a lower level of Employment-to-Population Ratio for another four years from 2010 to 2014.

See the BLS historical E-to-P Ratio here:

Ever since 2014 the US has been creating jobs and enticing workers back to employment. The crawl-back to 63% will likely be very gradual for the remainder of this decade. Time will tell ...
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[Ahlevah]

Kind of a circular scenario.

Circular how? We're talking about wealth distribution, right? Much of the wealth in this country is concentrated in private-sector capital. By definition, for a company to make a profit it must earn more than it spends, including the amount it spends on labor. So can you see how those who depend on labor to accumulate wealth are at a disadvantage to those who own the income stream of productive assets?

How does Joe Sixpack pay down his liabilities if his income can't grow?

Hey, I've argued 'till my lungs were blue that workers have gotten a bum deal when it comes to the split between labor and capital. Real wages have been stagnant for decades, and have actually declined over the last fifteen years or so, IIRC. Even within the share of national income comprised of wages, those at the top of the scale are receiving a larger proportion than they have historically. So, yeah, we've got a problem. As to why this is so, I've presented various arguments, and there's probably a little bit of truth in each one: the decline of unionization; globalism; the disconnect between executive and worker compensation; the rise of the (relatively low wage) service economy versus (higher paying) manufacturing employment; the disproportional rates of taxation on labor versus capital; etc.

But workers have to face the fact they they've become part of the problem. They've gotten away from the idea of thrift as a virtue. It's all about me, mine, and where the next deal is coming from. Live within your means, folks, whatever they are, and don't waste your time pointing your finger at someone else. It's your fault, too.

 

[Lafayette]

Some people make bad ones.....Or don't you believe in personal responsibility?

Personal responsibility is highly limited when one is a member of a large market-economy. We are all only one element in a very large mechanism of Supply & Demand for goods/services of which labor is only one component.

You are oversimplifying matters to suit a personal belief that we are all solely responsible for our destinies, when fate/luck is a much larger factor.

Of course, that may suit you personally. Smugness is also a human attribute.

Like a giant windmill that grinds the wheat, we are all only one peg on the wheel moving the grindstone ...
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[Lafayette]

saving is a lifestyle....ANY INCOME CAN DO IT

Yes, well isn't it a shame than most people actually do not or cannot save sufficiently.

From the Federal Reserve Board, a study called Economic Well Being of US Households, 2014, this infographic titled "Which one of the following best describes how well you are managing financially":



What's happening?:
*Notice that how well-off one is depends largely upon their Income-Base. If you are in the group making less than $40k per year, more than half of our fellow Americans aren't doing so good, or so they say.
*Go up a notch to the income level of $40$/100K yearly and well-being gets a lot-better. But, then you are one of a privileged group that is earning far more than the average wage-income of $52K. If a member, suddenly you are in a wage-group within which more than two-thirds are "Living comfortably" or "Doing OK". (And I'll bet that the wage-levels earned displaying that sentiment are well above the average wage.)

My point: Sentiments are one thing, but the real data does not lie - one's "well-being" is all about the income they earn. No real surprise there, right?

In an America where 15% of the population live below the Poverty Threshold of $24K (family of 4) annually; and at the time of the study when only around 5/6% were unemployed.
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[joG]

One displays the statistical facts regarding Wealth and you refuse them as "opinionated" and "ideological".

I'm through with you. You are "sad" and beyond redemption ...

I have absolutely nothing against data and its display. I do find its use as an ideological prop distasteful. I would not have said anything, but it is the way you regularly use data. That makes it much worse that just distasteful.

 

[Ahlevah]

Personal responsibility is highly limited when one is a member of a large market-economy. We are all only one element in a very large mechanism of Supply & Demand for goods/services of which labor is only one component.

You are oversimplifying matters to suit a personal belief that we are all solely responsible for our destinies, when fate/luck is a much larger factor.

Of course, that may suit you personally. Smugness is also a human attribute.

Like a giant windmill that grinds the wheat, we are all only one peg on the wheel moving the grindstone ...
__________________[/SIZE]

No, he's right. If people would take more personal responsibility for their own circumstances they'd be a lot better off. All of my grandparents came from humble circumstances. They all dealt with difficult years during the Great Depression, but they survived and prospered because they shared common values like thrift, hard work, and the avoidance of debt. They also waited until they were married to have kids. :shrug:

 

[Lafayette]

No, he's right. If people would take more personal responsibility for their own circumstances they'd be a lot better off. All of my grandparents came from humble circumstances. They all dealt with difficult years during the Great Depression, but they survived and prospered because they shared common values like thrift, hard work, and the avoidance of debt. They also waited until they were married to have kids. :shrug:

If. Big If.

You are making a subjective judgement about people. And the people in question are those Americans who work the most hours per year (far more than most of Europe) and habitually give vacation-time back to the company. (Which makes Europeans laugh when I tell them.)

No, no and no. I am quite sure that America can do more to fight the plague of Income Disparity than silly notions like "work harder", or "undertake more personal responsibility".

I will agree that the US, like most countries, is spoiling its kids. They all want the latest thingamajig. But that does not make them any different from the young elsewhere in the world. What is lacking (perhaps) is not sufficiently inculcating a Central Fact of Life - that is, without the adequate Intellectual Ability or Skills, one lives a life of drudgery at the lowest income-level possible.

(And since China has hollowed out virtually all of America's low-skilled jobs, that fact has become even more onerous.)

A PAST ACHIEVEMENT?

What the US needs, I suggest, is to get more of its children into Postsecondary Education for skills-attainment in order to find a career; and that said education should be a lifetime guaranty. That is, any time someone wants to change jobs or careers that they can find the schooling necessary (vocational for skills, and 2- or 4-year for higher studies) at an affordable price.

That is, almost "free, gratis and for-nothing". (Were we to do so, we'd have a long-term unemployment rate far less than the 4/5% at present.)

Making Tertiary Education a "BigBusiness" was one of the most inconsiderate achievements of America in the past thirty years. See the evolution of cost from 1983 to 2014 here .

The cost of a basic Tertiary Education is rising irreversibly by just less than 3% per year every year. Which is likely the basic reason why so few who graduate from High School today continue onward. The percentage of students enrolling in college in the fall immediately following high school completion was 65.9 percent in 2013 (source).

Total Tertiary Schooling completion rates, though looking good, could be World Leading were it not for their high-costs. See here (fifth country from the right):


Much of that achievement, however, may be in the past. At present, is our tertiary-schooling graduation-rate adequate? Methinks not ...
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[Lafayette]

From the National Center for Educational Statistics, excerpt:

Graduation rates

Question:
What are the graduation rates for students obtaining a bachelor's degree?

Response:
The 2013 6-year graduation rate for first-time, full-time undergraduate students who began their pursuit of a bachelor's degree at a 4-year degree-granting institution in fall 2007 was 59 percent. That is, 59 percent of first-time, full-time students who began seeking a bachelor's degree at a 4-year institution in fall 2007 completed the degree at that institution by 2013.

Sixty-percent seems pretty good. But is it enough? Methinks not - because the total cost is Too Expensive for Too Many, and that causes Higher Drop-out Rates ...
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[Dittohead not!]

No, he's right. If people would take more personal responsibility for their own circumstances they'd be a lot better off. All of my grandparents came from humble circumstances. They all dealt with difficult years during the Great Depression, but they survived and prospered because they shared common values like thrift, hard work, and the avoidance of debt. They also waited until they were married to have kids. :shrug:

Personal responsibility? Hard work? Thrift? Waiting to get married before having children? Now, those are some revolutionary ideas in today's world.

Whatever will happen to the new strategy of casual sex, children out of wedlock, spending more than you earn, and then blaming "society" for your troubles? If things are bad, just go to the vendor on the corner and get some happy pills. Better yet, get a prescription from your doctor and make the government pay for it. That's the ticket to success, don't you know.

 

[Ahlevah]

You are making a subjective judgement about people. And the people in question are those Americans who work the most hours per year (far more than most of Europe) and habitually give vacation-time back to the company. (Which makes Europeans laugh when I tell them.)

They can keep laughing. A goodly chunk of Europe has been stuck in what amounts to a depression. The rest of it is languishing in slow growth and deflation even as the euro loses purchasing power on the world market. Meanwhile, sixteen of the world's top twenty corporations by market cap are American. How many significant new, innovative European companies can I name? Not many, now that I think of it. Just a bunch of tired, old capital searching to mooch off of others' achievements.

America may have its problems, but it is still among the world's most productive, efficient economies. However, I don't take that as a given. I worry the more it seems bent on catching the "European disease" of nanny statism and government intervention in the private economy.