All Time Record Level of Severe Poverty
Robert Waldmann
The Census Bureau has released estimates of poverty in 2009. Coverage focused on the headline poverty rate which is horrible enough. Much worse, 6.3% of people in the USA suffered severe poverty, that is lived in households with income less than half the poverty line. This is the highest severe poverty rate on record (the series only goes back to 1975 — I don’t know why).
That means that over 19 million people in the USA live in households with income less than half the poverty line (severe poverty implies income significantly less than $ 11,000 yr for a family of four)
I blame welfare reform.
Like the poverty rate, the severe poverty rate goes up in recessions, goes up when inequality increases and goes down when per capita income grows. However, the pattern is very different with a long term trend of increasing severe poverty and no correspond trend of the headline poverty rate.
I think it is clear that this can be explained with two acronyms AFDC and TANF. In 1975 the economy was in bad shape, the poverty rate was 12.3 % which is not that much lower than the 2009 poverty rate of 14.3%. The severe poverty rate was 3.7 % less than 60% of the current rate. The fraction of people in poverty but not severe poverty was actually lower in 1975 than it is now.
During the period of high inflation, the real value of welfare benefits declined. This explains at least part of the increase in severe poverty. In 1983 the poverty rate peaked at 15.2% and the severe poverty rate peaked at 5.9%. Compared to 1983 a smaller fraction of people are in poverty but a larger fraction of people are in severe poverty. I think that welfare reform is the only plausible explanation.
If the ratio of number in severe poverty to number in poverty were the same as in 1983 the severe poverty rate would be less than 5.6%. In other words the number of severely poor people in the USA would be lower by more than 2,250,000.
It is basically universally agreed that welfare reform was a great success (as argued for example by Barack Obama in “The Audacity of Hope”). I think this conclusion is based on two gross and obvious errors.
First the matter was considered to have been decided by 2000. Only specialists reconsidered the analysis of welfare reform with any data not collected during the amazing boom of the late 90s.
Second a huge amount of attention is focused on the poverty rate and almost no one ever looks at the severe poverty rate. It is as if people think that it doesn’t matter how poor one is once one is under the poverty line. This is more extreme than not caring about income distribution.
But it is accepted as a fact that welfare reform worked like a charm. Evidence which isn’t less than 10 years old and the fact that $11,000
It’s almost as if most people had no clue what it is like to be poor so that they don’t even know that the poor are much poorer than they used to be.
“I blame welfare reform.”
Why?
Jimi –
You might try reading the last four paragraphs of the post.
Cheers!
JzB
i wonder how much the implosion of the housing market is impacting this. an awful lot of federaly mandated sub prime CRA loans were made in places like oakland that have since driven whole neighborhoods into poverty.
the great irony of the CRA is that it wound up doing the most damage to the people it was supposed to aid.
just because there are more people in poverty does not mean it’s nescessarily a welfare policy issue.
the facts here seem to support the arument that it’s just been the economy (and perhaps debt loads)
if you want another potential culprit, look at the changed in CPI calcuations from the ealy 90’s. CPI moved to a geometric wieghting with strong hedonic adjustment. this has brough reprted CPI way down from what it would have been using the old BLS methodology. if it now underreports inflation (and there is a great deal of evidence that it does) the cost of living adjustmenrts will not keep up with actual cost of living, and the benefits will buy less. bingo, more extreme poverty.
it seems to me that their are lots of potential external causes of this poverty issue. this article does not seem to lay out any actual causal reason that welfare reform created these outcomes. you just point out the outcomes and say there is no other plausible explanation.
i’m with jimi.
why?
Robert- The result of abolishing AFDC was to abolish poverty. If you have a program to support/help poor people then you are forced to confront their impoverishment. No poverty program, no poverty problem. Numbers just in themselves carry no force. The people who make our laws think everyone earns $250K a year because everyone they know does. “That’s not rich”, they say shocked that anyone would question that basic fact of life as they know it. I don’t think there is any way to get anyone to look at what’s right in front of them. I gave up trying to explain this stuff a long time ago. NancyO.
Why?
Welfare reform pays for tax cuts, war, and the shock and awe for the empire.
The empire is not paying for itself, elst there would be no poor.
Or is empire only for the top 1%?
imi, would you blame the crushing burden of the SSTF special treasuries for increasing poverty?
it also occurs to me that a great deal of this could potentially be explained by immigration. however one feels about it, it’s pretty undeniable that it has added a large number of low income residents (and even citizens wehn they have children).
also: “Government benefits like food stamps and tax credits, which can provide hundreds or even thousands of dollars in extra income, are not included in calculating whether a family’s income falls above or below the poverty line”
so perhaps increases in these programs are taking up some slack. 40 million americans are getting food stamps, the latest in a string of all time records. this would certainly offset some of the extreme poverty.
extreme poverty is about $5,400.
food stamps this year will go to a record % of the population at a cost of about $59bn to serve 40 million people. thats around $1500/person or 27% of the extreme poverty line.
so, perhaps it’s not as bad as it looks if more benefits are oging out in kind as opposed to in cash. that could still mean the overall level is higher, though i don’t have the aggregate numbers.
I know. I haven’t quite given up, but I don’t expect to ever convince anyone … of anything.
Ty–The fact is that a lot of people can’t earn enough money to pay rent let alone eat. AFDC prevented some of the worst of the poverty we see now. It did other things too, but people could generally eat. Now, it’s much harder to get even food stamps.
We can agree there aren’t enough jobs for everyone who wants to work now and for the last few years. Immigrants go home in bad times in the US. No need to stay if there’s no work. So, all the jobs that got shipped out play a part in this.
So, I don’t think that this is because mortgage brokers tricked and decieved poor people into mortgages they couldn’t afford or immigrants took poor peoples’ jobs, although to an extent both of these things play a part. I think it’s because capitalism produces this effect. Capitalism is what it is. Not everything it does is good. I am not outraged or surprised by this result. What you see is what you get. NancyO.
“ Now, it’s much harder to get even food stamps. “
given that a record % of americans are getting food stamps averaging $1500/year, how do you support that claim? the opposite seems true.
“jobs that shipped out” is a pretty questionable idea. we were at full employment 3 years ago. under 5% it gets really difficult to hire.
so what, they all left in the last 3 years?
manufactuing is just the new farming. the loss of 90% of all american agricultural jobs didn’t hurt us in the least. manufacturing is the same.
a few jobs get lost, but everyone gets lower prices and thus has extra money to buy new things creating jobs producing those goods and serivces.
this notion that a manufacturing job lost somehow is a loss forever is not true.
and blaming mortgage originators for “tricking” the people who lied on their applications to get loans that banks were forced to make by federal mandate seems a very interesting interpretation of the facts.
you only have to perform on the contract you sign. if you lie to qualify for a loan whose terms you don’t even bother to read, can you really blame anyone else?
if the banks were forced to make the loans (and many, like citi were sued and forced to do it when they resited the CRA), can you balme them for wanting to securitize it and get the crap off their sheets especially given the avid participation of freddy and fannie in this and the rating arbitrage they acheived through goverment guarrantee?
this housing bubble was a failure of government, not capitalism.
Welfare reform? The housing blow out? Immigration? Why not try the position of the planets? Or maybe it’s God’s curse on an immoral society, especially those poor folks who do nothing but drink whisky and fornicate all day and night.
Or why not acknowledge that the income disparity and the wholesale relocation of jobs to distant lands is the problem? How the devil is there any likelihood of an economic recovery when 10% of the people looking for work can’t find it; some additional percentage of Americans have given up even looking for work; and those who have work are being paid sub-par wages. Fully 50% of income earning households don’t earn even $39,000 annually,
That’s household income not individual. And twenty percent barely get passed $16,000 annually. That’s real poverty. It’s the absence of jobs and the absence of living wages for those that have jobs. Don’t simply judge by your small circle of friends. There are people in this country working for little more than $10 per hour. That’s not a living wage. That’s poverty. Require living wages and you won’t have to worry about welfare.
And it’s heart warming to see that Jimi has found a fellow traveler in tyger tyger. Now AB has two ideological idiots to waste band width on. There are no bounds to man’s inhumanity to man. We read it here every day.
“drink whisky and fornicate all day and night.”
And what exactly is wrong with that????
tyger tyger:
How about some proof to your claim that mortgage originators were “forced” to make bad loans.
The CRA didn’t force rating agencies to lie about the quality of CDO’s. The CRA didn’t force GS to bet against it’s own products knowing they would fall apart. The CRA didn’t force investment banks to leverage themselves 30-50 to 1. The CRA didn’t force AIG to make bad bets, and the investment banks assume AIG could always make good on those bets.
The level of truthiness on the right is disturbing.
Ty–The eligibility standards have been set quite a bit lower than before. So, people who would otherwise have been eligible 10 or so years ago are no longer eligible. So, the current number would have been higher in past had there been comparable unemployment. The fact that more people than ever are getting food stamps does not mean that many others may need this assistance. Nancy O.
“May need” should be “may not need.” NancyO.
Jack,
On a more serious note, what is a living wage? And will my high school kid get it when he’s working at the ice-cream shop? Exactly how much of a raise will he get per hour? What are the mandatory benefits the Feds will force the ice-cream shop to fund and how much will it cost? I’d like to know since it will help me plan for his colledge costs…
Unskilled labor is in a global arbitrage with unskilled labor in India and China. Now those guys can’t scope ice-cream in DFW, but just what should we pay?
Islam will change
Islam will change
The entire mortgage market is $11 trillion. About 6 trillion is GSE stuff. The rest was securitized CDOs and some banks still do things the old fashioned way and just hold loans on their books.
CRA was a tiny fraction of this market. Plus the GSEs started getting into subprime. So I think a lot of CRE mandated stuff was originated by banks, then sold off to the GSEs. The GSEs of course securitize “pass thru MBS” and sell it off again to private investors and banks (CBs too), but I think in the GSE case they held most of the subprime stuff on their books. This is financed by sales of GSE corporate bonds. It was the private sector originating and securitizing “no qual” loans (who’s the liar here?) that became most of the toxic waste that froze up the market.
Since 1975 average income has grown about 2/3 — while shrinking on the bottom. As for early 2007, 25% of the American labor force was earning less than LBJ’s (adjusted) $10/hr minimum wage. If you had predicted that would happen in 1968 they would have asked what you expected: a comet strike, a nuclear war?
It’s the bargainpowerless (through self neglect — nobody is doing it to us) American labor market.
I suppose you read my essay above from two years ago that poverty (measured not counting government helps as you note well) was more like 30% at that point than the official 12.5% — about 18% I believe if you do count gov helps like food stamps. 18%, without gov helps, forty years after LBJ began the so-called war on poverty — which was lost in the lopside bargaining power American labor market in spite of doubling average income since LBJ plus those government helps.
It’s the labor market!
Tyger
“we were at full employment in 2007.”
Hi Aaron . . . only he would make this type of statement just to same something. It isn’t worth repudiating your stance on U3 numerics.
Well, I don’t how to get rid of poverty either, but I see some questionable observations in your theory of production. For one thing, the early 1900s industrialization provided manufacturing jobs that replaced shrinking ag employment and also provided the machinery that still fed us productively.
In the 1990s people were ecstatic that we were getting rid of crappy manufacturing jobs and it included strange bedfellows like CEOs, investors, environmentalists and politicians.
So then we were to do the next economic transformation and become high tech designers and computer programmers so we could stay employed. That’s what I did since it sounded like a great idea to me. (choose computer programming because chip design was over my head).
Where we screwed up is we never figured out how to raise the average IQ from 100 to 150, and this left a sizable part of the population on the sidelines. (Mensa says 2% is above 140 IQ)
Once we solve that problem and we transform to the next level, Biotech, we will have 140 million bio tech scientists and engineers. Of course there will still be all the corporate supporting roles in BioTech USA, Inc. This became necessary because Asia and India want to do the high tech transformation too and make more money.
But then we still need to see what the consumer spends the household budget on and determine our market size. Stay tuned.
P.S. Of course we will always still have economists. Someone has to keep track of how we’re doing.
Why do you hate my Freedom?
Rich people have earned every penny, even when it’s passive income derived from rigged insider stock market gambling. They are 500X smarter and more productive than the rest of us slobs. Thery are entitled to living like Czars while the rest of us eat catfood, clip coupons and do without needless luxuries like healthcare and housing. And when they screw up big time, it is our obligation –no, scratch that– our PRIVILEGE to bail them out. Gambling your way to wealth at the expense of everyone else is the AMERICAN WAY. Taxation –especially when it eats into rich people’s gambling and jet-setting activities is THEFT!
Do you want the terrorists to win???
this housing bubble was a failure of government, not capitalism.
I’d agree that bad government policies and quasi-public/private agencies like Fannie Mae & Freddie Mac *did* contribute heavily to the recent housing bubble. But to imply that unfettered capitalism has never or can never blow bubbles without government help is disingenuous at best.
Tulipmania
South Seas
A dozen or more panics during the 1800s
Great Depression
etc….
Run,
One watches the morphing as style remains the same.
hate to say this, but
so far i agree wtih jimmy and tiger as a matter of logic… Robert hasn’t made a case. Not saying he can’t, I don’t see it yet.
on the other hand, one would hope that if “welfare” was operating correctly, we wouldn’t have any “severe” poverty.
Robert
I have the same problem. don’t give up.
ddrew
good beginning. but let me be the bad guy for a moment. if that family is healthy, and they might be, they don’t need to be spending 11 thousand a year on health insurance. granted it would be a good idea if they could… but it’s at least a tricky number to drag into the accounting.
i don’t kow what three times the cost of dried beans is today… but in any case poverty is also very much a matter of “compared to the neighbors” so i’d want to see some “anecdotal descriptions” before i relied on government statistics.
doesn’t mean there isn’t a problem.
tyger
and here i was agreeing with you just a few seconds ago. your logic on the food stamp issue alone is enough to call into question you ability to think objectively. are food stamps harder to get? i don’t know. but the fact that there are more people getting them says nothing at all about how hard they are to get. it might say something about how many people are hungry enough to put up with the depressing business of applying for them.
buff
try it and you’ll see.
buff
i think we should pay what meets the test of human decency. it the ice cream shop has to pay a living wage then maybe a living person would get the job instead of your kid.
i’m all for jobs for kids. and the ice cream shop may be one. but with ten percent unemployment and what looks like 40% poverty (not extreme poverty) maybe we need to get serious about paying a living wage.
tyger
i have not heard … except from the right … that the people in europe have a lower standard of living that the people in america.
and speaking for the high iq crowd, the measure doesnt’ measure a damn thing except the ability to take iq tests, or the tests in college which are much the same.
what’s wrong with you argument is that it is entirely specious. there is not a “fact” in it that you wouldn’t change if it helped make your libertarian case. and no one over the age of fourteen with intact frontal lobes is a libertarian.
The 11 thousand figure is insurance premiums which have probably gone up (wouldn’t know for sure; I’ve got Medicare and Medicade)!
The minimum needs in the Raise the Floor book (chart on p. 44) are very minimum indeed — allowing about $5/hr in today’s money to feed each person — all other expenses spelled out one by one — not one dime for entertainment. I don’t know where they get $11,000 for a family of three as extreme poverty — that literally would not keep a family of three fed and clothed if they were getting free rent (at the shelter?). Silly number to even play with.
Do you even realize that in fact there was no federally mandated sub-prime lending and that basically your entire post was full of Fox News lies? Probably not. That would require critical thinking and listening to multiple sources of information.
Your continued lying about the contribution of the CRA to the housing collapse calls into question your claims about anything. It calls into question your intelligence and honesty. So don’t be surprised when you’re called on it.
No grand explanatory theories, but look at the attached picture. There was a huge jump in the share of the population living below 50% of the poverty line between 1979 and 1983; it’s bounced around since then, and as you note it’s at it’s highest level now & has risen almost without interruption since 2000. But fundamentally the dynamics aren’t much different than they were between 1983 and the ‘welfare reform’ era of the ’90s.
On the other hand, the share of the population living at 50-75% of poverty jumped in the early ’80s, bounced around at that elevated level until the welfare reform era, and then fell steadily; and has generally stayed down (although 2009 may represent a break in that trend). The fraction of the population that is near-poor (those living at 75-125% of poverty, and at 125-200% of poverty) has fluctuated a lot less, and generally trended down throughout the 80s & 90s until flattening out in the past decade (although, again, the increases from 2007 to 2009 are foreboding).
These data don’t seem to support the idea that welfare reform has driven severe poverty higher, so much as (1) the reformed welfare system may be promoting stronger workforce connections among the less-severely poor & near-poor populations that have somewhat benefitted them on the whole, but (2) it seems to have changed little for the severely poor, a cohort that seems to be growing at an alarming rate. Whatever’s happened in our economy to create this large segment of severely poor, it predates welfare reform, and appears to have occurred in the early Reagan years.
[Some commenters below have pointed out that the impact of many income supports for the poor enacted post-reform are not picked up in the official poverty measure, and that’s true. If they were included, they’d most likely strengthen this argument, since the largest of those (the EITC) accrues most to the near-poor, somewhat to the less-severely poor, and least to the most severely poor – i.e. it would pull down the shares of the population falling into the near-poor categories & do little or nothing to the share in severe poverty.]
the fact is that a lot of people can’t earn enough money to pay rent
my ideology tells me that this is a self-solving problem. The cost of rent does not go to the cost of the physical housing good, lord knows it has been depreciated to $0 at this level, but the amount of money the renting population can bear.
I strongly believe that rent supports end up in the pockets of the LLs. If I were King I’d bulldoze miles of urban blight and put in new shiny 3 story garden apartments like the one I’m living in now. It was built in 1989 and is perfectly serviceable as a housing unit. It would cost $60,000 or so to build today.
“and blaming mortgage originators for “tricking” the people who lied on their applications to get loans that banks were forced to make by federal mandate seems a very interesting interpretation of the facts. “
This fact in your head is completely and totally wrong. Defaults are happening all up and down the FICO ladder. The major abuses, and the reason why losses are so great now, is that the IO/negative-am “Pick-A-Pay” product was innovated to a wider class of borrowers. This drove up prices well the hell passed any measure of actual affordability.
CRA was not a death pact. The industry did all that ON THEIR OWN.
“Where we screwed up is we never figured out how to raise the average IQ from 100 to 150″
That was beautiful.
“we were at full employment in 2007. what, did they all leave in 3 years? “
I always need to remind people on economics blogs that the home ATM ran out of money in mid-2007.
That was Peak Debt, $14.4T. Up from $6T at the end of 2001. $8.4T of household debt over 66 months, that’s an average of ~$1000/mo of bubble wealth being injected into the PER-HOUSEHOLD economy EVERY MONTH, 2002-mid 2007.
When the bubble money machine ran out of money, the economy started cratering. This is bleedingly obvious, but a fact that no one knows. It is perplexing to me.
It’s very important to eat an equal amount of rice with your beans. The low quality proteins found in each work synergistically together and form good as meat proteins.
Dried beans are $1 for a 16 oz bag. Forget how much the rice is. Needs cumin for taste tho.
Troy “but a fact that no one knows”
Not so. I knew. But the cat is out of the bag now. A real economist by the name of Richard Koo just told everyone and even came up with a new econ phrase for it called “Balance Sheet Recession”.
Just can’t keep these guys in the dark forever!
(actually I found out from Calculated Risk back in 2006 if I remember right when he first started charting it)
Does U.S. trade policy have a negative impact on poverty levels in the USA? Do the number of illegal immigrants in the USA have a negative impact?
Should anyone be surprised that poverty levels are rising as a result of the recession, trade policy, and presence of illegal workers?
Will not the increased numbers of individual living below the official poverty level further impact the support costs provided by the Federal and State governments? Won’t Medicaid enrollment increase?
Before then I had to count the Porsche population on CA freeways.
When ObamaCare finally fully kicks in and everyone has to buy health insurance, there is also a subsidy for those who can’t afford it. It goes all the way up to $80K household income, on a decreasing sliding scale. So that should be a few bucks to add to your budget calcs if they aren’t in there already.
That’s one more reason I don’t want my SS hijacked. I get a little note from them saying me and my employer already paid in $150,000.
h-
no question that capitalism can also cause bubbles. i have never agued otherwise and don’t know why you would think i had. i was just arguing that this last one has a lot of its origins in government. i think you are ascribing a beleif to me that i have never espoused.
i going to presume you meant to say “higher” not lower. can you lay out some facts on that? what was the eligibility change? is this in real or nominal terms? just ratcheting up the nominal cutoff with CPI is not a change in real terms. i realize that some of the means testing was tightened a bit, but if 13-15% of americans are getting them (a record %) that seems to argue that the program is pretty inclusive. if one in 8 people bought a beanie babie, it would be a huge trend.
i just donlt really see how you get from 1/8 americans getting food stamps to “the program is too restrictive in its application”. how big do you think it should be and how do youpropose to pay for it without creating even more need for it?
Cedric–You don’t need cumin if you know how to cook rice the right way. Which is not the way it says to in the average American cookbook. I’ll spare you. I don’t know about the synergistically, but I do know that beans need fatback to taste good. Also, some Tabasco, a little onion (sauteed first), clove or two of garlic and good salt and black pepper. Doesn’t hurt to throw in some sausage, tomatoes and peppers with parseley and cilantro. Black beans better than white but you can do with white if you throw in achiote. And, for the chile freaks, go for it. Bottom line–the stuff you put in beans to make them taste good costs more than the beans. Long time to soak. Long time to cook. Can’t make ’em in a microwave. Can’t make ’em if you live in your car or on the street.
Poor people in this country aren’t just whinin’ for the fun of it. Now we are down to hungry all day every day poor for this group in severe poverty and hungry almost all day every day for everyone else. Rich country, huh? Not so’s you’d notice down at the Salvation Army Shelter. NancyO
Not sure if this is a purposely a red herring argument, but if you’re really pinning the increase in poverty to what’s gone on with AFDC/TANF, you’re ignoring the entire motherload of economic pressures forcing poverty upload. a mammoth portion of that increase probably constitutes people who purchased homes, lived beyond their means, and are now living off of TANF/UIB et al in their cars, motels, or doubled up. I work on the homeless/poverty problem in a large suburban market and I can tell you, the sorts of folks we are now seeing walking through the doors are unlike any in most veterans of this work have ever seen. Why? Unemployment. Bad home loans. Lack of fiscal austerity (on the part of the folks coming in, they share a bit of blame here too for buying jet skis and hummers while maxing their home at 120% of inflated equity). There are a ton of factors contributing to the increase in this number. These folks were plunged into poverty from an AMI that was probably 80% or greater.
woods
i may not be getting your point, but i have a coupla questions: one is how honest are the statistics.
two is when you count govt aid to the poor, does that make them less poor? this is a real question… i grant we don’t want people starving and living in dumpsters, but giving them food stamps and rent vouchers still leaves the problem unsolved.
on the other hand, if i could opt out of the current job “market” entirely and live in a hovel on what i was able to grow, i’d take severe poverty in a new york minute over de-facto slavery.
TRoy
not only rent suports. your paycheck is keyed to the rent you have to pay. one could also note that the hugh horrible taxes that rich people pay are recovered in the rents they charge the poor people who don’t pay any taxes. economics is complicated. plenty of room for creative self deception.
ddrew
all numbers, and logic, are silly to play with until you understand the reality behind them. i don’t think you got my point about paying for health insurance while you are healthy, but it’ll keep.
Nancy
Cedric was just skewering us… as you know… he’s better at it than i am. or maybe he just likes to chuckle to himself, while i like to watch them bellow.
i like my rice and beans with a little cheese. and milk or beer depending on the mood. i think poor people used to eat better than they do today. purina people chows are too cheap to pass up, and who has time to cook any more?
i guess by creating a need for more of them
tyger means that if they don’t starve to death today they will want to eat tomorrow.
tyger
i at least am not calling for the rich to pay for the poor as the normal order of business. tho in an emergency the rich ought to consider paying for the poor in the same spirit that the farmer feeds his cows. that’s where their wealth comes from. what i am calling for is an intelligent effort to “solve” the poverty problem. that will take some tax money and some recognition that government is NOT the problem. but it need not be, should not be, welfare forever.
i see that the high iq was cedric skewering me, not tyger. my point holds, but i get his too.
Cedric
put me on the side of the troglodytes on this one. that subsidy so the poor can afford health insurance is a subsidy to the insurance companies and to the doctors country clubs.
i don’t mind being taxed to pay for your and my expected costs of health care if the gov at the same time is working on my behalf to control those costs. i do object to being forced to give my money to organized crime. and yeah, the heavy hand of gov is not a trivial issue, even if trivial people are the ones shouting about it today.
so a trillion in bad debt is no big deal? CRA was a part of the problem.
you are missing the roles of the GSE’s. who cares what crap you originate if quasi governemental agencies can use their federal backing to buy it and transmute it into AAA bonds?
they were 40% of the market (and are 90% now). that’s what took a potentially managble problem and mangnified it until the whole market came down.
i’m not claiming that there was no private culpability here or claiming that they did not game the system, but this mess was largely driven and enabled by the federal government. take out the GSE’s and this bubble would never have happened.
manufacturing jobs are not good jobs anymore. mostly, they never were. they were just better than ag. look at the top paying jobs in the US. virtually none are in manufacturing. look at the rich vs poor regions of the US. rich areas are not manufacturing driven. poor ones are.
only 11-13% of US jobs were manufacturing in 2007 and we had full employment. this notion that there are no new jobs is factually inaccurate.
you don’t need a 150 IQ to be in most of the service economy. you are still fixed in the notion that only “making stuff” is the economy. based on our consumption, that’s clearly not true.
you don’t have to make shoes to be able to afford them. most of the most profitable US companies don’t manufacture anyhting. (intel being a notable exception)
i’m not claiming that it doesn;t suck to have no skills and get paid accordingly, but apart fro a brief post war blip in the 1945-65 period, this has always been the case. that was a not to be repeated anomaly.
so 4.9% unemployment and employment/population ratio of over 63% isn;t full employment?
what’s your definition?
the only time in US history we got above that E/P ratio was the 2000 boom when hiring was virtually impossible and the economy was sputtering trying to find enough people.
Yes, beans are for the middle class. (the cumin was for the beans if you make them into refried beans. Cuban black bean dishes are good, and I like jambalya too.)
read cox an alm’s book “myths of rich and poor”
it concludes that is america’s “poor” went off and started their own country, it would be as well off as a typical european family.
our “poor” are their middle class.
then tell me socialism works.
Lehman, Bear Stearns, GS Abacus and whatever we didn’t hear about there, a RE division of MS, all were canvassing originators for sub-prime, no-qual loans so they could do their CDO magic on them. Then sell CDS on it too. Read the kiss and tell books out there.
The GSEs also got into subprime in a small way, but most MBS was still AAA. Problem is lending standards went down on AAA too. Then the rating agencies believed the BS about structured CDOs deserving AAA, which was fed to them by the IBs.
CRA was a crappy idea, but just a tiny part of the problem.
Just wait until Silicon Valley finds that all those high paid skilled jobs (outside of bio-tech, because that’s clearly ours) went to Asia and India. I think we’ll be talking about that in about 10 years.
But that still leaves CEOs, bankers, lawyers, politicians and economists in the US. And they will need doctors, nurses, waitresses, chefs, maids, limo drivers and yacht crew, so maybe we will be ok.
And since when aren’t jobs crappy?
“but just a tiny part of the problem”
Where did the Banks sell there loans to? It surely wasn’t a GSE!
Lies. When I was in Berlin for work in 2006 the city had over 20% unemployment but you couldn’t tell it from the streets I walked to the subway to get to work every day.
Poor people in Europe get housed and fed. They get basic medical care and pensions. This amounts to great economic policy since it keeps them out of sight and out of the way of the remaining productive sector of the economy.
And I notice the German economy hasn’t noticeably suffered in “competitiveness” for their socialistic largess.
Mr. tyger –
further, europe’s poor stay poor. our classes are much more mobile.
You tend to be rather careless with your naked assertions.
International comparisons indicate that intergenerational mobility in Britain is of the same order of magnitude as in the US, but that these countries are substantially less mobile than Canada and the Nordic countries. Germany also looks to be more mobile than the UK and US, but a small sample size prevents us drawing a firm conclusion.
http://www.scribd.com/doc/334774/Intergenerational-Mobility-in-Europe-and-North-America
And if you think having a color TV or a clothes dryer a priori make our poor better off than their poor – well, I guess you are entitled to whatever cheery-picked data support your preconcieved notion. Meanwhile, the U.S. is turning into a starkly have vs have not country.
http://jazzbumpa.blogspot.com/2010/07/income-mobility-revisited.html
http://jazzbumpa.blogspot.com/2010/07/paul-krugman-hits-me-upside-head-with-2.html
Cheers!
JzB
I see that a lot of commenters here have failed to understand the actual goal of antipoverty programs. They are not designed to eliminate or even reduce poverty. They are designed to make it invisible and keep poor people from moderating or or reducing other consumption.
So the answers to the common questions: What is the appropriate level of poverty? How much should be spent on antipoverty programs?
Turn out to be pretty simple: As much as it takes to keep poor people or fear of poverty from altering key patterns of earnings and consumption. Period.
The folks on this thread who want to have fun arguing about changes in the ways we measure poverty or counting color TVs and clothes dryers as evidence that poverty is not a problem are likely to face a real awakening at some point. The lesson of the Great Depression is fairly clear: if you let grinding poverty get out of control it becomes a real consideration for the relatively well off at some point.
If a guy sees an apple seller on his way to work he may not think much of it. If he sees 3 it might not matter. But if he starts going to work past a lot of shuttered businesses and empty foreclosed houses and farms it starts affecting his thinking: “Gee do we really need that 2nd car this year? Maybe junior should go to the community college this fall and start at State U next year” etc…. Poverty can reach a critical mass that drives its own momentum. Any policy maker (or policy critic) who tells you he knows how to measure and manage that critical mass is a damn liar.
First, to address Ty’s remarks on the number of poor household’s with various appliances, the fact that the appliances are there doesn’t mean the householders can afford to use them. It doesn’t even mean that their residences have lights, water and gas. That’s why poor people living in slums dumpster dive and eat what they find. Or live on cereal. And, he doesn’t state what the definition of poor is used in the census report.
Otherwise, I think you’re right that the Dept of Ag is responsible for the poverty level standards. I imagine those standards will never be raised though. This is a rich country and we can’t wake up one day to the shocking news that a whole buncha people here aren’t middle class as we thought–they’re actually poor! Gasp! Oh, noes! Etc. Nancy Ortiz
Jimi,
I never found out where the CRA loans went. But there has been congressional arm twisting on the GSEs to get into subprime since 1995. The GSEs don’t originate loans. I think its very possible that banks did sell them to the GSEs, just don’t know for sure.
If you are really interested in finding out more detail on the entire mess, there are about a dozen books that have come out on the subject in the last couple years. I’ve only read a couple, but decided that was enough. Try Charlie Gasparino’s book for an easy primer on how real estate finance has evolved thanks to the IBs. It was invented by Solomon Brothers in the late seventies. Larry Fink and First Boston was an early adopter. The Gov thought it was such a good idea that they copied it and supersize it with the launch of F&F into securitized mortgages. But they had rules back then…..
Charlie Gasparino works for Fox News, so he should be a credible source 😉
Never mentioned CRA once.
trog
well, you gotta be careful if you are going to be on my side. i fall on my own sword alla time.
besides,
those color tv’s are there to keep them poor. take their minds off everything. except buying more.
anyone who measures poverty in tvs and clothes washers doesn’t know what he is talking about.
look at the living conditions. look at the job conditions. look at the level of fear. look at the level of education.
food stamps and subsidized housing are a first step until we can think of a better answer. telling ourselves that the poor deserve to be poor and the rich must not ever be asked to pay taxes… even for the programs they lobby for… is the path to hell.
Yawn and Particpation Rate was what silly
There is nothing to agree with or disagree with. The asked a question for Robert to explain himself……and of course he did not….nothing new!
Jazz claims the answer is listed in the last four paragraphs……He is incorrect……..nothing new!
Dd2U–I don’t understand your comment. Are you saying that unionization leads to lower wages? And that the minimum wage law causes general deflation in wages? I would appreciate a short answer–something like 50 words or less. Nancy Ortiz
ced-
the reason most of it was triple A is that it was run through the GSE’s. once they stamped them, uit became a governemnt problem.
read roubini’s book on the topic. much better than CG’s.
Walk it step by step from Carter till now. To sit there and claim that The CRA doesn’t play a role call your intelligence into question not Tyger’s. Nobody is saying they are the only cause, but you can’t get to the end result without including the CRA.
Why would banks take that kind of risk on themselves? They aren’t stupid, and they are in the buisness to make money. They did it because they were able to pass the loans on the the GSE’s, and eliminate the risk for themselves for making bad loans. They also did it because of the ratings they would recieve from the CRA, which they were competeing against each other to expand their bank locations, and the rating allowed them to take on more loans with less risk, because they would get better baking from the GSE’s.
You can’t get to the packaging of the loans into securities without any loans to start with. The Rating Agencies, the CRA, Freddie and Fannie and the high risk gambling on Wall Street all play a part.
You remind me of me trying to understand some poker points in a book by a poker guru — before I understood the game well enough to understand him. You, I would guess — as a typical American — have so little idea of getting your share of the economic pie (not just how but even that you should get it at all) that you don’t understand I meant the opposite of what you said. 🙂
My point to all the big brain, progressive economists in the nation is that LEGALLY MANDATED, SECTOR-WIDE LABOR AGREEMENTS is the ony thing in “pure physics” terms that can bring fairness to the American labor market — and they treat it llike a dirty word (never hear it out loud from a single one of the them ever — listening RDAN?). The answer to all these poverty and so-called “inequality” problems (I call it the Great Wage Depression) is lying right in front of our big brains who unlike you have spent their adult lives schooling themselves in economics (unlike me too :-]) and they never pick it up.
Purposelessness (intelligent people not using their brains) is the one thing I cannot (not will not, cannot) tolerate. Just mention sector-wide (all at one time now children) outloud and watch all America’s pay and poverty problems melt away.
Roubini is the one that taught me about CDOs and CDSs back in the beginning when we were just finding out about the mess on his website. The GSEs got bad, but the CDO and CDS stuff from the IBs and AIG was much worse. And the rating agencies were stamping their approval on everything and anything.
Then in 2006, 30% of all loans were variable teasers, neg arms, etc,,,it wasn’t the GSEs doing that.
if we look around this area, we notice how many new or late model cars are zipping around. and we’re seeing upper scale cars all around us, —-mercs, BMW’s, caddies. kids let daddy pay for their cell phone, gotta have a laptop for school etcetc. people moving here think they’ve died & gone to Heaven—cigarettes so much cheaper
You demonstrate the problem well. You too exihibit a a problem common amongst economists, they can not speak in simple terms so people can understand them. The issue is not with people, it is with yourself and economists who can not get their point across without going off on tangents. I suspect the problem is not with Nancy.
I guess you have never read Sandwichman who has posted here on occassion. I have argued labor’s view also. cest la vie
Nancy knows quite a bit on Social Security moreso than the average person here and is respected for her views.
Dude–That’s more than 50 words. And, remember I am not a typical American. I am a hard-core former Social Security Field Office Manager with the scars to prove it. Therefore, I thank you for your explanation. But, I think you might bear in mind that I am humor and sarcasm impaired from so many years of working with the public. NancyO.
Yes…I agree!
Although the counterpoint to the typical talking points we hear about is that there is a long chain of responsiblity to go around, and to place the blame soley on Wall Street and the Banks is hollow, not that they don’t play a role, just that it is not the entire story!
Coberly,
That is only a quick fix! Doesn’t get back on track! We need a new manufacturing base, new energy technology base, and we have to fix the import/export problem…etc…etc…Immigration…etc….etc..Health Care.
AS,
O.K. but compare their immigration policies, economic freedom, culture and population to the U.S. Life is full of choices!
It’s the comparison between Apples and Oranges. Sounds like you enjoyed it there? You probably would enjoy it there, maybe you should consider moving there. I’m sure some of us around here could put together a few Bucks and help you make that happend, only for a permanent basis….of course!
CR,
“That’s one more reason I don’t want my SS hijacked.”
Ha!…..Cedric wants his Cake and he wants to eat it too!. If you had to pick which would you pick?
1.) Keep S.S. and make it work with more Taxes
2.) Keep HCR and see it thru to Single Payer
3.) Keep S.S. & HCR and ride it till she Bucks you, and let the kids worry about it later
4.) Get rid of S.S. and HCR and start over
You pinpoint my point precisely. My issue is with economists and their journalistic (and political if there are any) followers — specifically with (here we go off into space again) how their dumb reptile midbrains (seat of human motivations) screw up the usefulness of their (not my!) giant forebrains.
5)Give me my $150000 back, and then we can start over.
take out the GSE’s and this bubble would never have happened.
nope, the GSEs were sidelined durring the bubble. Golden West, Countrywide and Wamu were making their NONCONFORMING loans.
The core failure was all the alt-a crap with teaser rate stated income, stated asset, NINJA, negative-am pick-a-pay risk layering that boosted “affordability” and thus home prices.
This shit had nothing to do with GSEs and everything to do with deregulation.
jimi
what quick fix? it looks to me like you are calling for the same thing i am: an intelligent policy, not just government handouts… though sometimes that is what is needed.
Cedric
wouldn’t be a good deal.
SS will provide a benefit worth about 800,000 depending on what kind of annuity you can buy. of course if you could have got 800000 including interest on yoru 150,000 or better you could argue you”could have” done better than SS. but at the time you had no way of knowing you would do better.
and while jimi knows he would do better, the 60% of retired people who didn’t do better suggest that the whole economy would be much poorer if we had to pay welfare to support them, or step over their bodies in the street.
I know. I was just keeping it simple for Jimi, with his carpel turrets syndrome and all. That was just my “paid in amount”. Saved money is supposed to pay interest above the inflation rate. That’s what they told us in high school.