Posts Tagged ‘chart’

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Trickle-up economics, by any other name. . .

According to a new study of the distributional effects of the Republicans’ American Health Care Act (as introduced on 6 March 2017 and modified on 21 March 2017) by the Urban Institute and Brookings (pdf),

Upper-income families would receive net benefits from the tax and spending changes proposed in the AHCA, and lower-income families would experience net losses. Higher-income families benefit the most from the tax cut, with 70.6 percent of the tax reductions in 2022 received by those with incomes over $200,000 and 46.2 percent of the tax reductions received by those with incomes over $1,000,000. Reductions in federal funding for health benefits would hurt lower-income families the most; families with incomes below $30,000 would sustain more than three-quarters of the losses in benefits. Taking both tax and benefit changes into account, the largest average gains under the AHCA would go to those with the highest incomes ($5,640 on average for those with incomes over $200,000), and the largest average losses from the AHCA would go those with the lowest incomes.

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Clearly, 2016 was a good year for CEOs. They’re on track to set a post-recession record for capturing their portion of the surplus.

According to a new Wall Street Journal analysis, median pay for the chief executives of 104 of the biggest American companies rose 6.8 percent for fiscal 2016—to $11.5 million. At the very top was Thomas Rutledge, CEO of Charter Communications, who took home $98.5 million last year. (Here’s a link to the compensation of the other CEOs in the study.)

By way of comparison (using data from the Bureau of Labor Statistics), average wages for production and nonsupervisory workers rose 2.5 percent, to $21.86. And their annual pay rose by the same percentage, to $36,725.

If you’re keeping track, that means the ratio of average CEO to average worker pay in 2016 was 299.5!

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It is likely, if some version of Trump/Ryancare is approved in the United States, millions more people will not be able to purchase the insurance necessary to receive adequate healthcare.

The problem is, the United States is already an outlier when it comes to the relationship between health expenditures and health outcomes—measured in this case by life expectancy.

As Esteban Ortiz-Ospina and Max Roser explain,

all countries in this graph have followed an upward trajectory (life expectancy increased as health expenditure increased), but the U.S. stands out as an exception following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

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Even more worrisome, higher incomes in the United States are associated with greater longevity, and differences in life expectancy across income groups have increased over time.

As Raj Chetty et al. (pdf) discovered,

Higher income was associated with longer life throughout the income distribution. Men in the bottom 1% of the income distribution at the age of 40 years had an expected age of death of 72.7 years. Men in the top 1% of the income distribution had an expected age of death of 87.3 years, which is 14.6 years (95% CI, 14.4- 14.8 years) longer than those in the bottom 1%. Women in the bottom 1% of the income distribution at the age of 40 years had an expected age of death of 78.8 years. Women in the top 1% had an expected age of death of 88.9 years, which is 10.1 years (95% CI, 9.9-10.3 years) longer than those in the bottom 1%.

As a result, the average life expectancy of the lowest income classes in America is now equal to that in Sudan or Pakistan.

And, with Trump/Ryancare, that class difference in life expectancy is only going to get worse.

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As regular readers know, I’m no fan of the current healthcare system in the United States, including the changes introduced by the Affordable Care Act aka Obamacare.

But the Republican plan to replace Obamacare will make things even worse.

As a recent report from the Kaiser Family Foundation makes clear,

Both the ACA and the American Health Care Act include tax credits in their approach. However, the law and the proposal calculate credit amounts differently: the ACA takes family income, local cost of insurance, and age into account, while the replacement proposal bases tax credits only on age, with a phase out for individuals with incomes above $75,000.

Thus, the biggest losers under the change would be older Americans with low incomes, especially those who live in high-cost areas. They are the people who benefited most from Obamacare. For some people, the new tax credit system will be more generous. The winners are likely to be younger, earn higher incomes and live in areas where the cost of health insurance is low.

And, of course, as the Wall Street Journal explains, top income earners would pay less tax under the replacement proposal.

As expected, the bill repeals a 3.8% tax on investment income and a 0.9% tax on wages. Both levies affect only the highest-earning households, those individuals making at least $200,000 and married couples making more than $250,000. . .Repealing the investment tax would boost after-tax income by 1.6% for the top 1% of households and give the top 0.1% an average tax cut of $165,000

There’s simply no hiding the unequalizing effects of the Republican healthcare plan.

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Before the new Republican administration has a chance to implement its campaign promises and dismantle the social safety net, it’s useful to remember who in fact is assisted by the existing programs.

According to a new study by the Center for Budget and Policy Priorities, people of all races and ethnic groups who lack a bachelor’s degree receive significant help from the safety net. But white working-class adults stand out.

Among working-age adults without a college degree, 6.2 million whites are lifted above the poverty line by the safety net — more than any other racial or ethnic group. In addition, the percentage of people who would otherwise be poor that safety net programs lift out of poverty is greater for white working-age adults without a college degree than for other adults without a college degree.

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But we also need to remember how brutal U.S. capitalism is, before government programs are taken into account.

In particular, as can been seen in the table above, the poverty rate before taking income from government programs into account is more than three times higher among working-age adults without a college degree (30.4 percent) than among other adults (8.7 percent). And while poverty rates are lower for white adults without a college degree (24.3 percent) than for other adults without a degree (43.1 percent for Blacks and 36.2 percent for Hispanics), 1 in 4 white adults who lack a degree is poor before accounting for government benefits and tax credits.

The fact is, government anti-poverty programs are so important—for white, Black, and Hispanic Americans—precisely because capitalism in the United States generates so much poverty among its workers, especially those without a college degree.

What about that pie?

Posted: 6 February 2017 in Uncategorized
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The U.S. economic pie couldn’t be carved up much more unequally. The top 10 percent manages to capture about 47 percent of total pre-tax income, while the bottom 90 gets the rest. The top 1 percent alone walks away with 20 percent of national income.

And, of course, the distribution of wealth is even more unequal: the bottom 90 percent owns only 28 percent of total household wealth, while those in the top 1 percent own more than 37 percent.

As Justin Fox explains, the mainstream view—among both liberals and conservatives—is that, in the face of growing inequality, the main goal of economic policy is to increase the size of the pie.

We’ve just been through a long era during which discussion of economic policy was largely about growing the pie from which all of us partake. Yes, Democrats have been a bit more interested than Republicans in redistributing the pie through taxes and government spending. But economic advice givers in both parties had since the 1970s been focused mainly on what they think will stimulate growth.

That was certainly the thrust of the economic plan proposed by Hillary Clinton—grow the pie and hope that everyone would be satisfied with their obscenely unequal pieces.

The new Trump administration, for all of its chaos and lunacy (which is keeping many of us up at night, and making it difficult to focus on anything else during the day), appears to be inspired by a radically different approach.

Here’s Michael Anton (under a pseudonym), a former George W. Bush speechwriter who is now a national-security aide in the Donald Trump White House, writing last year in support of Trump’s stances to tighten immigration and renegotiate international trade agreements:

Who cares if productivity numbers tick down, or if our already somnambulant GDP sinks a bit further into its pillow? Nearly all the gains of the last 20 years have accrued to the junta anyway. It would, at this point, be better for the nation to divide up more equitably a slightly smaller pie than to add one extra slice—only to ensure that it and eight of the other nine go first to the government and its rentiers, and the rest to the same four industries and 200 families.

And then there’s Steve Bannon, Assistant to the President and Chief Strategist in the Trump administration, “a Cardinal Richelieu in cargo pants,” who identifies himself as an economic nationalist:

The globalists gutted the American working class and created a middle class in Asia. The issue now is about Americans looking to not get f—ed over. . .That’s what the Democrats missed. They were talking to these people with companies with a $9 billion market cap employing nine people. It’s not reality. They lost sight of what the world is about.

Now, I understand, many in the current White House team (from Secretary of State Rex Tillerson to Treasury Secretary designate Steve Mnuchin) are members of the very same junta and the kinds of globalists excoriated by Anton and Bannon. The battles among them have barely begun.

My point is only that Trump won the presidential election—and will proceed to formulate economic policy—at least in part on the basis of a critique of the status quo. Simply growing the economic pie was an insufficient response to the discontent generated by the grotesque inequalities that have emerged in the United States during the past three decades and that reemerged during the recovery from the crash of 2007-08.

It’s true, there’s nothing in Trump’s economic plan that will actually reverse those inequalities. The likelihood, in fact, is that the United States will end up with a smaller pie and an even more unequal distribution of the pieces.

But there is a rational kernel to the critique of the mainstream idea that all needs to be done is to raise productivity and increase economic growth and the problems associated with inequality will somehow disappear.

We also need to recognize that, with Trump, that rational kernel is standing on its head. It is up to us to turn it right side up again.

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Readers know the old adage: in this world nothing can be said to be certain, except death and taxes.

And, we should add, employers complaining they can’t find enough good workers.

The fact is, if workers were really scarce, their wages would be rising dramatically. That’s how things works in a capitalist labor market: employers who want to hire workers offer higher wages.

But, according to the latest report from the Bureau of Labor Statistics, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $21.84—and weekly earnings by $1.34. That’s an annual rate of just 2.1 percent, the same as the rate of inflation.

Workers’ wages continue to increase at a very slow rate because the situation is exactly the opposite of what employers claim: workers are not scarce, they’re abundant.

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While the official unemployment rate (the red line in the chart above) was 4.8 percent in January, the expanded (or U6) rate—which includes marginally attached workers and those who are employed part-time but prefer full-time jobs (the green line in the chart)—was a much higher 9.4 percent.

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Meanwhile, the civilian employment-population rate (the ratio of total civilian employment to the civilian noninstitutional population or, more simply, the portion of the adult population 16 years and older that is employed) was still below 60 percent—and thus far less than its pre-crash peak (in December 2006) of 63.4 percent.

There are in fact plenty of potential workers out there—in the labor force and in the larger working-age population. But employers would rather complain than pay higher wages to hire them.