August 21, 2007
Average Incomes Fell for Most in 2000-5
By DAVID CAY JOHNSTON
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.
While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004.
Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.
The White House said the fact that average incomes were smaller five years after the Internet bubble burst “should not surprise anyone.”
The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.
These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.
People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.
The group’s calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law.
The nearly 90 percent of Americans who make less than $100,000 a year saved on average $318 each on their investments. They collected 5.3 percent of the total savings from reduced tax rates on investment income.
The I.R.S. data showed that the number of Americans making less than $25,000 a year shrank, down by 3.2 million, or 5.5 percent.
Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.
The number of taxpayers making more than $100,000 grew by nearly 3.4 million and accounted for more than two-thirds of the growth in the number of returns filed in 2005 compared with those in 2000.
The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress despite overall growth in the economy. Many Americans are also paying a larger share of their health care costs and have had their retirement benefits reduced, adding to their out-of-pocket costs.
The White House noted that during the same five years, income tax rates have been cut under a series of laws sponsored by President Bush. Mr. Bush has delivered a steady stream of upbeat assessments of the economy, saying last fall, for example, “I’m pleased with the economic progress we’re making.”
Tony Fratto, a White House spokesman, attributed the drop in average incomes to “the significant wrenching hits that our economy took in 2001 and 2002, so no one should be surprised that what a bubble economy created in the late 1990s and 2000, where economic data were skewed, would take some time to recover.”
Mr. Fratto said the fact that nearly all of the growth in incomes was among those in the upper reaches of the income ladder and that the majority of investment tax breaks went to those making more than $1 million “is not a very interesting story.”
“There is no question that you will always have distributional concerns with a tax rate, a broad-based tax rate, at the very top of the income scale,” Mr. Fratto said.
He said the more significant issue was the reduction in taxes for middle-class Americans that Mr. Bush won from Congress.
Robert S. McIntyre, the director of Citizens for Tax Justice, said that even though he expected a few very wealthy people to reap most of the tax savings generated by lower tax rates on dividends and capital gains, the size of the savings “still takes your breath away.”
He said the tax savings at the top, combined with lower average incomes after five years, “shows that trickle down doesn’t work.”
Clearly during these years the standard of living in economic terms hasn't decreased, looking at the spending patterns of the population at large. Consumption has increased. How? Well home prices jumped, due to the massive expansion of loans given to people who are not able to pay them (subprime). That made it possible for people to take out second and third mortgages with their house as a collateral and spend those money on consumption. Houses are mortgaged over the chimneys (and that would be OK if house prices continue to rise for ever, which they don't), and this is what fueled the consumption of middle class, which kept the economy steaming. The only problem is that it was fueled by debt. I have seen figures that total American society debt is now in the range of 60-75 trillion$ compared with annual GDP of 11-12 trillion $.
What have started occurring now is that those that shouldn't have been able to borrow money to buy houses they couldn't afford were not able to make the payments (surprise!), in massive numbers (not very strange either since their actual income has decreased). Income has actually been reduced even more than what stated in the article above since inflation figures have been manipulated to give the impression of lower inflation to keep the confidence of debtors. Now probably 80-90% of the population that used to borrow money to buy a house isn't able to get a loan (because mortgage institutes sees what is happening and is attempting to controll damage. ----> Thus the housing bubble is imploding (we have only seen the beginning so far). People have to start living on the diminishing incomes -----> Consumption crashes ------> Business crashes -----> Income gone. Meanwhile the foreign lenders will attempt to get back what america owns ------> They can't -----> Confidence in US Dollar goes away ----> It will be less valuable than the paper it is printed on (which was worth paper before the ink destroyed the usefullness of the paper).
As far as I have seen the situation in Europe isn't that much different than the US, though things tend to happen a little later here (but when the shit really starts hitting the fan things will happen very quickly, everywhere).
I wonder what will happen when the american consumer (not calling them citizen any longer) when they will not be able to consume any longer. Would they take what others have? (actually, I don't wonder what will happen, it is pretty obvious). The riots for material possessions against the wealthy elite will certainly introduce martial law to maintain order. Dictatorship, oppression, tyranny.
Identify an outside enemy for the situation, to put the blame on, and wage war to get the population behind the Fuhrer.
I think this current situation is similar to where the world (or parts of it) have been before. The difference being that it is now on a much grander scale, due to globalisation and the speed of communications it is going to happen faster and more massively than ever before. Further because of the economic trickery and treachery by the fed and all the other central bankers the problems have been hidden for a longer time thus it has accumulated and gotten worse.
The only positive thing to say is that the process might occur faster this time. A bit like a very big energetic star, burns out much quicker than a smaller star. Thus the war ensuing might not last for an extremely long time frame, maybe 3-5 years with enormous casualties, but after that the world finally might be ready for peace, reason and love.
My hope would be that the minority that do survive Armageddon would be of the kind that will not bow to injustice, force and greed. I doubt any of the sheeple will survive. And at the end there will not be much left to steal anyway.
Joined: 01 Dec 2006 Posts: 354 Location: Colorado, USA
Posted: Thu Aug 30, 2007 3:32 am Post subject:
There is lots of talk of another 911 in the month of september.
with bush ratings crashing, economic instability, the war protest coming on stronger and more political corruption being revealed, the only solution to save the BushCo Gang is to pull out all the stops, create another terrorist attack and impose martial law.
what else can they do to save their sinkng, rotting ship?
911 worked wonderfully...why not do it again?
these are some smart evil people working against a majority of common folk (who like Art said) cannot create an original thought. Sheeple. And the BushCo Gang knows this.
No doubt they can pull off a new terrorist-attack to seize power, and they may. However this time around I doubt they need to do that. Debt going out of hand, banks going bust, people running desperate to their banks to withdraw lifesavings which doesn't exist. The American dream becomming a nightmare. Social unrest. Bang! Martial law to protect law and order. Tyranny and dictatorship!
Then the time might be ripe for a false flag operation to unite the country against the outside enemy, Iran. This time around many people would know about what is going on, but very few would voice it, those who do will be thrown in jail or get killed.
No problem getting soldiers either since most people will be flat broke and out of work, their house owned by the government. They would fight in this next war for next to nothing.
I read somewhere that when the Stock market crash of 1929 occurred the debt to GDP ratio was around 260%. In the last year it has been running at +300% ratio. At this point there are 2 options:
1) Reduce debt, by saving and calling back loans, this will lead to depression, since debt is what have kept the economy running. I think this option is very unlikely today, but it was what happened in 1929.
2) Increase debt, until it is no longer possible to do so anymore (iow until no-one is prepared to loan you money any longer since they realise that you are broke). I think we were at this point a few weeks ago. As no credit is available any longer, money needs to be printed (apparently the last 2 weeks the Fed and European Central Bank dropped about 1/2 a trillion USD on the money markets (created out of thin air). Thus devaluating the currency. This create a peeing in the pants effect. The economy will consume these money quickly. The increased money supply will lower interest rates but make the money less worth. Thus any foreigner (read chinese) who has loaned money to the US. Will face two terrible things return of investment is down, and has lost value, since there is no sign that this behaviour is going to change, the chinese investor would attempt to get the money back quickly. The money going out of the system will need to be replaced by printing more, devaluating currency making imports more expensive, fueling inflation ---> spiraling into hyperinflation, and value of dollar is worthless and economy finally crashes. Same as Weimar republic after world war I, which gave rise to Hitler eventually. In this scenario it is a good thing to hold food and precious metals.
Of course what David Walker says is true, but I think he is wrong in assuming that the system is salvageable. I am pretty certain that things have allready spiralled out of controll and a crash is likely within 6 months or maybe a year (if the spinmasters at the Fed are working really hard). The longer they manage to get this leaking balloon holding up the harder the crash.
Ron Paul says martial law provisions in place to deal with economic discord Paul Joseph Watson
Wednesday, August 29, 2007
Texas Congressman and presidential candidate Ron Paul says that attempts to rescue an ailing stock market last week, during which the Fed pumped in billions in liquidity, were merely a stop gap measure - and that an economic collapse is all but inevitable. "They think that they can control it but eventually they can't, as powerful as they are eventually the markets are more powerful," the Congressman told the Alex Jones Show yesterday. "The dollar can't be kept in check because eventually it will come unwound," he added.
"But I think the most significant figure we've heard in the last few weeks is the measurement between 2000 - 2005, the clear cut admission that real income has gone down, which is a reflection of the dollar."
Paul explained that recent attempts to pump liquidity into the markets are only a temporary fix and that the long-term effects of doing so spell disaster for the economy. "The dollar is plunging no matter what you read and hear about and no matter how hard they work to keep the bubble going the only way they can do that is creating more money....causing the dollar to go down even faster, the market seems to be reassured - there's a contrivance to try to hold this together....but it won't last, eventually it's going to collapse," said Paul.
Joined: 01 Dec 2006 Posts: 354 Location: Colorado, USA
Posted: Thu Aug 30, 2007 5:58 pm Post subject:
On Market Predictions in the Current Chaotic Environment
by Richard C. Cook
Global Research, August 28, 2007
No one can predict how deep the decline in Western economies that is underway will go, because there is so little transparent information. Within the U.S., the government is hiding the severity of the crisis in order to prevent a collapse of consumer confidence.
Realize that the problem does not lie on the side of production. Global industry has the capacity to produce a huge quantity of goods and services. There is even a glut in some sectors, such as automobiles, textiles, IT, and other consumer products.
Rather the problem, as with the Great Depression, is that purchasing power at the consumer level is lacking. In the U.S., purchasing power, as measured by M1, is already in a recession-level decline. The causes are the high level of consumer debt, high cumulative levels of taxation on the dwindling middle class, and the tragic erosion of wages and salaries from job outsourcing.
In the absence of purchasing power, the Federal Reserve has chosen the strategy of trying to outrun collapse by creating inflation. This is the meaning of the bail-outs that are going on. It's an attempt to devalue debt at the macro level. It’s a hidden tax on everyone but the super-rich. Everyone else is poorer today than they were yesterday.
How long this can go on is unpredictable. It's another bubble following on the housing and asset bubbles that are already bursting on a daily basis before our eyes.
I don't see any responsible analyst who foresees any better outcome than a recession that would see the DJIA at a level of 8000-8500 within a few months. Again, maybe the Fed's printing presses can hold this level of decline at bay for a while longer, but I doubt it.
There are major players in the markets who see an even steeper decline coming even sooner. Some say as soon as a month.
There is also a real chance of an eventual depression-level contraction. How much of a chance, I don't know. This conceivably could lead to a total collapse of consumer markets, economic paralysis, and widespread homelessness and starvation. Yes, even in the U.S. Agribusiness, bio-fuel conversion, seedless mega-farming, the disappearance of family farming, and the recent disastrous weather conditions place everyone at risk.
At some point, the federal government, at a minimum, has to step in with New Deal-type relief measures. Whether the Bush administration has that capability is doubtful. Look at New Orleans. They may even try to cover everything up by starting a war against Iran. Are they that crazy? Who can say?
There are also rumors going around that there are plans to allow the markets to be crashed by a terrorist event so as to divert blame. I have gotten no reliable confirmation of these rumors, though there are parties placing what people in the markets are calling "bin Laden"-type bets similar to, but bigger than, the "puts" that were placed before the original 9/11.
These types of bets have been placed in the U.S., European, and Japanese markets that assume a stock market crash of fifty percent within the next five weeks. A report was just carried, I’m told, on CNBC.
Some have said the culprit may be China, but it makes no sense for the Chinese to crash the markets while holding U.S. dollars. Others say it is hedge funds at work to try to drive down the markets in a self-fulfilling prophecy.
But a fifty percent market decline? That’s just not conceivable. Even the hedge funds do not have that much power. The federal plunge protection team—known as the "men in black" by floor traders—would never allow them to do something so disastrous. This has caused some to speculate that the "men in black" are parties to the bets.
These remarks probably give some indication of the chaos going on right now in the U.S. and world economies. The only real solution is a new world financial system based on the concept of credit as a public utility. This is what should be implemented to replace the present system of institutionalized usury.
Richard C. Cook is a retired federal analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, and NASA, followed by twenty-one years with the U.S. Treasury Department. His articles on monetary reform, economics, and space policy have appeared on Global Research, Economy in Crisis, Dissident Voice, Atlantic Free Press, and elsewhere. He is the author of "Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age." His website is at www.richardccook.com.
In that case it doesn't really matter there has been no "progress" in Iraq. Anyhow the pieces of the puzzle are starting to come together. I don't think that the change of the finance minister in China is a coincidence, they are going to get their money back now, and they don't care if it crashes the american economy (which they realise it will do anyway, might as well pull the trigger themselves and get some of it back, the gunpowder was provided by the bankers though). The change of finance minister is the clearest indication of change in policy. Don't expect to be able to buy any chinese products in the next decade or so . I don't think the US is going to see the humor in having their economy crashed (even though it is inevitable). Hold on to what you got, and buy usefull and valuable goods for your dollars while you can (probably not chinese)
I found a page with a chart showing us debt/GDP ratio from the 20's til today. Actually it is probably much worse today than the actual chart shows, since a lot of debt isn't showed today (for instance pension liabilities are usually not counted as a debt):
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