The year of the 1%ers

What bitter irony that in the year following the re-election of the most left-wing President in history, America's wealth and income inequality continues surging to new highs.

Real estate is re-bubbling, the stock market is skyrocketing, but job creation is slow and the new jobs tend to be low-paying and/or part-time.  Real median household income is still well below where it was a decade ago.

There are many reasons for the growing inequality.  At the top end, Fed easy money is at the top of the list for increasing stock and real estate wealth and incomes in banking, real estate development, and related industries.  The crony capitalist / corporatist regime in Washington D.C. is not far behind, with the Washington suburbs becoming one of the wealthiest areas in America based on buying and selling policies that rule the rest of us.

At the other end of the spectrum, automation and outsourcing certainly play a large role in the decline of the middle class.  But throughout history, jobs lost to technology have been replaced by new jobs in new industries.  Is this time structurally different?  The new Obamacare mandate certainly doesn't help.  Why would businesses hire more full-time employees with expensive Obamacare mandates when they can much more cheaply hire part-time, or even outsource or automate?  High consumer indebtedness, too, surely discourages business expansion, as there's no point making more products if the customers are maxed out.

What's the outlook for 2014?  Wall Street strategists see an acceleration in economic growth based on the housing rebound and the domestic energy boom.  That's certainly plausible, and even looks like the default scenario barring an unforeseen shock.  Rising health care costs due to Obamacare could certainly be one such shock, but would likely take more than a year to derail the recovery.  So a best guess for 2014 would be more of the same: Wall Street and Washington lobbyists getting richer, the middle class struggling under heavy debt loads and stagnant income.

Given that outlook, Charles Hugh Smith's timeless advice seems especially timely:

Debt is serfdom, capital in all its forms is freedom. The only leverage available to all is extreme frugality in service of accumulating productive capital.

Get out there and accumulate some capital. The outlook ain't getting any better for labor.

News you can use

McDonald's internal employee web site gave employees advice on how much to tip their maids and pool boys.

'Twas Christmas Eve, Babe

Richard Riordan and Tim Rutten have absolutely no idea what they're talking about

It's bad enough when one person writes something obviously wrong (like Chriss Street did last week).

But how do two supposedly intelligent people collaborate on a short editorial and both not realize that what they are writing is ridiculous?

Richard Riordan and Tim Rutten in the Sacramento Bee, on whether to default on municipal bondholders instead of cutting pensions:

Some will argue that it’s better to hurt “fat cat” investors than retirees on fixed incomes. That’s nonsense, however. The majority of municipal bonds are purchased by funds whose shares are held by private pensions and individual 401(k) accounts precisely because they’ve been seen as low-risk investments. That means that trying to resolve a municipal bankruptcy entirely on the backs of bondholders just spares one group of working people by hurting another.

That's nonsense, however. Municipal bonds are tax-free (other than the short-lived Build America Bonds), so it would be financial malpractice to put them in a tax-sheltered account such as a pension fund or 401(k). The tax-free status is of most benefit to high-net-worth investors, and that's who owns the vast majority of municipal bonds (whether through a fund or held directly).

There are plenty of reasons not to advocate default before pension cuts. But pension funds and 401(k)s holding muni bonds is not one of them.

What to get for the WCV reader who has everything

Zombucks, the currency of the apocalypse. My favorite is the Walker (above), which is sold out but you can still find it on eBay.

New York Times illustrates ObamaCare Cliff

As we've said over and over, it's all about the incentives.

ZeroHedge has pointed out the welfare cliff, where government payments punish work and reward quitting your job or cutting your hours.

Now there's an ObamaCare cliff: middle class families are screwed if they have to pay the full price of ObamaCare. The solution? Cut back on work.

Ginger Chapman and her husband, Doug, are sitting on the health care cliff.

Doug and Ginger Chapman with their son Charlie Galanes, 11. They are looking for new coverage after their plan was canceled.

The cheapest insurance plan they can find through the new federal marketplace in New Hampshire will cost their family of four about $1,000 a month, 12 percent of their annual income of around $100,000 and more than they have ever paid before.

Even more striking, for the Chapmans, is this fact: If they made just a few thousand dollars less a year — below $94,200 — their costs would be cut in half, because a family like theirs could qualify for federal subsidies.

Yeah, that's a great economic incentive for America. Punish work, reward people for cutting their incomes.

They'll turn us all into beggars 'cause they're easier to please...

Not much thinking going on at American Thinker

At the "American Thinker," a relatively widely-read conservative web site with serious writers and real staff, Chriss Street makes the assertion:

One of the reasons the reported unemployment rate isn't higher is that the State of California's [sic] statistically considers all 1,427,000 welfare recipients to be "employed."

No evidence is given to support this assertion; the link is to a blog that makes the same unsupported assertion.

This statement was so ridiculous on its face that I responded instinctively:

Get your facts right, moron.

All welfare cases are not counted as employed in the official unemployment stats. Where would you even come up with something so absurd?

Admittedly, it's bad form to initiate a discussion by calling someone a moron, but the combination of ignorance and arrogance by a publication proclaiming itself the "American Thinker" is enough to make me do Very Bad Things.

Street responded:

It is referred to as "welfare to work". It can be training, counseling or education that is treated as "employed": http://www.ppic.org/content/pubs/report/R_512CDR.pdf

... which obviously doesn't support the assertion, but does give an indication of where Street came up with such a dunderheaded idea.

My response:

If you have any sources to back up your assertion, I would be most interested to read.

From the link you provide: "As Table 3 shows, less than a third of parents in CalWORKs families were working at all in 2009 (27%)"

As I'm sure you know, the enforcement of the "job-related-activities" rules are pretty lax. Basically, you say you read the help wanted ads and put in a job application somewhere, etc., and they're not going to kick you off welfare.

But participating in a minimal job search or "training" enough to get TANF doesn't count as employment. The unemployment stats come from the BLS household survey, where they ask people if they're employed, looking for work, etc. Looking for work doesn't count as employed.

http://www.bls.gov/opub/mlr/2006/02/art2full.pdf

http://www.bls.gov/news.release/empsit.nr0.htm

So where do you get the idea that nonworking TANF recipients are being counted as employed?

Credibility is a precious thing, and easy to lose. American Thinker squanders it by publishing unvetted material from unproven writers.