FedUpUSA

Archive for April 27th, 2010

How much do average Americans make after the Great Recession? Examining the income of U.S. households. 65 percent of U.S. households live on $65,000 or less.

Posted by mybudget360

In order to understand the middle class, we first have to draw a line in the economic sand.  Many in our society would like to believe that we live in a classless system but this isn’t true especially when we look at the financial data.  This classless belief has been shattered with the current structure of the banking bailouts that have favored the top 1 percent in our country.  I wanted to update some of the data that I had posted back in December of 2008.  There is something fascinating about looking at aggregate income data because it tells us a lot about our financial condition.  Yet whenever we hear debates about the middle class, rarely does anyone talk about the specific income cutoff.

Let us first examine the top 35 percent of households:

Source:  Census

If a household brings in $65,000 or more they have made it into the top 35 percent of affluent households.  Now this may not seem like much to a large number of middle class Americans given the rising cost of goods over the last few decades.  To make it into the top 1 percent a household would need to make more than $250,000 per year.  To be in the top 0.1% a household would need to make more than $1.6 million.  This data distribution was from 2007.  I managed to find more recent Census data from 2008 and put together an updated chart to shed a different perspective of the middle class.  The below chart is more realistic because it goes from 0 to $200,000 and since most people fall along this spectrum the information might be more useful and applicable:

38 percent of U.S. households make $49,999 or less.  When we talk about the 40 million Americans receiving food assistance this is where we are looking.  If we look at household incomes of less than $74,999 we cover 58 percent of all U.S. households.  The actual median household income in 2008 is $63,000 according to the American Community Survey done by the Census.  We’ll have more updated information in September of this year with data for 2009.

The above chart helps highlight the cutoff points for middle class Americans.  In recent debates, we have seen that those who make $100,000 or more have somehow made this seem like the de facto income in America.  Even at this level, only 20 percent of U.S. households make $100,000 or more.  This is high relative to what many Americans are working with.  Yet I think many in the media since they fall in this range seem to project their own income situation onto the public discourse.  If they would only look at the above data they would find out that middle class Americans have to get by with much less in today’s market.

A household that makes more than $200,000 is in the top 5 percent of our country.  Yet even that isn’t enough to put them in the top 1 percent that control 42 percent of all financial wealth.  But even within the top 1.5 percent income variation is enormous:

Source:  Wikipedia

“As of 2005 there are approximately 146,000 (0.1%) households with incomes exceeding $1,500,000, while the top 0.01% or 11,000 households had incomes exceeding $5,500,000. The 400 highest tax payers in the nation had gross annual household incomes exceeding $87,000,000. Household incomes for this group have risen more dramatically than for any other. As a result the gap between those who make less than one and half million dollars annually (99.9% of households) and those who make more (0.1%) has been steadily increasing, prompting The New York Times to proclaim that the “Richest Are Leaving Even the Rich Far Behind.” Indeed the income disparities within the top 1.5% are quite drastic. While households in the top 1.5% of households had incomes exceeding $250,000, 443% above the national median, their incomes were still 2200% lower than those of the top .01% of households. One can therefore conclude that almost any household, even those with incomes of $250,000 annually are poor when compared to the top .1%, who in turn are poor compared to the top 0.000267%, the top 400 taxpaying households.”

I guess many things are relative when it comes to income.  True wealth is actually measured by net worth.  In 2009 the number of millionaire households jumped to 7.8 million but this is down from the peak of 9.2 million in 2007.  This recession has destroyed a lot of wealth and the middle class have seen a longer journey ahead if they ever wish to reach financial security.  But this isn’t a new trend and this recession has only brought the issue of economic class to the forefront.

The Financial Crisis: Are We All Responsible?

“Whoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that confidence which constitutes not only the ease, but the very existence of a society.” Samuel Johnson

As the hearings and scandals progress, and the revelations and charges start to cut closer to the heart of the credit swindles, inevitably there will be a movement to say, “We are all responsible. Let’s allow bygones to be bygones, it was all a misunderstanding. Let’s move on to something new. Justice is not important, and cannot be done.”

There will be long accountings of how the problems arose, and how changes in the banking laws, broker deregulation, and the erosion of elite privileges compelled the Wall Street banks to take more and greater risks, to violate unspoken understandings about customer relationships, to take great risks, to bend the laws, to use money and influence to suborn perjury and the breaking of oaths, and to generally undermine the fabric of government.

There will be long analyses that suggest that trust has been lost, the trust that binds the social and financial interactions of people. And there will be an effort to regain that trust, to promise change and reform, and of course, justice.

As for justice they will say, but aren’t we all responsible? Didn’t we all believe the promise that ‘greed is good?’

No.

The overwhelming majority of people are hard working, honest in their dealings, more concerned with raising families than ruling others, if anything distracted by their day to day problems. Long suffering, patient to a fault, too willing to the give the Wall Street bankers the benefit of the doubt for the very reason of their own good natures. They could not imagine themselves doing the things of which these men stand accused, so they cannot believe that others would so willingly lie and deceive, cheat and steal, attack the very heart of the nation, while wrapping themselves in a flag of hypocrisy, for a few more dollars that they can hardly need or even personally spend.

And why? Because it feeds their sickened hearts, their pathological egos, and the need to make others suffer loss for their own gains. It sets them apart from a humanity which they hold in contempt enmingled with a nagging self-hate, makes them feel superior and worthwhile, and at the extreme even as gods among men.

So when the fresh public relations spin and propaganda from Wall Street and the financial sector’s demimonde starts this week, and seeks to confuse the issues and distort the true nature of the fraud, recall who profited and who lost, who was caught with their hands deep in the pockets of the many, and even now stand arrogantly unrepentant with the ongoing misery of others to their account. And who stood idly by while charged by sworn oaths with protecting the innocent, the unsuspecting many, from the predatory, lawless few.

“When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle.” Edmund Burke

Or, in the words of William K. Black and Elliot Spitzer in their essay Questions on the Goldman Scandal at New Deal 2.0:

“We applaud the SEC lawsuit, but it will not solve the problem. Unless our financial system is reformed to put adequate protections and checks and balances in place, we can expect this kind of fraud to continue. Financial executives will continue to take risks they do not understand. Those who control the flow of capital will continue to churn out profits with socially disastrous consequences.”

The banks must be restrained, the financial system reformed, the economy brought bank into balance, and justice done though the mighty fall, before there can be any sustained recovery.