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Income Re-distribution

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    On a constant dollar bases, i.e., adjusted for inflation, what are the cost of living categories that have increased for the middle class American family? Based upon Harvard Law School’s Professor Elizabeth Warren’s study, The Two-Income Trap, discussed in Kevin Philip’s book, Bad Money, there are five such categories.

    As house costs have increased, so too have mortgage expenses. As more wives have entered the workplace, both child care costs and car expenses have increased.  Healthcare costs have increased due to their rising costs and the greater co-payment cost burden requirement of the individual.  Taxes, including social security, income, sales and personal property et al. also require a greater portion of middle class income.

    In the early 1970’s, these five expenses consumed 53.9% of a single income families annual income. By the early 2000’s, that figure had grown to 75.4% of a dual-income family.  In the early 1970’s, a single-income family had $19,560 available for other spending. By the early 2000’s, that figure actually declined to $18,110 for a dual-income family.  During this period and continuing through last year, savings declined and consumer debt increased.

    Clearly income growth has been mal-distributed. Peter Orszag, Obama’s budget director, observed, “Over the past two or three decades, the top 1 percent of Americans have experienced a dramatic increase from 10 percent to more than 20 percent in the share of national income”. Income and wealth is now more concentrated amongst the very wealthy than at any time since 1929.

    Until or unless the low and middle class families in this country regain the ability to, and actually do, achieve significantly increased real income, our current economic quagmire will look better than any we may find in the future. 

   Unfortunately, many of we-the-retired may not live to see an improvement.

 

A retired MBA, I am a former corporate ideologue, former 3rd party advocate and current curmudgeon. While a continued supporter of a 3rd party, I have concluded their efficacy cannot be demonstrated until our form of Government is changed to (more...)
 

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This is an important post about a major problem.Se... by Mark Goldes on Friday, Mar 6, 2009 at 2:30:34 PM
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