Impoverishment: America's New Normal

Economics expects, Scripture predicts and History presents society largely poor with a small middle and a few wealthy; America’s expanded middle class seems an historic anomaly. Few economists and fewer statisticians should be surprised to see the U.S. returning toward that venerable model.

The conditions that lifted North America so far above the economic norm were a unique combination: available land and resources, a smaller, pro-development government, disparate post Renaissance and mostly post Reformation immigrants that shattered traditional classes, and an industrial revolution supported with European capital. But as ever, time having passed, things are changed. Few of the listed conditions remain unaltered and America’s economic direction shows it.

The defining American middle class is devolving toward poverty. The 1970’s brought an undeniable economic retreat: the disappearance of the traditional middle class housewife into the workplace. A declining standard of living was heralded as a feminist triumph. The linked map illustrates the accelerated middle class economic decline since the 2008 financial crash; today, 20% of American families include no workers and most Americans receive government benefits.   

Reflecting this, American wealth distribution has also changed, favoring the wealthy. Those earning the top 10% of incomes are capturing essentially 100% of American income growth; the remaining 90% are stagnating. Their incomes as a percentage of Gross Domestic Product (GDP) have declined since the 1970’s. That is why the masses aren’t consuming enough to boost the economy; consumption falls when consumers are strapped. Even recovery optimists recognize today’s economic doldrums.

Politicians who promise free goodies and painless cures for sad economies can’t afford stagnant ones; they require published recovery, preferably quickly. So government and its client media tell us we are recovering. They point to the currently 5.4% unemployment rate as evidence. They don’t mention that the rate isn’t computed as it once was. The older computation remains available at shadowstats.com, where U–3 Unemployment surpasses 20%.  A different useful government statistic is the Labor Force Participation Rate, the percentage of the available workforce that is working. That has (quietly) declined to late 1970’s levels; there is no real recovery. Stocks and real estate have been inflated by the Federal Reserve’s flood of funny money while the middle class, largely dependent upon wages, has declined.

Using reality and disregarding propaganda, we see progressing American impoverishment reflecting general government policy. “Progressive” economic policies have amounted to promising a free lunch, for which the bill has arrived.  Government/union cronies can force wages up; government can circumvent markets with legislated wages/prices and regulatory distortions, but none can repeal the ultimate operations of economics that simply reflect human behavior. America’s economically excessive labor costs are in unadmitted, forced decline to meet world competition.

American production became overpriced on the world market, ironically sending American capital to “developing” countries to compete with Americans. Erstwhile jobs followed the money abroad. Previously too expensive, robotic production technology became affordable against high priced labor, further reducing employment. The labor price distortion has been great enough that even burger flippers now face competition from machines. It seems notable that regardless, fast food workers are demanding a significant wage boost, illustrating the width of the gap between worker expectations and economic reality. A new factory setting up in Louisville, will have 100 3 D printers but only 3 employees, one for each of 3 shifts. Even more disturbing was news of the first all-robotic factory in China

Some now expect robotic production to put masses of workers onto a government dole. Robert Reich, former Secretary of Labor and now a Professor of Public Policy, said that redistribution of incomes will be necessary to support the masses of workers unemployed as the machines take over. With government using deficits to fund its present benefits, whose incomes will be redistributed remains undefined.

The government intervention that has exacerbated labor costs (most recently with Obamacare) is still increasing costs imposed by regulation, both directly and via environmental programs, particularly those affecting energy costs. This reinforces American inability to compete in the world. Present proponents of a minimum wage boost are selling the same delusion.

As most know, the government is also importing as many foreign workers as it can manage, hundreds of thousands of educated, highly qualified tech and professional folk via H–1B guest worker visas. In 2014, the U.S. hosted 25.7 million foreign born workers: 16.5% of the workforce. Southern California Edison replaced its IT department this way; Disney recently has done the same.  The government claims there are too few Americans qualified for these jobs, but appearances suggest that in reality, foreigners are cheaper. Even more illegal but welcomed border jumpers are competing for the lower paying jobs. Since the prices of food, shelter and such continue to rise as wages do not, impoverishment continues.  

American workers seem less qualified than they once were; U.S. education in reading, math and science has fallen out of the top 20 on international rankings where it was once among the best.  The dismal economic truth: America has abdicated its competitiveness and continues on that path. The Federal Reserve’s cheap money has papered over an economic swamp but that cannot last without destroying the currency. And the policies have failed to restore growth.

Government, federal plus many cities (e.g. Chicago) and states, has run up unmanageable debt; debt that is a liability for taxpayers already sinking into personal economic mire. When overvalued stocks and real estate deflate, removing the paper cover from America’s economic swamp, insolvent taxpayers and government must sink together. Democrats and Republicans likely now each share a hope that the others will provide the next Hebert Hoover.

There seems little doubt that the economic pattern results from government intervention; it is nothing new in history. India’s static caste system and China’s 15th century halt of exploration and change both embedded poverty via economic stasis. In America, it has been overregulation and the increasing corruption accompanying crony capitalism.

The unique conditions of American wealth generation having passed, nothing suggests a return to that widely wealthy condition. Economist Tyler Cowen speaks of a “Great Reset;” a permanently lower economic level that lies yet ahead.   

Rather than awaiting recovery, the people and even more, the government, need to learn again what is needed to survive in a world where others have risen up to compete. Until then, impoverishment seems likely to be the new normal for America and for similar reasons, for much of the rest of the world as well. 

Economics expects, Scripture predicts and History presents society largely poor with a small middle and a few wealthy; America’s expanded middle class seems an historic anomaly. Few economists and fewer statisticians should be surprised to see the U.S. returning toward that venerable model.

The conditions that lifted North America so far above the economic norm were a unique combination: available land and resources, a smaller, pro-development government, disparate post Renaissance and mostly post Reformation immigrants that shattered traditional classes, and an industrial revolution supported with European capital. But as ever, time having passed, things are changed. Few of the listed conditions remain unaltered and America’s economic direction shows it.

The defining American middle class is devolving toward poverty. The 1970’s brought an undeniable economic retreat: the disappearance of the traditional middle class housewife into the workplace. A declining standard of living was heralded as a feminist triumph. The linked map illustrates the accelerated middle class economic decline since the 2008 financial crash; today, 20% of American families include no workers and most Americans receive government benefits.   

Reflecting this, American wealth distribution has also changed, favoring the wealthy. Those earning the top 10% of incomes are capturing essentially 100% of American income growth; the remaining 90% are stagnating. Their incomes as a percentage of Gross Domestic Product (GDP) have declined since the 1970’s. That is why the masses aren’t consuming enough to boost the economy; consumption falls when consumers are strapped. Even recovery optimists recognize today’s economic doldrums.

Politicians who promise free goodies and painless cures for sad economies can’t afford stagnant ones; they require published recovery, preferably quickly. So government and its client media tell us we are recovering. They point to the currently 5.4% unemployment rate as evidence. They don’t mention that the rate isn’t computed as it once was. The older computation remains available at shadowstats.com, where U–3 Unemployment surpasses 20%.  A different useful government statistic is the Labor Force Participation Rate, the percentage of the available workforce that is working. That has (quietly) declined to late 1970’s levels; there is no real recovery. Stocks and real estate have been inflated by the Federal Reserve’s flood of funny money while the middle class, largely dependent upon wages, has declined.

Using reality and disregarding propaganda, we see progressing American impoverishment reflecting general government policy. “Progressive” economic policies have amounted to promising a free lunch, for which the bill has arrived.  Government/union cronies can force wages up; government can circumvent markets with legislated wages/prices and regulatory distortions, but none can repeal the ultimate operations of economics that simply reflect human behavior. America’s economically excessive labor costs are in unadmitted, forced decline to meet world competition.

American production became overpriced on the world market, ironically sending American capital to “developing” countries to compete with Americans. Erstwhile jobs followed the money abroad. Previously too expensive, robotic production technology became affordable against high priced labor, further reducing employment. The labor price distortion has been great enough that even burger flippers now face competition from machines. It seems notable that regardless, fast food workers are demanding a significant wage boost, illustrating the width of the gap between worker expectations and economic reality. A new factory setting up in Louisville, will have 100 3 D printers but only 3 employees, one for each of 3 shifts. Even more disturbing was news of the first all-robotic factory in China

Some now expect robotic production to put masses of workers onto a government dole. Robert Reich, former Secretary of Labor and now a Professor of Public Policy, said that redistribution of incomes will be necessary to support the masses of workers unemployed as the machines take over. With government using deficits to fund its present benefits, whose incomes will be redistributed remains undefined.

The government intervention that has exacerbated labor costs (most recently with Obamacare) is still increasing costs imposed by regulation, both directly and via environmental programs, particularly those affecting energy costs. This reinforces American inability to compete in the world. Present proponents of a minimum wage boost are selling the same delusion.

As most know, the government is also importing as many foreign workers as it can manage, hundreds of thousands of educated, highly qualified tech and professional folk via H–1B guest worker visas. In 2014, the U.S. hosted 25.7 million foreign born workers: 16.5% of the workforce. Southern California Edison replaced its IT department this way; Disney recently has done the same.  The government claims there are too few Americans qualified for these jobs, but appearances suggest that in reality, foreigners are cheaper. Even more illegal but welcomed border jumpers are competing for the lower paying jobs. Since the prices of food, shelter and such continue to rise as wages do not, impoverishment continues.  

American workers seem less qualified than they once were; U.S. education in reading, math and science has fallen out of the top 20 on international rankings where it was once among the best.  The dismal economic truth: America has abdicated its competitiveness and continues on that path. The Federal Reserve’s cheap money has papered over an economic swamp but that cannot last without destroying the currency. And the policies have failed to restore growth.

Government, federal plus many cities (e.g. Chicago) and states, has run up unmanageable debt; debt that is a liability for taxpayers already sinking into personal economic mire. When overvalued stocks and real estate deflate, removing the paper cover from America’s economic swamp, insolvent taxpayers and government must sink together. Democrats and Republicans likely now each share a hope that the others will provide the next Hebert Hoover.

There seems little doubt that the economic pattern results from government intervention; it is nothing new in history. India’s static caste system and China’s 15th century halt of exploration and change both embedded poverty via economic stasis. In America, it has been overregulation and the increasing corruption accompanying crony capitalism.

The unique conditions of American wealth generation having passed, nothing suggests a return to that widely wealthy condition. Economist Tyler Cowen speaks of a “Great Reset;” a permanently lower economic level that lies yet ahead.   

Rather than awaiting recovery, the people and even more, the government, need to learn again what is needed to survive in a world where others have risen up to compete. Until then, impoverishment seems likely to be the new normal for America and for similar reasons, for much of the rest of the world as well.