Saturday, February 28, 2009

Class Warfare; Who's For Dinner?

The number of jobs being lost is an astonishing number, especially because what it represents is households faced with sudden, alarming, economic disasters. Each job lost represents a tilt into desperation. When a household makes a decision to buy something, a car or a house, or even the inevitable refrigerator or lawnmower, the decision involves the amount of money coming in. When that is shut off suddenly, the purchase becomes a huge problem.

This has happened to increasing numbers of us. It's a growing disaster.

Much of the attention in this economic downturn has focused on the growing legions of men and women who are officially counted as unemployed. There are now more than 11 million of them.

But a better picture of the economic distress related to employment emerges when the number of jobless Americans is combined with two other categories of workers: the underemployed (those who are working part time, for example, because they can’t find full-time work) and the so-called labor force reserve, workers who have abandoned their job searches but who would work if employment became available.

This total pool of underutilized labor has now risen above 24 million, according to researchers at the Center for Labor Market Studies at Northeastern University in Boston. That total will only grow in the coming months.

The Obama administration has more than enough on its plate at the moment, but before long it will likely have to consider a range of additional strategies, beyond the recently passed stimulus package, for putting jobless Americans to work.

A comparison of the number of people being thrown out of work in this recession with that of the severe recession of 1981-82 will indicate why. The peak unemployment rate was higher in that earlier recession than today’s 7.6 percent, largely because the last big wave of the baby-boom generation was entering the job market in the early ’80s. Those boomers who couldn’t find work were officially counted as unemployed.

What is different and more frightening about the current downturn is the number of people actually losing their jobs — being laid off or fired. That number is dramatically, dangerously higher.

We are a consumer economy. Without consumers, there is not much of an economy left for the country to depend on.

Flipping burgers is a travesty as a job, but without anyone to buy the burgers, even that sort of job is a boon.

Rich and comfortable sorts like to blame irresponsibility for the desperation of losing a home or getting into credit card debt that can't be managed. It's hardly the major element for working people who have had gas for the car, then groceries, and everything that has to be transported, go out of their range within a matter of months. The jobs that are evaporating has pushed huge numbers of us over the edge, into financial disaster. The blame isn't a good thing to throw at the desperate in their plight.


Of course, in the struggle to keep an audience of the worried bigtime earners, CNN Money has a reflection on the plight of those being hit by increases in taxation after years of having their taxes cut.

The burden will indeed go far higher than in the Clinton years via a technicality -- one that will come as a rude shock even to the taxpayers already braced for a soaking.

The group that's hit hardest are the taxpayers I call the HENRYs, for "High Earners Not Rich Yet." The HENRYs are families who make between $250,000 and $500,000 a year.
Here's how the HENRYs will get hammered. Say a family earns $300,000 a year, and pays $50,000 a year in mortgage interest; the family also contributes $5,000 to Boy Scouts, Red Cross and other charities. Under the AMT's top effective tax rate of 35%, they benefit from savings of $19,250 on those deductions.

But under Obama's new plan, the share of that $55,000 that HENRYs can deduct is no longer 35%. It's capped at 28%. Hence, their tax bill rises by almost $4,000. That's a jump in their marginal tax rate, the crucial share of an extra dollar of income they get to keep, from 35% to over 37%.

If you aren't crying yet, it may be because you are well aware that we are all able to cut a few corners and it isn't beyond belief that even those who earn large salaries can make that effort.

Our friend Dr. Professor Wombat also read and marveled at the above article, and made the following great observations;

Its thrust is, essentially, that they'll have a harder time getting rich under new tax burdens, that they were entitled to become rich by dint of hard work and productivity and, by implication, possessed of virtues that others who work hard for far less money don't exhibit.

The 'hammering' the article points to is in the amount of $4000. I would guess just about anybody earning, say, $75,000 a year, could look at the way just about anybody earning $250k lives, and effortlessly point out discretionary spending far greater than that.

But I know some of these $250K types. You start adding up house payments, real estate taxes, insurance, cars, tuitions, student loans, professional fees, heat, medical and dental expenses, drugs, the meter runs. And you don't think, as a first step, that you really don't need that 5000 sq ft house or that 6-series BMW, or that the excellent public schools in your comfortable suburb are an option for your kids, or, in general, that you could change the way you live with little if any serious impact on your quality of life. You think you're paying too much in taxes, that the government wastes it, or uses it to hire featherbedders or timeservers or hacks, or gives it to people who don't work as hard as you do or don't deserve it, or who are illegal immigrants sucking our revenues dry.

Much of this arises from plain old selfishness or greed. But much, too, arises from these folks' isolation from others. Many of them have far more contact with, and empathy for, professionals of their ilk ten thousand miles from here than they do with the people who cut their meat, or sell them books, or plow their streets, or cut their grass, or fix their plumbing.

The social contract desperately needs reweaving in this country, and the world. And it's hard to imagine it being done without a serious jolt to self-justifying complacency. Too bad.
ProfWombat | 02.28.09 - 7:55 am | #

The saddest part of our society has to be those who just can't see the public interest as their own interest. With that kind of blinders on, they vote in class warriors against the less fortunate, and the present financial meltdown results.

Try it, one more time, with feeling. Without consumers, the consumer economy falls apart.

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Blogger Hecate said...

I'm a HENRY and I'm willing to pay more in taxes if it doesn't go to war.

10:11 AM  
Blogger Woody (Tokin Librul/Rogue Scholar/ Helluvafella!) said...

The consumer economy has ALWAYS been a house of (credit) cards...It is and was a very fragile thing upon which to try to support an Empire.

I agree with Wombat (when have I not?) that the social contract needs to be rewoven (a nice turn of phrase--perhaps you always knew the word "technical" refers, etymologically, to the ancient art of weaving: textere, L, to weave")...

This will, however, prove very difficult when such a huge swath of the polity (e.g., the 60 million Pukes who voted AGAINST Obama) does not consider itself bound by even the shreds of what remains of the old one.

10:19 AM  
Blogger Ruth said...

While not a HENRY, and retired, I find no problem in contributing to an improving society - and not for the tax break. I believe that shame is beginning to have an effect on the worthless wingers. Fewer identify themselves, every poll taken, with the party of Nope.

1:25 PM  

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