notes on the week ended Sept 17th

i’m slowly becoming aware that we may have been duped by the “American Jobs Act” that was hustled on us last week…recall that i noted that obama had intended to propose a means of “paying” for it this week, and that plan was revealed this week to include around $400 tax hikes on the wealthy and cuts to tax deductions for those making over $250,000, along with closing of some cherished loopholes for oil & gas companies & corporate jet owners – just about all of which the republicans have sworn on a stack of their bibles to oppose…so obama is, in effect, tying his “jobs plan” to tax increases that he knows cant pass the house…why would he do that?  my thinking is that the entire package may be a political charade; let walk through it: obama proposes a “jobs bill” of which half is tax cuts for everyone paying into social security, and the rest is programs which would on their face gain popular support; he ties it to the tax increases which he knows will be defeated by the house republicans, & then he can campaign against their obstructionism…and rumors are that he will also propose $2 to $3 trillion in additional deficit reductions over the next ten yearsincluding changes to medicare & medicaid, as if he’s trying to outflank them at that as well….maybe im becoming too cynical, but i’ve been reading enough from those with white house connections to know that obama’s political advisors have always trumped the advocacies of those cabinet members with alternate agendas, such as the EPA…the fact that most of the ideas in the “jobs act” were rehashed & repackaged from the first stimulus should have been a clue; obama doesnt even have any senior cabinet level economic advisors on board any more; alan krueger, who has been characterized as less than dynamic, has been nominated to chair the council of economic advisors but is not confirmed, while peter orszag left for citigroup, economists christy romer, larry summers, & austan goolsbee returned to teaching, & jared bernstein turned to blogging, all which should tell you something about the degree of influence they were able to wield when they were on the inside…

at any rate, i suspect at least the payroll tax cut that is currently in place will be salvaged from this “jobs” proposal, and it may even be expanded, because the last thing the republicans in congress want to face is an accusation from their right that they hiked taxes (as it will be characterized even though it would just be allowing last december’s tax cut to expire) and end up with a primary challenge from the tea party contingent..

Deep Poverty Rate Highest on Record

there was a major report released by the census bureau on tuesday “Income, Poverty, and Health Insurance Coverage in the United States: 2010” (PDF) which was received significant coverage by the MSM & in the blogosphere, with most of the focus on the headline poverty records that were set last year: 46.2 million of us — 15.1% or nearly 1 in 6 Americans – fell below the gross income level that the government defines as the poverty level: $22,314 a year for a family of four (as i understand it, that figure is arrived at by a simplistic Johnson era computation whereby a family was considered below the poverty threshold if they spent more than a third of their income on basics such as food, and the census is working on a new metric developed by the Natl Academy of Science which is expected to show a higher rate)…the number of families in poverty is now the highest since the census bureau started keeping track of the number in 1959, and the poverty rate of 15.1%, a full percent higher than 2009, is a rate not seen since 1993...moreover, 6.7% of us lived in a household wherein the income was less than half the poverty line, a serious number that received little coverage, & which was the highest severe poverty rate on record…Unemployment Insurance Has Been a Critical Anti-Poverty Program in This Downturnthe poverty numbers would have also been much worse had not unemployment insurance kept over 3 million out of poverty, but for many, those rations have been running out…recall the unemployment allowance was extended to cover those unemployed for 99 weeks instead of the standard 26 with the first stimulus package in 2009, and extended again at the end of 2010 to cover this year, expiring Dec 31…but since many of the unemployed first lost their job during the mass job cuts during 2009, they’ve been running out this year, and hence weren’t captured in this 2010 report, so it’s clear that its already in the cards for these poverty rates to set new records in next years report…as the government keeps no records of them, Mish estimated the number of unemployed who’ve exhausted their rations to be over 3 million, which is consistent with other estimates i’ve seen…

this census report also covered household income, and those numbers show what we already suspected; real median household income is declining; in 2010 it was $49,445, a 2.3 percent decline from the 2009 median, and down 6.4% from the prerecession level; but it’s actually been declining for the entire decade, as last years median income was 7.1% lower than the high set in 1999; for working age households, it was the lowest since 1994…most of the media reported these household income figures from the main report, but they dont tell the whole story; the census also published a number of supplements, including a slide deck with graphs (pdf) and one for individual income, which showed the median income per worker was $26,197, meaning half of the population made less than that…of course, the average income was higher at $38,337, because the higher income workers pulled up the average…men fared worse; adjusted for inflation, the median male now makes less than he did 43 years ago, in 1968….in addition, a census blog post indicated 69.3 million, or about 30% of households were “doubled up“; meaning more than one generation of adults were living under one roof…while many were elderly and some were unrelated, a significant number were young workers & unemployed of ages 25 to 34 still living with their parents, which is up 25.5% since 2007, & now at 14.2% of that age group…the census post notes that if their poverty status were determined by their own income, 45.3% of them would have been in poverty as well…

Long-Term Erosion of Job-Based Health Insurance Coverage Countinues

there was not much change in the number of americans with health insurance; in 2010, 49.90 million americans (16.3%) were without health insurance vs. 48.99 million (16.1%) in 2009, but much of that was because 1.8 million more were covered by government insurance plans; medicare coverage rose 2.1% to 44.3 million, and Medicaid, the program for the poor, increased 1.5% to 48.6 million…as you can see by the chart, employer-sponsored health insurance has declined 10% over the past decade…the fact that life expectancy has gone up since social security was introduced is often given as a reason to raise the retirement age; but the reason it’s gone up is that we have had better health care; the population as a whole is no more healthy than it ever was, and by some metrics, our national health is worse…the often mentioned “fix” for medicare, to raise the eligibility age from 65 to 67, will leave many uncovered when their health is failing, and as ignored health problems are likely to develop into something more serious, could end up costing more in the long run…

to briefly mention the economic reports out this week: retail sales showed no increase in august from july, and both june’s & july’s increases were revised down; preliminary consumer confidence for Sept from thomson reuters, still dismal, edged up a bit, but a separate report from Credit Suisse showed confidence among the wealthy was at its lowest since Mar 2009, which bodes ill for retail, as the top 5% of us by income account for 37% of all consumer outlays…also boding ill for retail, inbound container traffic for was down at the LA & long beach ports in august, when pre-christmas shipping should have caused an increase…small business sentiment was also down for the 6th consecutive month…the first two regional Fed manufacturing surveys, from the NY & Philly Feds, both showed further contraction and were also worse than expected, although national industrial production reported by the Fed was up 0.2% in august…first time unemployment claims were up again last week, to 428,000, and the two previous weeks were also revised up again…the consumer price index was up 0.4% for august, and 3.6% annually, and bill mcbride at calculated risk estimates from the CPI-W part of that report that social security cost of living adjustments will be 3.5%…there was a 33% surge default notices preliminary to foreclosure in august, primarily in the non-judicial states, and mostly driven by Bank of America…CoreLogic reported 10.9 million mortgages, or more than two in nine, had negative equity in the 2nd quarter; according to the Fed’s 2nd quarter flow of funds report, household real estate assets are down $6.6 trillion from the peak…and according to Freddie Mac, the 30-year fixed mortgage averaged 4.09 percent, a new all-time low, and the 15-year fixed mortgage, often used for refinancing, also reached a new record low for the week, averaging 3.30 percent…

there was a lot of news out of europe, and early in the week indications were almost certain that greece was about to default…but on thursday, coordinated action by five major central banks (the Fed, the ECB, & those of japan, england & the swiss) to provide liquidity to the european banking system seemed to stem the hemorrhaging a bit; even so, greek one year rates remained above 100% on friday (they had been up to at least 146%) and the next tranche of loans to greece was postponed, so there is still no resolution to the greek situation…if you want the whole play by play of the week in europe, there’s about 80 links on europe at the end of this week’s blogpost

i also want to briefly mention the unemployment report from the UK, because their austerity program, much like we are about to embark on, has been in effect all year, and may be predictive of what we will face…they lost 80,000 jobs total in the period ending july, and even though their private sector added 31,000, government cutbacks of 110,000 were the largest on record…& thats with a population of 61 million, one fifth ours…and something else austerity will do for you; last week, combined effects of declining income & inflation resulted in the UKs disposable income falling to the lowest since 1921

the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me

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