In Third World America, You Can't Buy a Ream of Paper on Minimum Wage

Politics / US Politics Dec 18, 2010 - 02:50 PM

By: Janet_Tavakoli

In 2010, every one of my work-related conversations turned to personal wealth management. The money-class wants to preserve and increase their considerable wealth, and they are terrified of losing it. Elsewhere in America, those that don't have money are terrified of the rising cost of necessities like food and energy not captured in the consumer price index calculation.

As of July 24, 2009, minimum wage in the United States was $7.25/hour (before taxes). At the beginning of 2010, minimum wage barely bought you a pre-tax $6.79 ream (500 sheets) of paper at Office Depot. By the end of 2010, that cost had skyrocketed to $9.49 per ream, nearly a 40% increase. But printer paper isn't a necessity for those who need to feed and clothe their families. Official unemployment is at 9.8%, and many "new" jobs are part-time jobs that replaced former full-time jobs. Counting underemployment, the misery soars above 20%.

Huffington's latest book, Third World America, explains how those with the least power and money have been getting squeezed for decades:

[The median middle class American] in September 1979 was earning (in constant, inflation-adjusted dollars) $25,896 a year. In September 1995, that same man or woman was earning $24,700 a year -- a 5 percent cut in salary over the intervening decade and a half. (P. 54)

Meanwhile, the financial system has strangled U.S. growth by parasitically growing from 3% of GDP in 1965 to 7.5% of GDP currently. Money was diverted from capital investment, the most important stimulus generator for our economy, to save corrupt financial institutions. Financial services now account for 35-40% of all corporate profits in the U.S. That number should be less than 5% in an honest economy. CEOs of bailed-out banks earn more than they did before the bailout.

Sanders: The U.S. Is a Banana Republic

Senator Bernie Sanders (I. Vermont) explained to the Senate during his tax cut filibuster on December 10 ... ter/20338/ that the gap between the wealthiest Americans and the poorest is the greatest it has been in U.S. history. The bottom 50% of Americans own just 2% of the wealth. The top 1/10th of 1% takes home 12 cents of every dollar earned in America. The top 1% earned 23.5% of all income, more than the combined income of the bottom 50%.

Yet, the lust for money and power by the financial elite knows no limits. Over 10 years, the top 2% of the wealthy in this country will get $700 billion in tax cuts. Meanwhile, the country chokes on a $13.7 trillion national debt.

Deflation and Inflation: Where It Hurts You Most

The disappearing middle class is dying of stranguflation. Nominal income is falling; yet debt-loaded consumers have to meet usurious consumer loan payments, while prices for staples like energy, school tuition, and food rise. Despite a rising stock market, most Americans still feel a negative wealth effect, particularly due to depressed housing prices.

The coming year will be worse for too many Americans. They face the quadruple threat of the weak recovery, the astronomical government debt load, price inflation for necessities, and the fear of future overall inflation.

Congress has blocked meaningful financial reform. It approved the Great Bailout, followed by the Great Cover-Up and the Great Recession. If Congress continues its sham investigations, culprits will never be brought to justice.

As the economy struggles in 2011, expect most of Congress to again protect its cronies in the financial elite, instead of the interests of the average voter. It is a bi-partisan betrayal of the nation's economic health. If Americans don't pay attention and vote out corrupt members of Congress, we'll sink further into a banana republic, and this time it's in English.

On December 8, I presented an analysis to the Federal Housing Finance Agency (FHFA) in Washington D.C. of key causes of our current financial crisis: "Repairing the Damage of Fraud as a Business Model." Since I was speaking on issues of public interest and policy, I took more latitude with my remarks than I would in a typical presentation:

Audio version: Please click here.
Presentation notes: Please click here. ... 282010.pdf

(There are a couple of obvious misspeaks. When control fraud occurs, financial institutions often lose a lot of money and often collapse. Losing money -- as Citigroup, Merrill, and others did -- is sometimes not an indication of innocence, but of managements' fraud. When I said risk managers had the authority without the responsibility, I obviously meant to say they had the responsibility without the authority.)

By Janet Tavakoli

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