Bottom 40% Have Negative Net Income

[IMPress Polly]

A remarkable new study published by Ashlyn Still and Jonathan Spicer for Reuters reveals that fully 40% of Americans currently have a negative net income, which means that their living expenses exceed their annual incomes. In act, according to this study, even the middle quintile of the population -- the average American -- is only barely above water financially, and the margin has collapsed.

A few other factoids are also telling: the rate of personal savings has fallen from a high of 11% in December of 2012 to just 3.1% in March of this year, which amounts to a drop-off of more than three-quarters over the last five years or so, including a drop of half within just the last three. The authors also call attention to how, historically, U.S. consumption growth is dominated by the top 40% of earners, while, by contrast, in the past few years, the bottom 60% of earners has accounted for the majority of consumption. Consumption makes up for over 70% of all economic activity in the United States and plays a critical role in economic growth. Meanwhile, serious credit card delinquencies and defaults have surged in recent years.

Put all these facts together and the picture you get is that, while the average middle class American is slightly above water financially, the economic significance of this fact is outweighed by the sheer volume of debt that the working class is accumulating. The poorer 40% of the population (to which I belong, incidentally) is exhausting its savings to pay debts and living expenses; a formula for survival that is obviously not sustainable. Eventually, the working class, which is now fueling the main driver of the economy -- consumption -- will not be able to sustain its consumption levels and have to scale back, which will have ripple effects across the economy, and especially for the barely-above-water middle class population. As the authors point out, what it all means is that "the nearly decade-long economic expansion may be more vulnerable to a further spike in gasoline prices or an escalation of trade conflicts" at present. In an unsustainable situation like this, little shocks can trigger a recession.

While the findings of this study explains a lot, really the telltale signs that (contrary to what you hear from the White House) all is not well with working America have been there already. In recent years, the United States has been wracked by growing epidemics of alcohol and opioid addiction, increasing rates of depression, anxiety, and suicide, and declining life expectancy. But now we can clearly see a big part of why.

[DGUtley]

Yes, it's gotten very expensive to live. Just day to day expenses.

Credit card debt is going to implode soon, I think. I have come to think that debt, generally, is a function of priority rather than income. I have a brother that doesn't have two nickels to rub together. He and his wife make good incomes but have given their kids everything, monster vacations, all the toys, etc. He's filed for bankruptcy three times. Mrs. U and I are anti-debt hawks. I loathe personal debt. We would go without and our kids went without all that stuff when they were young. My uncle that never made 1/5 of what I make was anti-debt also. He died happy and content -- debt free.

I acknowledge that there's exceptions to every rule.

[MMC]

Yes, it's gotten very expensive to live. Just day to day expenses.

Credit card debt is going to implode soon, I think. I have come to think that debt, generally, is a function of priority rather than income. I have a brother that doesn't have two nickels to rub together. He and his wife make good incomes but have given their kids everything, monster vacations, all the toys, etc. He's filed for bankruptcy three times. Mrs. U and I are anti-debt hawks. I loathe personal debt. We would go without and our kids went without all that stuff when they were young. My uncle that never made 1/5 of what I make was anti-debt also. He died happy and content -- debt free.

I acknowledge that there's exceptions to every rule.

This trend is not new: lower-earners have been sinking deeper into the red over the last five years.
Those in the middle managed to earn more than they spent but that margin has collapsed, while the top 40 percent have generally grown their financial buffer.....snip~


I wonder why we didn't hear about it when the Peep was in the White House. Oh yeah, that's Right the Lame Stream was swooning over the Peep.



Of course, they really don't get into those reasons why the bottom 40% began living outside their means. Nor do they talk about why the bottom 40% don't ever try to buffer themselves as the top 40% does.

[Common]

Net income fell starting with bush and plummeted during obamas 8 yrs. There is clearly no doubt that the economy and working americans are faring much better under Trump. Not only is the economy humming there are more people working than in decades and there was an increase in workers average wages across the board.

[Chris]

I learned as a kid not to outspend my earnings. That if I wanted something, I had to earn the money and save it till I could buy it. Older, I was very cautious about borrowing money, plotting out exactly how I would pay it back. The mortgage company told me I couxld buy a house at twice the value I was willing to borrow. My current truck require a small loan paid off in 6 months.

I see people all around me earning less and spending more and wonder how they do it. You can't sustain that.

I suppose people learning it from our big spending legislators who drive the country into debt. OK for them, must be OK for me, right?

Naturally the left looks and sees the economy rising and harps on how unfair it all is. Society owes you nothing.

Besides, wages are going up--from the OP link:

[MMC]

Net income fell starting with bush and plummeted during obamas 8 yrs. There is clearly no doubt that the economy and working americans are faring much better under Trump. Not only is the economy humming there are more people working than in decades and there was an increase in workers average wages across the board.

Yep.


Now to the great economic news. The Atlanta Federal Reserve’s “GDPNow” measure (which predicts future GDP growth based on current data) just upgraded its third quarter GDP prediction from 4.7 percent to 5 percent growth. If that prediction comes true — right before the November elections — Trump’s GOP wins a huge victory.


How good is the economic news? In June, 155,965,000 Americans were employed. That’s the 11th time in 19 months under Trump we’ve set a record for the most Americans working. This guy is Houdini.


Hispanic unemployment set another record low. But even more remarkably, the number for disabled Americans is also the lowest ever.


It gets better. These aren’t Obama’s crappy, low-wage, part-time jobs. High-wage manufacturing jobs were up by 37,000 in June. That brings Trump’s total to 400,000 new manufacturing jobs. Not surprisingly, with the economy booming and a job market this tight, worker pay raises are now the highest since 2008.


But the news gets even better for Trump. Democrats, Ivy League eggheads and the liberal mainstream media think they have a winning/wedge issue with Trump’s trade war. They call it “reckless” and “dangerous.” They keep claiming it will destroy our economy. Well, guess who disagrees? American businesses.


Seventy-one percent of business owners surveyed by the UBS Investor Watch support additional tariffs on China. Eighty-eight percent agree China engages in unfair trade practices. Sixty-six percent support additional tariffs on Mexico. Sixty-four percent support additional tariffs on the E.U. Sixty percent even support additional tariffs on Canada. Trump wins again. The people no longer care what the media say.


Trump rolls back Obama-era gas mileage standards. Liberal environmentalists scream. But that saves $2,400 per car for middle-class Americans. The people cheer. Trump demands work requirements for anyone who gets food stamps. The people cheer.



The Democrat response? Socialism. Free health care. Free money for everyone. Free college for everyone. Free handouts for everyone. Reparations. Open borders.


Trump has hit the daily double. He’s destroyed the Democrat Party and the liberal mainstream media at the same time. Liberals have fallen into a very deep, dark hole. They may never crawl out.....snip~


https://www.reviewjournal.com/opinio...-daily-double/

[Chris]

This will help explain the problem, The Cognitive Biases Tricking Your Brain:

Most of them have focused on money. When asked whether they would prefer to have, say, $150 today or $180 in one month, people tend to choose the $150. Giving up a 20 percent return on investment is a bad move—which is easy to recognize when the question is thrust away from the present. Asked whether they would take $150 a year from now or $180 in 13 months, people are overwhelmingly willing to wait an extra month for the extra $30.

Present bias shows up not just in experiments, of course, but in the real world. Especially in the United States, people egregiously undersave for retirement—even when they make enough money to not spend their whole paycheck on expenses, and even when they work for a company that will kick in additional funds to retirement plans when they contribute.

In economics, it's called time preference. Those who get ahead tend to have low time preference--are willing to forgo immediate reward for greater reward down the road. Too many have high time preference.

Think of Aesop's "The Ant and the Grasshopper."

[Mister D]

Hey, I have a great idea. Let's import more poor people from Latin America.

[Captdon]

Rule #1--Don't spend more than you earn. When you debts go past your essential expensives you are gong to go down the chute. People make bad choices and it's all their fault. Too many people think now and not later.

It's a problem for them and there is no solution except for them to solve.

[The Xl]

Ever since we went off the gold standard, the poor and working classes have had their wealth stolen via runaway inflation. Fractional Reserve Banking is theft.