roundtable: After a while, nobody seems to care

roundtable: After a while, nobody seems to care

After a while, nobody seems to care

Curtiss Priest (cpriest@juno.com)
Thu, 07 Aug 1997 12:24:34 EDT 

To: ROUNDTABLE@CNI.ORG
Subject: After a while, nobody seems to care
Message-Id: <19970807.122245.7695.1.cpriest@juno.com>
From: cpriest@juno.com (Curtiss Priest)
Date: Thu, 07 Aug 1997 12:24:34 EDT


Archive:  After a while, nobody seems to care 
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CITS Observations on attached article
Dr. W. Curtiss Priest

After a while, nobody seems to care about the economic predicament the
country is in.

Low inflation with low unemployment is seen as so fantastically nice, no
one bothers to ask if low inflation is the start of disinflation into a 
major depression.

Everyone focuses on the reduction of the deficit, rather than the
reduction of the federal debt.  These are different, but you would 
hardly tell from what the media tells us.  Even if the deficit went 
to zero next year, I would be remain mighty concerned about the 
several trillion dollars of federal debt -- which the Japanese 
occasionally suggest they may no longer float.

Bankruptcies?  Who cares anymore, bankruptcies, divorces, death -- it is
all down in the "noise."   You come out of bankruptcy, the finance people 
will still lend to you -- they'll tack on another 5% to the 18% as a 
"risk premium" and away they go again.

That home owners have increased their own debt via refinancing/home 
equity loans from 50% of their total debt in 1988 to 65% of their 
total indebtedness in 1995 is greeted with enthusiasm since the 
payments are tax deductible and they are less than they used to be 
in the '80s.  (Excuse me, but the average cost of money over 100 
years has only been 5%.  When someone gets excited about paying only 
9 or 7%, I get real worried.)

And now all these Americans in debt have even more to lose than their
credit cards -- their homes -- if they can't make the payments.

And this debt financed buying spree will stop.  Finally the banks will
understand that they have paid for the buying spree by holding the bag 
on these refinanced properties.

I could go on, but, nobody cares anymore.

Curtiss

******************************************************


           W. Curtiss Priest, Director, CITS
      Center for Information, Technology & Society
         466 Pleasant St., Melrose, MA  02176
       Voice: 617-662-4044  BMSLIB@MITVMA.MIT.EDU
 Fax: 617-662-6882 WWW: http://www.eff.org/pub/Groups/CITS



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****************************Advertisement********************************
Subscriptions to the Boston Globe can be received by calling 617-929-2000
****************************Advertisement********************************

The Boston Globe, Thursday, August 7, 1997, p. A21

Another tax cut for the rich? Give me a break! 

Molly Ivins

     Having a hard time getting a grip on what's happening with the 
economy? We all know something's not quite right here, but it's hard 
to put a finger on just what it might be. The Dow Jones goes up almost 
daily - big boom there, no question. Millionaires a dime a dozen, as 
it were. Unemployment down, inflation down, all good news.

     But then we see these odd blips. The number of US bankruptcy 
filings reached a fifth straight record in the first quarter, rising 
26 percent above the year-earlier quarter to 335,073, according to 
the American Bankruptcy Institute. (That must be a jolly place to 
work.) Median wages stagnant. Income gap getting worse. Wealth gap 
even worse than that. People working longer hours, needing two jobs 
or two incomes. Que Pasa?

     What we have here is the interesting fact that a rising tide 
does not lift all boats. This defies not only conventional wisdom, 
but natural law as well. How can it be that a rising tide does not 
lift all boats? Some of us may have yachts while the rest of us are 
in rowboats, but shouldn't it work anyway?

     Nope - the problem is we had the wrong metaphor to begin with. 
Or, if you want to stretch the metaphor, the majority of us never 
even made it to the pond and are still sitting with our water wings 
on dry land.

     The problem is distribution. Andrew Hacker's new book (since 
we're on a monetary roll here, it's a gold mine of information), 
"Money: Who Has How Much And Why," contains the following 1975-1995 
increases in average income: . Richest 5 percent: up 54.1 percent . 
Top 20 percent: up 35.4 percent . Second 20 percent: up 13 percent . 
Middle 20 percent: up 6.7 percent . Fourth 20 percent: up 4.4 percent . 
Bottom 20 percent: up 1.5 percent

     Although everyone gained, the top fifth did 24 times better than 
the bottom fifth. And measured by their share of the aggregate, not 
just the bottom fifth but the three above it, all ended up losing 
ground. Indeed, the overall share received by those segments, 
comprising four of every five households, dropped from 56.7 percent 
to 51.3 per cent.

     That's why this "booming economy" story the media keep harping 
on feels so odd to so many of us. The median wage for men actually 
dropped during the 20year period from $24,007 to $22,562 because of 
declining wages for those in the bottom tiers.

     Let's look at a few more reasons why this doesn't feel like a 
"booming economy" to most of us. In 1970, a newly built house cost 
about twice a young couple's annual income. By 1994, the price on a 
typical new home was almost four times their income. You can figure 
out the social consequences of those numbers without my help: a need 
for two incomes, postponing marriage and having children, more young 
people living at home with their parents, etc.

     Allan Sloan of The Washington Post reports: "The biggest trend 
in the US economy for the past 20 years has been the decline of 
manufacturing and a corresponding shift to high-technology, retailing, 
finance, and entertainment."

     The primary source of wealth has gone from making things to the 
business of thinking up things. But, as Sloan points out, this is an 
evanescent form of wealth: "Your sneakers go out of fashion, your 
movies flop, your software becomes obsolete, and suddenly, you go from 
being top dog to being dog food,"

     The second spur to economic growth has been the rise of 
international business: Coca-Cola, Wrigley, and Gillette can now 
market worldwide. Billions of Chinese will soon be persuaded to chew 
on Doublemint. This is all very well for the stock of gum manufacturers, 
but as we are all uneasily aware, the globalization of markets is not 
joyous news for American workers.

     What we have here is a case of Them Who Has Is Them Who Gets: 
those who own stocks and mutual funds (about 25 to 30 percent of all 
households), those who have stocks in their pension funds, and those 
who have been in the market since the mid-'80s. The stock market has 
quadrupled since 1983 and doubled in just the last 30 months. And 
that leaves the other 70 to 75 percent of us out of luck.

     According to economist Edward Wolff of New York University, most 
middle Americans save so little that their assets would sustain their 
lifestyles and consumption for only three months. Mary Leonard of The 
Boston Globe reports: "The average wealth of the richest 1 percent of 
Americans increased from $10 million to more than $14 million from 
1989 to today. But wealth at the low end is actually shrinking, as 
the use of credit cards, debit cards, and home equity loans pushes 
many middle-class families and lowerincome families, who are 
disproportionately minorities, further into debt, out of the 
home-buying market and even into bankruptcy."

     Lots of people have lots of dandy ideas about what to do about 
all this - to be reported upon - but for now, I just wanted you to 
know two things: Numero Uno, you're right, the media are doing a 
terrible job reporting this economy, and Numero Two-o, it was an 
exceptionally dumb time for Congress to give big tax breaks to the 
rich.

Molly Ivins is a syndicated columnist.

***************************************************

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