Saturday, 31 May 2008

Economic Hardship

I've waited a long time to write this post. I wanted to wait until my blood stopped boiling from another post I read written by someone else some place else. You know who you are.


I waited because I didn't want to be overly emotional but I reckon that even after waiting this long that is going to be hard to do.


Sure there are people out there who live beyond their financial means and use their credit cards when they should be using cash. They buy houses they can't afford and Starbucks every morning instead of their utilities every month. They overindulge their children with expensive toys never teaching those children the value of money. These people are irresponsible and should suffer the consequences of their bad decisions.


These are not the vast majority of people suffering from the current economic landscape.

The people suffering are those who have managed their money carefully making sure to put away a little bit each month into their emergency fund for a rainy day and a little bit more towards their retirement fund. But the fact that wholesale gas prices have risen from $25/barrel to over $120 in just 5 years has meant that you have to make a decision to pay either the gas or the electricity because you simply can't afford both. The same price increase has meant that people can't afford to fill up their cars with fuel to get to work. and don't give me that nonsense about go buy a car that gets better gas mileage. If they had the money to buy a new car they'd pay their gas and electricity. and the increase of food prices at the grocery store have risen by over 7% in 6 months have meant that their food bill has gone up so dramatically they no longer have money for retirement or rainy days. They struggle to pay a mortgage on a home they've paid for 10 years due to the misguided attempt to control inflation with interest rate manipulation.

You can live in your big cushy house with your big salary smiling that smug smile whilst you look down on those who have less than you warm with the feeling that you currently reside at the top of the economic pyramid. I hope that you never lose your job particularly as you get older and the younger generation proves your ideas old fashioned, skills obsolete and your experience irrelevant. I hope your family is blessed with good health and no one close to you is critically injured or diagnosed with a terminal illness not covered by your medical insurance or for which there is no cure. Heaven forbid you even find yourself in the middle of the pyramid because the path from the middle to the bottom appears to be getting shorter every day.

In the meantime I am looking for pennies in the sofa.

11 comments:

Shirley said...

Well said, LaDawn! I hope you get a vote here this year.

Joe B said...

Wow, whoever sparked this post sounds like a mean SOB. I wonder who that could be? Not knowing who this guy is, I have a response. I must be careful with this response since everyword will be scrutinized (tough to be thorough and work at the same time).

My view focused on the people who abused the system. I am well aware there are people who have to make choices, tough choices everyday. Some dramatic (medicine vs. dogfood) and some not so dramatic (starbucks or a gallon of gas).
I appreciate the attempt to be objective, but your arguments appear more emotionally based. My own mother would argue that she is in that situation. Fact of the matter is, she is not. This entire post, despite your attempts, is emotional and anedotal (Sp?)

Tough personal economic situations, I am speaking from experience, should not be permanant. If they are, then that's a life changing event. I will attempt to address both.
---There are times when (food and energy) prices rise faster than wages. Its generally called inflation. This affects almost everyone and choices have to be made to get yourself through tough economic times. The purpose of saving for rainy days is to use the rainy day money.
Hopefully you were able to muster up enough cash cover your particular rainy day. Not everyone can save for a rainy day and stuggle day to day to make ends meet. For those people, in America or in the UK, there are mountains of social programs to help people with their utilities, food, day care and even how to be a raise a healthy girl. It took me five minutes to find the following three programs in the US.

Low Income Energy Assistance - http://www.acf.hhs.gov/programs/ocs
/liheap/
Growing US Subsidies - http://www.cato.org/pubs/tbb/tbb_
0611-41.pdf
Child Care Subsidy - http://www.opm.gov/Employment_and_
Benefits/WorkLife/FamilyCareIssues/
ChildCare_Subsidy/index.asp

Given we have a capitalistic US economy, there has to be tons more of these in the UK. These programs grow in the US year after year after year. Some of these programs actually advertise! Now that is crazy. Why? Do they advertise because they care? Not really, some do.. but if they don't get people to use up their money give away's, then their program gets canceled. I know for a fact that Welfare advertises in several states.

Life Changing Events: I consider the following life changing events - diagnoses of a terminal illness to myself or someone in my family that insurance won't cover or a sudden death of my spouse or myself. While I can't avert my own sudden and tragic death (hopefully never happens - I do travel a lot however) life insurance and estate planning or a simple will can help ease the burder of death. I am heavily insured. I have disability and life. My wife doesn't work, but she also has life insurance. I'll admit I am behind on the estate planning and I have to get on that soon.

Is it that simple, not entirely. But people have to make choices. I grew up poor, I paid for college. I didn't have health insurance while in college. I wasn't worried.. why? Well, if I broke my leg uncle sam is going to pay for it. Its a federal law. US Citizen, Illegal Alien and everything inbetween.
Everyone is covered. We have SCHIP (Children) Medicaid (poor and disabled) and Medicare (Elderly). All programs ready to go bankrupt! Of course employer paid insurance.
The UK is practically going bankrupt with insanely high tax rates and free healthcare for everyone! That's the wrong answer. Prices will never go down when gov't runs anything. Here's a dirty little secret.
Did you know most employer insurance programs don't cover lasik surgery. You are on your own there. What does that mean, people like me have to shop around for a good deal or wait for prices to come down. More and more doctors enter the lucrative field. Competition ensues and prices drop. Who are the early adopters of this expensive surgery that drive the prices down.. you guessed.. Evil rich people with cushy jobs.. That's a free markets. The very second insurance covers Lasik, prices will shoot up.

Bottom Line, I believe in a safety net. I appreciate everything I have because I was forced to make choices as well. Insurance in College (or no insurance rather) being one of them. I can site many more.

Don't have time to do much proof reading, hopefully this reads ok.

Love... Joe B

Joe B said...

My question back to you, or anyone..
What is your solution? More government programs? What policy can Barack Obama, Hillary or McCain do to solve it? I challenge you to come up with that policy?

What is the solution?

The new recession is slow growth, recessions used to be negative growth.

I don't like doom and gloom. I try not to participate, don't mis-interperet that is not being generous and helping others. The world and the US economy is not in another great depression. Most people, NOT ALL, are in their situations as a result of their own doing.

At some point in your life, now matter how poor you are how bad your situation is, you are responsible for yourself.

Government is not.

LaDawn said...

If you weren't so bloody condescending I might actually read what you wrote but you are so I won't.

Try this: http://www.time.com/time/nation/article/0,8599,1809950,00.html?xid=newsletter-weekly

My world is full of these greys not the black and white of yours. Not everyone can afford estate planning and life insurance and health insurance you idiot. Didn't you read? They can't afford gas and electricity. HELLO?!?!

Janell said...

I am probably living barely above pverty level when it comes to annual income, as are most of my friends and the people I work with. I am not personally acqauinted with anyone here who can not afford gas and electricity. Or even cars, cell phones, cable tv and home computers with internet access. And I've never known anyone who has been denied medical care at any hospital in this state. Who are these people? And what IS the solution?

LaDawn said...

oh and none of these stories are anecdotal. These are real people, real friends, real stories.

LaDawn said...

I wouldn't betray their confidence and reveal their names here but some of them are not far from you Janell.

Joe B said...

1. I thought I explained very early on (Months ago on different posts), I hope that my passion is not mis-interpereted as anger or condasencion.
2. The way I used the word anedotal was not to imply that you made it up (how did you know that word was there if you didn't read my post.. hmmmm).. The word anedotal in my context was individuals cases which are 100% true but doesn't necessarily represent the entire population as a whole.
I have family in that situation, but not to the point where they can't afford gas. Adrian's Brother (Norm) is probably in that situation as well.
3. Idiot? I thought we can keep these debates civil...At no point was I mad, I even used sarcasm calling myself a SOB. So does this mean we won't be having dinner again?
4. I am aware not everyone can afford estate planning or certain insurances, etc, etc.
5. I understand grey, my answer is, I don't have an answer for someone who is working and barely getting by. Can't afford to go to work and can't afford not to go to work, can't earn enough money to pay all the bills. I don't know the answer. My point was, help is available. I don't know what else to say.

LaDawn said...

1. Passion is no excuse for condescension (you need a spell checker, dude).
2. My cases are no more anecdotal than yours are. You say nobody is suffering or if they are it is their own dang fault. I’m saying that is not the case. I know some who are suffering and it is their own dang fault but most I know are solid middle class families who are genuinely struggling to make the pennies add up.
3. My blog I can do what I want. Reserving right to rescind dinner invite.
4. Not being able to afford these luxuries can lead to a very slippery slope downward particularly when a family death or illness or accident happens.
5. The middle class are the sufferers. Now I don’t know what your income is but I do know at what company you work and roughly your position within that company so I can make some educated guesses. Roughly 9.7 million Americans earn between $100,000 and $200,000. 2.3 million Americans earn between $200,000 and $500,00. 0.5% of Americans earn above $500,000. So if you make more than $100,000/year you are in the top 10% of wage earners. 90% of Americans have household incomes of less than $100,000. (This data comes from the IRS itself.) 50% of Americans earn less than $30,000.
The help you reference is for the out of work or below the poverty line which does represent 12% of the population (which in America is defined as $21,200 for a family of 4).
So if I subtract the 12 from the 90 I get 78% of the population representing the middle class. It’s the lower end of this 78% which are currently struggling. Lots of programs are designed to help the 12% and maybe even the bottom 20% but that leaves a lot of people out there just trying to do a bit better than their parents did (many parent’s dream for their child).
The rising cost of living is extremely disproportionate to the wage increases. Many people have had their salaries either frozen or been given less than the official rate of inflation (which is always lower than the real cost of living due to the archaic way in which inflation is calculated).
Maybe all you are lucky and don’t know any of these people but I personally do. Some of them read this blog. Some of them are my best mates.
I don’t have solutions. I wish I did. If I did I wouldn’t be doing the job I’m doing. I’m good at the job I do. I’m afraid I have to leave the job of economics and public policy to the experts (although not the current administration, as they don’t appear to have any experts in anything on board). I know the answer is not massive handouts.
What we can do is have compassion. Stop judging. End of.

Joe B said...

1. We finally totally agree on something, I need to spell check my posts!
2. My cases are not anecdotal and I never said nobody is suffering. I've posted many times on OSM statistics that sited more demographics on what it means to be "poor" in America. I never said I don't believe anyone is suffering. The American poor and the British poor and middle class have people that are suffering. My point is, on an aggregate basis, the "suffering" is over stated. Let me dig up the numbers on mortgages, taxes and poverty again. This post will probably be buried by then. So I'll probably just re-post on OSM.
3. I guess dinner is off. That's unfortunate.
4. Family death / accident aside, Not exactly sure what you mean by this. This is somewhat my point. Poverty is in the process, as is economic recession, of being re-defined. Despite all the economic hardships occurring, legit and il-legit, there is no place I'd rather be in "poverty" or in the middle class or the working poor than in the USA. There is no other place on the planet that affords more opportunity to rise out of poverty or to move up the economic scale than the good old US of A. I to a State University, I had average grades in HS and came out of college with a 2.6GPA. I still managed to get two bachelor's degrees and one minor in economics. I came out of college with $35K in debt and was making 30K a year. I took an extra job, in the evenings selling shoes at Dillard's, to make extra money. I did that for 2 yrs. Friends would invite me out, I couldn't really afford to go out because of the bills. I drove a crappy car (89 Nissan Sentra - red and rusty) that actually slowed down when you turned on the AC. Not once did I accept help from anyone. My mother, is on Medicaid, which is government insurance. She is considered the working poor. Yet has a son who upper income? What should I do about it, pay her bills? She knows when times are tight, I am good for groceries or any basics she needs. I am good gift giver on Mom's day, Christmas and b-day. Outside of that, I don't subsidize. She asked me for money, very recently, to help purchase a new couch. I said No (How mean a SOB do I sound like now, but this is the truth), because she has the ability to earn more than she does and in my opinion chooses not to. I offered to pay for her flights to Miami and Chicago to come see her grandson (cle to Mia is expensive) and she declined.
5. UR Right, I earn over 100k. The key word is "earn". I earn every penny I bring home, I have absolutely zero guilt about my paycheck and zero guilt about how I live my life. I am generous with what I have (except for couches to mom) to people nearest to me and I give to my church and charity (United Way, but mostly adopting US soldiers like my sister). I told you where I came from, and my wages have outpaced Cost of Living. A lot of it still comes down to choices. One my nephew's, who is a union laborer, recently lost his job. He lost the job because he went on strike over an additional 2% pay increase. Instead, the biz shut down and moved to another area. I told him to cross the line and he refused. I told him he should consider moving from Cleveland to where jobs are better and he could make more. He was not interested in moving. A good friend of mine graduated with me, he's struggling a bit to make ends meat. He has a wife and a 2 year old. I practically offered a job without interviews for more money if he moved to Chicago (working for me). He refused. My trade off for my success is I am willing to move around the country and travel a significant amount. The cost is time away from my family and home. People are not "given less than the rate of inflation" and are not given money in generally. They earn it. I don't consider myself a very lucky person, I made most of my own luck (as did you by the way). If the struggling people have cell phones and can read blogs (access the internet) then times can't be that tough. If you need money for the electric bill, cancel your mobile service and internet perhaps? I'd rather eat than surf the net. Next post, is what I think the solutions are...

Joe B said...

What I'd do... Going to post on OSM
--Begin drilling in Anwar, Utah and North Dakota immediately. The action alone would drive the price of oil down by 25% without a drop being harvested.
--Build 1 nuclear power plant per year for 10 years
--Cut Federal Income Taxes by 2% per year, for 4 years for a minimum total of 8% over 4 years.
--No public assistance for legal immigrants for 5 years. Cut all public assistance to illegal immigrants (aliens)
--Increase pay for active duty combat troops by 10%.
--Eliminate all Farm Subsidies to corporations
--Eliminate all earmarks
--Eliminate all subsidies for private mortgages
--Recind all laws requiring lenders to lower standards and lend money to people to buy homes who would not otherwise qualify (a big part of the problem)

Who is thinking tax cuts for the rich people with cushy jobs who don't deserve it?
This is the data for calendar year 2003 released in October 2005 by the Internal Revenue Service. The share of total income taxes paid by the top 1% of wage earners rose to 34.27% from 33.71% in 2002. Their income share (not just wages) rose from 16.12% to 16.77%. However, their average tax rate actually dropped from 27.25% down to 24.31%
Think of it this way: less than 3-1/2 dollars out of every $100 paid in income taxes in the United States is paid by someone in the bottom 50% of wage earners. Are the top half millionaires? Noooo, more like "thousandaires." The top 50% were those individuals or couples filing jointly who earned $29,019 and up in 2003. (The top 1% earned $295,495-plus.) Americans who want to are continuing to improve their lives, and those who don't want to, aren't. Here are the wage earners in each category and the percentages they pay:
The top 1% pay over a third, 34.27% of all income taxes. (Up from 2003: 33.71%)
The top 5% pay 54.36% of all income taxes (Up from 2002: 53.80%).
The top 10% pay 65.84% (Up from 2002: 65.73%).
The top 25% pay 83.88% (Down from 2002: 83.90%).
The top 50% pay 96.54% (Up from 2002: 96.50%).
The bottom 50% pays 3.46% of all income taxes (Down from 2002: 3.50%).
The top 1% is paying nearly ten times the federal income taxes than the bottom 50%!
And who earns what?
The top 1% earns 16.77% of all income (2002: 16.12%).
The top 5% earns 31.18% of all the income (2002: 30.55%).
The top 10% earns 42.36% of all the income (2002: 41.77%); the top 25% earns 64.86% of all the income (2002: 64.37%) , and the top 50% earns 86.01% (2002: 85.77%) of all the income.

Source: IRS Website and Rush Limbaugh.com. You can easily google this as well...