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Charting The Extinction Of American Disposable Income
It was the best of times, it was the worst of times. Given today's excitement at a rallying equity market, we are already hearing chatter on raising GDP estimates even though macro data is benefiting from standard seasonal improvements. However, while these good times are rolling for some (who, we are not sure), Sean Corrigan (of Diapason Commodities) points to our real disposable income. The man on the street's spend-ability has seen the worst five years' growth in half a century.
For four decades, US real per capita disposable income has risen at ~20% a decade. For the average working man, that is a doubling of disposable income in a typical working life. The last 5 1/2 years, however, have seen no change whatsoever - the worst performance in at least half a century.
Chart: Bloomberg
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'The man on the street's spend-ability has seen the worst five years' growth in half a century.'
That "man" needs to starting asking some questions in my opinion.
The "man" is too stupid. As long as the "man ' has chips and a six pack of beer he is happy.
Durden, could you plot Household Credit on this chart for comparison???
huge transfer of wealth from middle to rich in tax burden, too:
http://azizonomics.com/2012/01/03/taxation-nation/
from the link you posted: "Well, far less of the money is coming from corporations, and far more from payroll taxes. That means that a lot of the burden has been switched from corporations to their workers. I’m broadly against that, because it puts the power to invest into increasingly fewer hands"
This type of thinking drives me crazy. Not necessarily because I don't agree with it; but because it takes the exact wrong approach to how we should examine taxation.
Corporations should bear 100% of the income tax burden, and natural human beings should bear 0% of it. Why?
Corporations are creatures of the state; they cannot exist without state sanction or without the legal support of the state. Being creatures of the state, they are obliged to serve their creator, and consequently owe part of their livelihood to the state which created them..
Natural human beings, on the other hand, were created by God. Forcing natural human beings to pay an income tax to the state is equivalent to slavery to the state, as mandatory income tax is by definition a form of involuntary servitude... which allegedly was outlawed by the 14th Amendment. This is self-evident and cannot be disputed.
Are we so brainwashed and ignorant that we cannot recognize this simple, logical truth?
It shocks and depresses me to know that apparently this is the case.
Corporate taxes should be zero.
Corporations do not pay taxes.
They collect money and pass the cost onto the people in the form of higher prices, lower wages, less benefits, less research and development, less dividends, less profits, depending on the elasticity of the product.
wait - small corporations pay worldwide lots of taxes - it's the big boys that can avoid them
so yes, I agree, scrap all corporate taxes and end this tax-benefit for multinational corps
do you have a job for the zillion tax lawyers that big biz does not need anymore?
That chart is quite useless. It shows the mean real gdp per capita spanning decades in a country with among the highest and fastest growing wealth inequality in the world.
If you remove even just the top 1% of the population from the statistics, real income growth has barely risen overall and is likely flat now or lower for the median worker relative to the highs of the 70s.
sqz - you are exactly correct - Corrigan's chart is smoke (like GDP is; REVENUE is what matters).
TYLER - you posted a far superior chart only a week ago - by Stanberry Research, showing GDP Per Capita adjusted into real purchasing power - evidencing that average US spending power today is lower than ever before 1965 (chart start date) - and probably since the early 1950s.
Would you kindly re-post - for your readers convenience and elucidation of comparison?
Thanks.
And for those who don't understand current consumer spending's relative "strength": when 10 million households - i.e. 20 million workers - don't pay their mortgages, they can buy quite a few more heavily discounted (courtesy of squeezed manufacturers, vendors, retail chain employees & layoffs) consumer goods.
Eureka - you are quite correct - Corrigan's chart is just plan wrong. The real per capita income of the average american has declined since the early 70's. source FRED
...and, you completely missed the point.
Maybe I need to work on my communications skills.
Hi Buckaroo
We are slaves to the state anyway and maybe soon slaves to China. Individuals should pay the taxes. That way they know how to vote. Corporations can only vote with their feet.
Hi Buckaroo
We are slaves to the state anyway and maybe soon slaves to China. Individuals should pay the taxes. That way they know how to vote. Corporations can only vote with their feet.
So you think that if me and my friends form a corporation, funded by our pooled savings, we should then then be free of income tax?
The bit about 'passing on taxes' works for everybody who pays taxes, whether or not they form a corporation. It's relatively easy for the butcher, the baker, the doctor or lawyer to pass on taxes. It's much harder for the working man, but it happens as they abandon job areas that don't pay enough.
Your argument assumes total price elasticity. That doesn't exist. More tax means less R&D, etc.
If you meant this as sarcasm, you need to take lessons from MillionDollarBonus.
hey buck, i own a corporation. guess what? my corporation doesn't pay taxes. my customers do, in the form of higher prices, my employees do, in the form of smaller bonuses and layoffs and i do, in the form of less take home pay. every time guys like you take a swing at GE or ATT you end up planting a left hook right on my jaw instead. GE and ATT can lobby for tax breaks. i can't and you, and people like you, are tools of TPTB at my expense.
Nice rebuttal. It seems that some people focus only on the legal fiction of corporate personhood while ignoring the ramifications of the plunder they see as a form of revenge, all in order to make things fair (that four-letter F-word).
Taxation is theft. That there are ways for some to avoid it via the legal facade, but not others, is no reason to ignore this fact.
Exactly. The entities should be taxed via registration fees, franchise fees, etc. That's it... you want to start a company or corporation? Fine, but we'll charge you $150 for having to fill out all the paper work for registration... past that, no tax.
Because of these biases in perception of the wealth gap, "corporations" get the blame... which is ridiculous... there is always someone behind those corporations pulling the strings... and collecting the money. This is the target. [this same perception is also the reason behind large jury awards...]
Of course, if I had my druthers, we'd only have sole proprietorships, partnerships, and limited partnerships, thus eliminating this problem, as well as rescinding the judicially mandated right to vote separately and apart from their owners, but I digress.
...and, you completely missed the point.
OF COURSE your customers pay the taxes in the end...if they buy your products. The point is, they can CHOOSE not to pay the tax by simply not buying your product.
When it comes to income taxes on personal income, THEY HAVE NO CHOICE.
CHOICE versus NO CHOICE. Get it?
Sounds like you like the Fair Tax.
NO, not if the "Fair Tax" includes a tax on personal incomes!
Agree in theory BB, but in reality corporations pass on tax liability to people too, so that wont work.
Only tax that will meet all the requirements is excise, ie sales taxes.
Agree with your reasoning about how a creation of ours has first crack at our lifeblood. I have argued in real life to others about the exact premise that tax on labor is slavery.
Crazy assed world.
pods
...and, you missed my point.
Corporations can certainly pass the tax liability on to their customers. But at least their customers will now have the CHOICE not to pay the tax by choosing not to buy the corporation's products.
But with personal income taxes, people have NO CHOICE but to pay.
CHOICE versus NO CHOICE. Get it?
So when all of the producers of an inelastic product are subject to the tax, then consumers can choose not to purchase?
I think you're missing their point...to live, you MUST buy...from a corporation...therefore, you ARE paying the tax. Sure, you choose whom you will buy from, but you still have to buy it...therefore, you pay the tax anyway. Does it matter HOW the money comes to them? They still collect the same amount...or raise tax rates...or borrow it.
I do however agree...directly taxing my labor is wrong.
Really? So you are saying that before corporations were invented, that nobody could buy anything? Really?
What if you buy products made by partnerships, or sole proprietors? There would be no taxes on those because those entities, not being corporations, would not be subject to income tax.
Or, what if you become self-sufficient-- grow your own food, make your own furniture, make your own fuel? That would dramatically lower your tax burden also.
Think this all the way through!
Your point ignores the supply chain... unless you have perfect vertical integration as a pass-through entity, you're going to be subject to corporate taxation somewhere along the line... gasoline?
That's fine. This isn't necessarily about tax AVOIDANCE, rather it's about where, exactly, in the value chain you CHOOSE to pay taxes. Note that the lower on the value chain you go, the less total tax you are going to pay.
At the end of the day, it's about CHOICE. You CHOOSE where you want to pay the tax, and to a certain extent, you also CHOOSE how much tax you want to pay depending on where in the value chain you buy.
Furthermore, you make these choices in such a way that it won't reduce your income. In a personal income tax regime, a percentage of your income will be confiscated, no matter what, and the only way to reduce or avoid your tax is to make less money. THat kind of choice really isn't much of a choice.
Ok, we got the first retreat and retrench, let's try again.
Practically speaking, I think you vastly over estimate "choice" in the market. The wealth gap essentially dictates where the tax will be paid. In a more diverse and redundant economy, there might be more flexibility in determining where to pay the tax... not so much in the present environment. When a larger and larger portion of income goes to necessities (biflation), the choice becomes starve, be immobile, or incredibly decrease your standard of living OR pay the tax.
Your argument is more fit for an academic vacuum and really has no place in the present economic environment...
If you really want to advocate the notion of liberty, then you need to skip the half hearted measures and middle men and go straight to the abolishment of taxation. Reminds me of "situational ethics."
>skip the half hearted measures and middle men and go straight to the abolishment of taxation
Yes. Theft is wrong, bad, inhuman, beastly, immoral, unjustifiable (per argumentation ethics), and economically destructive (per Austrian Economics).
>
Tyler... seven plentiful years are followed by 7 years of famine... always has been that way since the beginning of time, always will be that way until the end of time.
That is the way it is.
Get used to it and stop whining.
The "man" should be getting paid in gold and silver so the central bank cannot rip him off.
'The "man" is too stupid.'
Once upon a time I might have taken exception to your statement, responding that due to the so-called "media" being controlled by only a handful of corporations (as opposed to over 1,000 in my youth, and regulated as well), but after 40 years of volunteer political activism, warning my fellow Ameritards about the outcomes from offshoring of their jobs, and still meeting adult Ameritards who are either completely oblivious to the exponentially growing jobs offshoring, or who are aware of it and and think it harmless, I thoroughly agree with you, Doc.
Ameritards are simply bloody stupid, and being unaware and completely oblivious to one's environment is the chief indicator of intelligence!
Too late to ask questions GeneMarch....while everyone was asleep and complacent due to stock price 'stability' operations and normalcy bias reinforcement, Obama signs 'indefinite detention' bill, and over the next couple weeks 'enemy combatant expatriation bill' along with SOPA. Ask any questions, get vanished to Guantanamo Bay. Isn't that NEAT!
And some more men on the street....that is wallstreet just got there walking papers. Over 100 to be exact.
WJB Capital Halts Brokerage Operationshttp://www.bloomberg.com/news/2012-01-03/wjb-capital-halts-brokerage-ope...
GOOD!
Let them eat cake and rot on the street.
There are three main components to income inequality.
1. The Federal Reserve and inflation. The middle class and poor do not have the education to deal with inflation. The Fed creating money out of thin air and giving it to Wall Street and indirectly to Washington is complete BS.
2. Transfer payments robbing the working class of their paycheck to buy votes. The percentage has increased from 5% in the 60s to 15.3% today.
3. In 1970 foreign born workers were 4.7% of the population, today 12.3%. The vast majority blue collar workers who depress blue collar wages helping the rich get richer.
http://usa-wethepeople.com/2011/09/income-inequality-explained-for-robert-reich/
If the Federal Reserve and federal government stopped ripping off workers we could eliminate income inequality.
So is this why the market is up or was it that other theory. Does it really matter?
Correct. The theory of the day is irrelevant, as within 24 hours, a new theory is asserted and parroted on the BlowHorn [CNBC] and Bloomberg, sadly. The market has long since disconnected from investing theories, and it will remain disconnected from any and all reality as long as TBTF banks are co located in the room next to where Duncan Niederauer takes his afternoon constitutional.
Even now, the DOW's key rally component, MCD, is in a full on reversal off of all time highs...with DIS about to replace that component as the issue pumped to hold the index. It is about pumping the index...not investing in forward looking earnings.
There is no market...only crooked market makers.
http://www.outpost-of-freedom.com/jimbellap.htm
As far as I'm concerned, 100% of Americans income is "DISPOSABLE" (assuming it's being received in the form of fiat)...
And god forbid you start paying down debt.
Don't worry, they've got a credit-card time-bomb set up to make sure that can't happen. All they have to do is to juice up the Prime Rate a bit, and everyone who carries a CC balance is going to watch their interest payments skyrocket. Revenue will shift from principal reduction to debt service. Those who can't keep up, well, you get principal growth instead. TADA!
Just another flavor of Credit Crunch. Consume at your own risk.
Americans are underqualified, undereducated and too lazy to earn more. Global labor competition draws real income away from the U.S. labor force and it goes where people have better education, more productivity and are willing (or forced) to work longer hours.
Once the obese and lazy U.S. middle class wakes up from their credit-financed-McMansion-owning-and-retired-at-45-pipedream and gets back to a 1950s style work ethic you may see a turn around in the trend. But not before that.
FoieGras... Lecturing on obesity & laziness...
Couldn't help but notice the irony...
The French - the world's biggest importer of duck liver - compare how to the average American on the obesity index?
Freedom Fries mother fucker!
I wasn't aware duck liver was a Muslim dish.
That is funny. But seriously, the French are even lazier than Americans. The place where the French really win is with female libidos. We'll take your French women; you can have the 50 hour work week for the crony capitalist machine.
right ....so let me see if I understand this? The solution is to work like slaves 70-80 hrs a week for the corporate boss and be good little servants and then we will all be richer!!
Thanks but no thanks!
Eat or be eaten. Evolve or perish. Your choice buddy.
The immediate future is about surviving. I can skin a buck, can you?
http://www.youtube.com/watch?v=I4s0nzsU1Wg
You're right, of course, fookerGras, as those people in China and India actually invented and created virtually everything, including the entire computer industry, digital electronics, biopharmaceuticals, aviation and marine electronics, everything, dood.....just how is it you know so much, dood?
[end sarcasm/]
Some loss of skills has happened and too many people do have distorted expectations about the future, but another part of the problem is that a lot of the companies they could have worked for have disappeared. Our steel mills have all closed their R&D shops. Inflation turned over the depreciation schedules and made it uneconomic to reinvest in new capital equipment (killed industries in the 70s) and similarly stupid and onerous regulations continue to kill (not connected and favored) companies now. Did engineers suddenly get stupid overnight or in the battle between the engineer/product guys and the MBA/bean-counter guys did the bean counters win? Is it reasonable that the best job opportunity for most folks with physics degrees is in making radars for the military?
There are a *lot* of distortions out there. We have eaten our seed corn. It is all consume consume consume and no save save save leading to grow grow grow. All of this is caused by people at all levels seeking and (supposedly) obtaining special privileges from the government at the expese of their fellow citizens. Bastiat was right when he observed that "Government is the great fiction through which everybody endeavors to live at the expense of everybody else."
No special privileges, far fewer lazy people.
Overly optimistic. When view as median or excluding the top percent instead of average, i.e. per capita, it's much worse.
I would like to see Household Credit plotted on this same chart for comparison.
But but but Bama is paying the mortgage for 40% of mericans
http://finance.yahoo.com/news/delaying-foreclosure-borrowers-keep-homes-...
In order to keep the sheeple quiet, while v-below-v was all passed over the holidays.
No problem, Obama just signed the NDAA Indefinite Detention for dissenters bill, SOPA internet lockdown bill and the 'expatriation act' next to be signed.
While everyone was mesmerized at stock prices they didnt notice america just got turned into East Germany.
Good luck in the indefinite detention centers, all you dissenters and govt critics, dont forget to bring a towel!
Sheep Dog,
What is it with the Towel? I read another of you posts about what you need for a melt down and the one item you said you needed was a towel.
Not sure why the towel is so important? Please enlighten me.
Thanks
He managed to get hold of hundreds of towels at $1.28 each ;O)
smiler03
LOL +1
You poor, sheltered soul...
http://www.zerohedge.com/news/douglas-adams-explains-innate-fascination-...
Now, read the book and truly live before the Mayan DOOOOOOOOOOOOOOOOOOMMM!
This seems like as good a place as any to throw up this cache of goods(28C3 videos): http://mirror.fem-net.de/CCC/28C3/mp4-h264-HQ/
Thank you, did not want to be so nieve but just did not put 2+2 together. I did watch that but did not know that his post was refering to the riot over towels.
Thanks for the explanation. At least now I get the joke.
Try adjusting it for inflation. Keeping value constant from 1992 give a bit of a different story...
http://i1140.photobucket.com/albums/n579/bearasaur/PMStatsr3_13135_image...
Adjusting for inflation, we have about 1/3 or the real spending value the per capita individual had in 1992.
Inflation...taking a little bite, a little bit every year.
Edit: This is total income for the entire US divided by the total population of the US. Therefore this takes into account enployment, wages, elderly, population growth, infants, the productive, unproductive, talent under utilized, etc. This chart wraps all of it up into one chart that represents the constant value that each individual rates across the entire US. This is the tide we fight. One may beat the average for a time but it is really tough to beat the tide. Good luck with that!
We're riding the surface of a credit/debt bubble that can't be sustained.
www.pmbug.com
It doesn't matter. It's all Bush's fault.
http://vegasxau.blogspot.com
The man on the street Loves walmart and $1.98 towels on black friday
peekcrackers, an obvious plant or too damn stupid to realize that, gives us the same, tired talking point propaganda from the US Chamber of Commerce --- Americans want their GDP, jobs, and strategic assets all offshored so they can continue shopping at Wal-Mart (which demographics clearly illustrate have a majority conservative/neocon/republican shopping base --- and any moron who voted repupub (once upon a time as it has long since not mattered) who makes around minimum wage, demonstrates just how stupid ameritards actually are --- which may validate other points posted which I railed against!
$1.28 http://www.youtube.com/watch?v=paLO5VN3hPM
LOL.... Thanks smiler03 atleast you get my wit .,
+1
If $102 WTI is bullish, wait til $120 WTI. Spending sprees all around.
doomers be damned. market is going through the roof, housing recovery on the way, need to focus on important things like making sure healthcare bill gets enacted, domestic terrorists (half the people on this site) are detained, people are working (in rice fields), prices are stable (stocks and bonds going up averaging out deflating wages)
The only people I know with real disposable income are those working for the government. They don't need to save for retirement. They have incredible pension plans. What they have in their pockets they get to spend. That's real disposable income. For the rest of us every penny we spend we do so with a guilty conscience because we'll have less to retire on or perhaps less to use when we're laid off for the umpteenth time.
they think they have incredible pensions plans waiting for them.......just as homeowners thought they were wealthy with home equity.......just taking the public pigs a little longer to find out that its also a LIE
Numbers on paper.
The only people I know with real disposable income are those working for the government.
Really? I thought that Jamie Dimon made a couple of bucks. Oh well,
Unlike you he probably doesn't know Jamie Dimon?
We are all just getting killed with inflation.
My Property taxes went up 150% in 3 years.
Just a 100 Gallons of Oil is $255. Usually enough for one month.
Every time I go to the store the prices are higher for everything. Especially Beef and fresh vegtables. The stores are having fewer things on sale and even then the sales are not that good.
The cost of Cable and Internet is up.
The cost of Cars are up, plus the cost of Gasoline.
The cost of Car repairs are up.
The cost of plumbers and general property repairs are thru the roof. Like replacing a water heater or appliance.
Credit card interest was doubled. I was lucky as I was paying 9% and their raised it to 18.9% so I paid it off. They then let me write a check at 0% interest for 12 monts with a 3% up front fee.
Taxes on Telephone, water and sewer bills, cabel and internet up. Even in some states sales tax.
Health Insurance costs up 30%.
Plus, many other "COSTS" just to live. Yet, most people are not increasing their income nearly enough to keep even with all of the increased costs.
The only thing for most people to do is to dramatically reduce their spending, run up their credit or even tap their 401K and savings. Maybe a combination of all of the above.
For Seniors it just may be getting a Reverse Mortgage just to make it thru and then there goes the Inheritance for their Children to buy them out of Debt.
Good thing I finally got a raise this year (first time in three). Without that extra $.25 an hour, I'd be screwed.
However, inflation is closely linked to disposable income. The reality is that if Americans don't have enough disposable income, inflation cannot be sustained.
See this chart: http://research.stlouisfed.org/fredgraph.png?g=3Iv
I still contend that Americans are basically idiots when it comes to managing their finances.
Everything you said is true. BUT--you have to learn to live less expensively in the first place. You can't manager higher gasoline prices except to operate a vehicle that is as fuel efficient as possible. Drive less, if you can.
Car repairs? Learn how your car works and learn to fix it. Everything. That may not be possible for some people, so find someone who sidelines as a mechanic, they do exist. People buy such shitty, expensive cars. They don't have to bear that burden except they are vain. Learn to not be so fucking vain!
Ditch cable, ditch Internt (I have to have Internet because of my job, it's a cost of doing business). Cable is gone from my life and my family's lives--they don't hardly miss it. Television is all just garbage thrown into your life to distract you from doing anything meaningful. It is a drug. So are video games--it makes me sick how many so-called adults while away their lives with video games. I'm not saying zero video games, I'm just suggesting that they are another kind of drug to keep the population soft and easier to manipulate.
Credit cards--you don't need a credit card to live. It's a convenience only.
Taxes--yeah, they are fucking us on taxes. Welcome to the USA.
Food--I hear a lot of complaints about food, but I don't think people understand how to grocery shop, quite frankly. Yes, prices are definitely up. Here's some advice--learn to make everything yourself. Eat less. Don't buy overpriced convenience items. I used to buy the snack crackers like Ritz, but now they are $3 a box. You know what? Fuck them. They can eat all of their fucking crackers at the price. See how they like that.
All in all, the only thing you can do is react. Vote with your feet.
aerojet
" I used to buy the snack crackers like Ritz, but now they are $3 a box."
Hence my nic :-)
These are very good times for tobacco farmers and cigarette makers.
Undertakers are doing well and beer sales are foaming.
Gun and ammo sales are shooting up.
SWAT teams are much in demand despite another record growth year.
The TSA cannot hire touchy-feely airport guards fast enough.
Oncology is still growing malignantly,
and small businesses which teach people how to start a small business and
collect their tuition from uncle Sam are very interesting as well.
Thjere's a silver lining in every cloud, eh?
I really don't know what to make of the gun and ammo sales supposedly being up. It seems like all the major US gun manufacturers are barely keeping the lights on. I sense there is something wrong with the picture and that the wrong conclusions have been drawn from it. Ammo prices are up. Seems like there is gigantic glut of firearms, though. Also, nobody is actually out shooting. The ranges are no busier than they ever were.
I agree. I know quite a few salesmen and I watch a lot of auctions online and I don't see a lot of real sales activity. I'm sure there was a christmas/black friday spurt, but it seems like a lot of glut. There is going to be a lot more glut as inventory comes back on the market when the apocalypse doesn't happen before a liquidity event for the gun owners. That 30 gun collection ends up being an easy target for liquidation in a pinch. Basically keeps a ceiling on future civilian sales.
This is the same mall ninja alert that came when obama was elected... all those black rifles are going to get liquidated in deleveraging episodes.
But, gee, Mista Paulie Krugnutts.... How can we be bleeding "disposal income" when the gubbermint is printing all that money and spending it like drunkin' sailors? We should be bazillionaires! And I DIDN'T get that fucking PONY for Christmas! .... you Nobel asswipe!