A Few Facts and Figures

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1. The U.S. borrows $2.1 billion everyday to pay its debt, and the average American household is carrying more than 9,000 in credit card debt. Today’s so-called middle-class families, with two-working spouses are in worse shape financially—they save less and owe more— than a single-income and middle-class family of 30 years ago (pg 30).

1. Real income for the bottom 50 percent of the U.S. populace over the last 25 years has remained relatively flat and the bottom 20 percent has experienced a slight decline. The top one percent experienced a sevenfold increase of income during the same period (pg 31).

1. As many as 69 percent of American (92 million people) earned less than $50,000 in 2003. The average adjusted income, after expenses and line-item deductions, for this group was $19,512— not very much money left to pay for food, transportation, and clothing (pg 78).

   

1. Tuition at community colleges averaged $2,191 in 2005-06, and they enrolled 46 percent of all undergraduate students attending college. Tuition at private colleges, including room and board, averaged more than 31,000. The community college is becoming the forced-choice among students of moderate-income; nonetheless, their fundraising ability accounts for less than one half of one percent of all private funds donated to colleges. One likely reason is that a class bias exists in the business and philanthropic community helping to perpetuate a two-tier system of higher education (pg 81-82).

1. U.S. production is peaking. China and India each graduate four to one more scientists and engineers than the United States, indicating where tomorrow’s innovation, and inventions will come from: Even worse, there is now reverse “brain drain” from the West to the East, as foreign science/math students graduate from college and leave the U.S. and follow the lure of economic opportunity back to the East (pg 95-96).

1. In 1980, the top one percent in the U.S. owned 21 percent of the nation’s wealth. By 2005, they owned 35 percent, equivalent to what the bottom 95 percent owned. In 1980, the same top one percent earned 8.2 percent of the U.S. income; in 2005, they earned 22 percent, equivalent to what the bottom 50 percent (150 million Americans) earned (pg 140).

These facts came from my book Class Counts which you can find here: http://www.allanornsteinbooks.com

Like and comment what you think which is the most interesting (or eye-opening) figure.

When the American Dream is just a Dream

A recent article focusing on the odds of employment after graduating in Nevada put a close-up perspective on a nationwide issue. There’s a growing number of graduating students, and all are hoping to achieve some sort of well-paying job that correlates to their major. But what jobs await them? The answer is startlingly bleak.

Underemployment is nothing new in the last couple years. Its something America’s been struggling with since the recession and collapsing of industries (like the housing market). But now, during what can be considered the ‘reconstruction’, there’s a high number of unemployed workers (with education) that either lack experience to get the job they want or are overqualified for entry-level positions elsewhere.

Over the past couple months, there’s been an addition of 280,000 jobs to the US job market, and yet unemployment rose ever so slightly from 5.4 to 5.5. According to HuffingtonPost, the bulk of these jobs are driven by construction and health care: and this could be one of the reasons why college graduates struggle in finding appropriate work in their field. And even though our economy is consumer based, our consumers are acting more cautiously than in the past. This makes jobs, wages, and wage-increases the most viable way to get them spending again.

It sounds like a relatively simple plan: graduate, get a job, contribute to capitalism. But what usually ends up happening is students are often forced to work while earning their education in order to help avoid crippling student loan debt. While struggling to get on your feet after and even in college used to be a sort of ‘rite of passage’ to becoming an adult, the period of time to do so is increasing. And the longer it takes to get “comfortable” in the professional/working world, the more difficult it is to do so. Many end up living at home to try to curtail expenses.

In my book, I talk about how

Our economic system is partially based on a culture that thrives on independence and individualism, not on the collective good… It is fueled by the spirit of work hard, and inner-directed behavior. If I work hard, and with a little luck, I’ll get what I need, and I don’t have to be concerned nor worry about the person who cannot or will not work as hard… it corresponds with the notion of Social Darwinism.
Wealth vs. Work (pg 36)

So what are the currently unemployed supposed to do? And what of those just graduating and future graduates that are going to be entering an over-saturated market?

Eeny, Meeny, Miny, Social Programs

We’re living in a time where upwards mobility is becoming more difficult, and the middle class is shrinking (and slipping) more and more into poverty. Social programs are used to combat poverty and have been a controversial topic since their inception, but there is finally hope in building a bigger picture on their effects on families. The thought of programs nowadays is that they’re a sap to government resources. That they’re essentially useless and are cushions for more lazy people who’d rather live off disability than get a real job. In many cases, this is true but recent studies featured in the NYTimes showed that

“much of the benefit appears to derive from helping low-income families pay for basic needs like food, housing or health care, or simply reducing the intense economic pressure…. In addition to long-term benefits, the safety net, of course, supports many Americans right now. In 2013, income and nutrition assistance programs lifted 46 million people, including 10 million children, out of poverty, while health programs benefited tens of millions more…. Moreover, safety-net programs do not discourage work in any big way
Smart Social Programs– NYTimes.com

While there is an undeniable fact that many programs have the proclivity for dependency, the benefits can’t be denied either. In the light of recent cuts to nutrition assistance, health care, housing vouchers and other social programs, studies like this can help determine exactly what programs are   most effective. They could also become a good way to better screen potential recipients and have more appropriate contingencies for remaining on any given program. Regardless of which programs are kept, it’s hard to deny their position in securing a safety net for downwards mobility.

In my book, I talk about the decline of the middle class. The decline is due in part to people slipping into poverty- which can often happen from being denied help from a program. Deciding who gets help (and how much help) is a thin wire to walk across, and it doesn’t help that the government tends to borrow from Social Security and Medicare funds to finance its current deficits.

“The common people… should be concerned that the network of public and private social and health protection is unraveling. There are fewer safeguards against downward mobility in a world pulsating with economic insecurity for the vast unemployment, limited employment opportunities and lw wages; loss of retirement investments and pensions; deflating home values and equity; soaring medical bills and health insurance costs…”
Wealth vs. Work: How 1% Victimize 99% (pg 22)

So which programs do we keep? Which ones do we cut? Who gets them and for how long? Obviously, questions like this are why we have a government but who’s to say they’ll make the right decision, even with this new information?

Mobility in Moving

When starting a family, one of the first questions asked is “Where will we live?” Ultimately, whether out of choice or necessity, families must choose between staying in the area they’ve been living in, or to move elsewhere. Instinct often nudges some to stick to their roots, to not venture out into unknown territory, even if it were to be to a better neighborhood; there are those who feel a type of sentimental pride in their neighborhoods.

But is this really the right way to go – especially when it comes to your children’s success? Research that has been conducted over the past few years showed evidence that moving to a better neighborhood is beneficial not only for the children in the household, but for other members as well. According to Raj Chetty and Nathaniel Hendren’s study, there are a few necessary key components that can help determine if a neighborhood will lead to higher success for a family.

“Within a given commuting zone, we find that counties that have higher rates of upward mobility tend to have five characteristics: they have less segregation by income and race, lower levels of income inequality, better schools, lower rates of violent crime, and a larger share of two-parent households.”

Equality of opportunity- Raj Chetty and Nathaniel Hendren

The benefits of moving include a higher college attendance rate and a relative decrease in the poverty rate. However, the benefits are dependent on time and age, according to the New York Times. In the article, the study said, “In the mid-to-late 1990s, 4,600 families living in public housing entered a lottery in which the winners were offered a voucher that enabled them to move to better neighborhoods.” There were those who were given the opportunity to move, but were still unable to reap the benefits of moving to a better neighborhood. This seemed to be the case when children were above a certain age during the move, making mobility less plausible to a parent.

 

That being said, what’s to stop anyone from any neighborhood from achieving the “American Dream”? And what of those who cannot achieve their dreams due to their economic situation or any other hindrance that life is known to give? It seems that whether given the opportunity or not, there’s always the option for “failure” in the sense that a person/student fails to increase their current amount of wealth and/or succumbs to financial instability. It does not, however, account for the general happiness of the person, who may be earning less money doing something they truly love.

“Given how American society has evolved, the idea is… to achieve a balancing act which rewards merit and hard work and provides  a floor or safety net for low-performing, slow running and weaker individuals. But despite this ideal standard for society, we are confronted with the harsh truth that this nation remains much more stratified than what its principles suggest… We would like to believe that through merit and hard work anyone can achieve the American dream”

Allan Ornstein, Wealth vs. Work: How 1% Victimize 99%

But it seems that simply ‘going to school and graduating college’ does not always make the cut for immediate success. There are those who grow up considered ‘doomed to fail’ due to their neighborhood or finances. Shouldn’t they still be provided with an opportunity to live a comfortable life? There is so much talk of how much education or a good neighborhood will lead to success – that having a passion for your job and financial stability will naturally go hand-in-hand if you do things the good ol’ fashioned “American” way.

But what do you do when neither of those options are viable or plausible?

Money Over Matter

The college admissions process can seem confusing, but many of the hoops to jump through are there to make sure candidates meet the standards set at a (usually) high bar. A certain SAT grade, along with a particular GPA correlated with it, are often the only two things keeping students out of college.

Most less-selective colleges have hard admission cutoffs for prospective. For example, the minimum combined reading and math SAT score could be an 830, as long as the student maintained at least a C average GPA. Students can fall to either side of this line, according to the New York Times, and students who did not pass that set bar were rejected from college a majority of the time. To be exact, roughly half of the students who cleared this standard graduated with a bachelor’s degree, as compared to only 17 percent of those who did not meet this standard–regardless of how marginal the difference was.

There have been a few studies of the students that fall to either side of this line over the years. One such study found that young adults who fell above the line and went to college made an average of 22 percent more in their late 20s than those who fell just below the cutoff. This is a statistic that contests ardently to the notion of “go to college to live a successful life.” However, there seems to be an unexplored caveat of this dictum. How many of those students making 22 percent more than those who did not go to college were already wealthy?

According to the Wall Street Journal, “Students from the wealthiest families outscored those from the poorest by just shy of 400 points,” which is just another example of “economic inequality result[ing] in much more than just disparate incomes”

In my book Wealth vs. Work, I discuss both equality and inequality financially. There are many wealthy students who are given the opportunity to go to college, but either wish to pursue a different career path or are otherwise disinclined towards college.

“When we talk about equal opportunity, eventually the question arises as to whether everyone should have the right to go to college. If everyone has the right to go to a high school education, why not college? …[T]here are many children whose academic limitations cannot be traced to poverty or deprivation. Children who come from upper-class homes have the advantage of social capital, and have parents who can hire private tutors, if necessary. They also have the ability to move to a successful school district- where… the school climate is more conducive to learning.

Others who are less fortunate start out on a less than equal footing and continue to experience family, school, peer group, and community handicaps that only increase their disadvantages- and thus are often doomed to disappointment.”

-Allan Ornstein, Wealth vs. Work: How 1% Victimizes 99%. p. 214

Some say that college dictates success–that social mobility relies on education. Why, then, do those those at the bottom of the totem pole have a society set against them getting a college education? Does excellence matter anymore, or has higher education become a result of money and circumstance, instead?

Robots are the new labor force

When you think of the future, what do you think of?

I think: ROBOTS

That’s right, robots, and machines, that are going to be so technologically advanced that the workforce may not be able to compete with these machines.

Today, machines can process language, recognize faces, read expressions, and even carry out conversations with emotion. The future is not so far ahead.

According to the New York Times, “Machines aren’t used because they perform some tasks that much better than humans, but because, in many cases, they do a ‘good enough’ job while also being cheaper, more predictable and easier to control than quirky, pesky humans. Technology in the workplace is as much about power and control as it is about productivity and efficiency.”

“We no longer need humans to do the heavy lifting, counting, packing, inspecting and moving of items. In addition, robots work around the clock, on Saturday and Sunday, and they don’t get hurt and sue their employers. They may break down and need a new bolt or chip once in a while, but that sure beats a million dollar lawsuit for alleged discrimination or exclusion from meaningful opportunity. As The Economist declared on a recent cover page about robots, they are the “immigrants from the future.” We may not see it at the end of the corner, but technological replacement and unemployment is around the corner. Protectionism will not solve the problem. Outsourcing, global low-labor costs, and technological displacement are converging at the same time and affecting the nature of work.”
-Allan Ornstein, Excellence vs. Equality: Can Society Achieve Both Goals?. Ch. 4, p. 11

Historically, there is no need to fear as long as people stay rational. During the Industrial Revolution, machines replaced manual labor. However, all we needed was a little more education and knowledge. Machines are just machines, after all. What we need is to use the machines and robots to empower and enhance our work, instead of staying idle and letting technology take over. Yes, the robots are coming…but to be afraid of them is pointless.

The U.S. is losing its top spot in the economy, experts say

The United States government is far divided, which could cost the nation its top spot in the economic world. As it slips toward ceding its supremacy, the United States could be handing over its power to other, faster developing nations.

“It’s almost handing over legitimacy to the rising powers,” said Arvind Subramanian, the chief economic adviser to the government of India, in a New York Times article. “People can’t be too public about these things, but I would argue this is the single most important issue of these spring meetings.”

There are several reasons for the United States slipping, but people can be sure that the fall is by no means voluntary. The U.S. is reeking of political infighting, along with financial strains of its own. Internal problems can often overwhelm the government. How does a government hold onto international status if it is having trouble within its own country?

“Experts say that is giving rise to a more chaotic global shift, especially toward China, which even Obama administration officials worry is extending its economic influence in Asia and elsewhere without following the higher standards for environmental protection, worker rights and business transparency that have become the norms among Western institutions,” according to the New York Times.

China has been seen as less stable in recent years, due to a diminishing growth factor, but the nation is still rapidly developing. Experts have debated China’s future, and the superpower’s economy is not headed for an inevitable disaster.

“At what point does the rickety architecture of civilization begin to collapse? What are the limits of American power? Americans are an optimistic people. But make no bones about it – we are in decline, and our standard of living is bound to be reshaped, as other centers of economic growth reconfigure the world order. The 2008 financial meltdown, initially caused by Wall Street greed and irresponsible risk involving some $33 trillion in credit default swaps that few people involved fully understood not only dragged down the U.S. economy, but also the global economy…It was the emerging nations, not only criticizing the U.S. for dragging down global markets but also it was China, Japan, and Saudi Arabia surfacing as the nations with fat wallets and the likeliest candidates to assist distressed countries – all symbols of the shifting landscape of economic power and the future test of the American economy.”

-Allan Ornstein, Wealth vs. Work: How 1% Victimizes 99%, p.18

What do you think of the U.S. economy? Is it in decline, or do you still see glimmers of hope in the seams of the nation?

Is China headed for disaster?

Newly released figures show that growth in China has slowed considerably. Deflation is setting in, according to the figures, due to weaker factory production and debt. Growth for 2015 is expected to be the weakest in 25 years.

Could this be a sign of China headed for economic disaster? Or is China is headed for economic stability instead?

Disaster?

According to The New York Times, Former Treasury secretary Henry M. Paulson thinks so.

“Frankly, it’s not a question of if, but when, China’s financial system will face a reckoning and have to contend with a wave of credit losses and dent restructurings,” wrote Paulson.

In his new, 340-page book on the nation, Dealing With China: An Insider Unmasks the New Economic Superpower, Paulson stresses the likelihood, but not the inevitability of a Chinese economic crisis.

“Slowing economic growth and rapidly rising debt levels are rarely a happy combination.”

Mr. Paulson, along with many other analysts, is worried about China’s trust companies, which often use their profits to give out risky loans. Some have even gone as far as to label them a “time bomb.” However, the former Treasury Secretary wrote that good policy decisions by the Chinese government could avert such a crisis.

Unfortunately for China, transparency is virtually nonexistent in the Communist government. Citizens and the public cannot know the full depth of China’s economic issues if the government has all of the information.

Women working in a Chinese factory.
By Robert Scoble [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)%5D, via Wikimedia Commons

Reform?

According to an article in The Economist, “The robustness rests on several pillars. Most of China’s debts are domestic, and the government still has enough sway to stop debtors and creditors getting into a panic. The country is shifting the balance away from investment and toward consumption, which will put the economy on more stable ground.”

Although growth decreased, the economy still continues to grow. Last year, 13 million new urban jobs were created.

Pessimists are saying that China’s time of crash has come. However, China’s government is working to ensure that such a time never truly comes. The government is loosening control over interest rates and international monetary flow. Financial liberalization is the newest path for the country.

The government is also is sending more government from local to provincial funds, due to high local-government debt rates. Administratively, Prime Minister Li Keqiang has made it slightly easier for private businesses in the country. About 3.6 million private firms were created just last year.

Liberalization can indeed lead to instability, but China’s economic experts in the high ranks have the knowledge to avoid a crash. Reform won’t be easy, but China is beginning to lay the groundwork for a more stable economy.

Conclusion…

As stated in my book Wealth vs. Work: How 1 % Victimizes 99%, I believe that “China will eventually supersede America as the engine of growth and production within the next 20 to 25 years.”

From the point of view of highly qualified analysts, China’s economy is entering a dangerous zone. An economic crisis is definitively avoidable, considering China’s $4 trillion in reserves and experience in finance amongst top-ranking officials.

However, as Mr. Paulson said, “The longer they wait to address this problem, the more costly it will become and the more likely that it will disrupt the real economy.”

The Decline of Labor Unions

In 2014, the union membership rate was a mere 11 percent in the U.S. This is down 0.2 percent from 2013, which does not seem like a notable decline. However, this is a 98-year low in America. To get some idea of this immense drop in union membership, the union membership rate was 20 percent in 1983 and 28 percent in 1954, according to Cornell University.

Labor unions are vital to the nation’s success. President Eisenhower himself once even said, “Labor is the United States. The men and women, who with their minds, their hearts and hands, create the wealth that is shared in this country–they are America.”

Policies against unions

However, government and policy have victimized unions for decades. The Taft Hartley Act of 1947 expanded employer rights at the expense of union rights. Some of the clauses prohibited closed shop for unions, secondary boycotts, and federal employee strikes. It was even referred to as the “slave labor” act by its opponents.

In 1978, labor unions put together a bill to strengthen the National Labor Relations Board. Big business significantly outspent labor efforts, ensuring that this bill did not pass.

In 1981, President Reagan dismissed 3,000 striking workers of the traffic controllers union. Businesses and Corporations began to hire strike breakers, effectively posing a viable threat to any union that dared to go on strike. There were 371 strikes in 1970; there were only 11 in 2010.

According to CNN, “For the sake of our economic and political future, however, America would be better off if we had more strikes.”

Labor Unions are essential to democracy and equality

The graph shows the rise of the Gini coefficient, which correlates with the rise in inequality.
-Photo By Wushi-En [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0, via Wikimedia Commons]

We need labor unions in the U.S. for a variety of reasons. First, the decline in unionization is correlated to the increase in income inequality. According to a study by the International Monetary Fund, about half of the increase in the Gini coefficient–a measure of inequality–and the significant rise in incomes of the top 10 percent can be explained by the decline in unionization. Historically, times of high union membership were also times of low inequality.

Second, unions provide a checks and balances system of sorts to the corporate world. Labor unions increase worker moral, protect basic worker rights, and are essentially the epitome of the middle class. Although there is corruption in some unions, there is also corruption in the corporate world. Even a flawed union can balance out a flawed corporation.

Unchecked corporations consume money and power, as presented in the quote from Wealth vs. Work below.

The fact is, however, people at the top of the pyramid are continuously redistributing wealth from the common people to their own pockets (this is the history of human kind), allying themselves with those who run the political system, writing self-serving rules concerning investments, credit, insurance, and banking. Even when the day of reckoning comes, and markets tank, the people in charge of corporate capitalism and finance manage to recover or get rescued by the system…

[In the 2008/2009 Recession], it was the ordinary worker who paid the bill. Money was redistributed from the bottom of the pyramid to the top…The rest of the world saw a system of government, which was supposed to regulate, monitor and hold people accountable, that allowed the robber barons of the twenty first century complete immunity and placed the rest of the world in jeopardy.”
-Wealth vs. Work: How 1% Victimizes 99%. pp. 138-139. Allan Ornstein

According to the New York Times, the decline in labor unions could help explain why CEOs of large corporations earned, on average, “20 times as much as the typical worker in 1965, and 296 times as much in 2013, according to the Economic Policy Institute.”

In the words of Elaine Bernard of Harvard University in the piece Why Unions Matter, “Because we have not yet succeeded in extending democracy to the workplace, democracy and civil society themselves are threatened.”

Thinking 2016: A short insight

2016 is fast approaching.

Hillary Clinton announced her run yesterday; Marco Rubio announced his today; and Rand Paul officially announced his run for president last week, joining Ted Cruz in the GOP running. Several other presidential hopefuls, such as Martin O’Malley and Jeb Bush, are expected to officially announce their campaigns soon, as well.

By United States Department of State (Official Photo at Department of State page) [Public domain], via Wikimedia Commons

By US Senate (Email from the Office of Senator Marco Rubio) [Public domain], via Wikimedia Commons

It’s time to really think about who will serve the country the best.

Government plays a key role in America’s class structure and whether the American dream runs on or off track. The story involves more than just tax rates, minimum wages, and Medicare benefits, but which political party is in power—which philosophy or doctrine controls human services and safety nets for people, whether the party supports and protects labor or business, and what kind of policies and level of transparency and accountability govern finance, technology, and globalization. We would like to think that we are alive and well and we have it all under control, and the stuff we overlook or cannot control doesn’t matter. But it does matter. It’s just that we don’t realize it or don’t want to face up to it. We would like to think there is very little difference between Democrats and Republicans, between liberal and conservative thought, and between free markets and regulated markets… But there is a difference, and it is bigger than most of us think. What we need is a government that cares more about people than property; and more about rising inequality and the shrinking middle class than denying it or arguing that what is good for the rich is good for the country, or what is good for labor or unions is nothing more than socialism.

(Wealth vs. Work: How 1% Victimizes 99%, p. 9, Allan Ornstein)

Presidential primaries often become more about who can garner the most donors, than they are about who will be best for the country.

Who do you think will treat the people of the U.S. with respect and why? Take into account social policy, treatment of labor unions, education policies, fiscal policies, etc. Do you think in today’s day and world there is room to care “more about people than property?”

With the election so crowded as of now…only time can tell. Personally, I’d like to see more support for labor unions and more taxing on the rich (More on that later).

According to the New York Times, the most likely/now running candidates are:

Dem:

Hillary Clinton

Martin O’Malley

Jim Webb

Lincoln Chafee

GOP:

Ted Cruz

Rand Paul

Marco Rubio

Jeb Bush

Scott Walker

Chris Christie

Mike Huckabee

Rick Santorum

Rick Perry

Bobby Jindal

Carly Fiorina

Ben Carson