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Poverty hits the suburbs
Posted By Garth Kant On 03/24/2013 @ 2:35 pm In Front Page,Money,Politics,U.S. | No Comments
The stock market is roaring but that doesn’t mean the nation’s economy is healthy.
Warning signs include a startling growth of poverty in the suburbs and among the elderly who, increasingly, can’t afford to retire. Many other dark clouds are also gathering on the economy’s horizon, not just the nation’s astronomical $17 trillion dollars of debt.
The Dow Jones Industrial Average has made a remarkable comeback from its recession low of 6,594.44 on March 5, 2009, to close for the week at 14,512.03. The Dow surpassed its previous all-time high on March 11 when it closed at 14,254.38.
But the gains on Wall Street aren’t being realized on Main Street, according to a study by the Brookings Institute. It found the number of people in the suburbs living in poverty skyrocketed by almost 64 percent between 2000 and 2011. That’s double the rate of growth of poverty in urban areas, and 16.4 million more suburbanites in poverty.
“I think we have an outdated perception of where poverty is and who it is affecting,” said Elizabeth Kneebone, a co-author of the report, adding, “We tend to think of it as a very urban and a very rural phenomenon, but it is increasingly suburban.”
Poverty is also growing rapidly among older Americans.
Writing in Forbes, Edward “Ted” Siedle says millions of elderly Americans are falling into poverty and the country is facing the greatest retirement crisis in the history of the world.
More and more older Americans face the dilemma of being too poor to retire and too frail to work. Siedle lists a number of causes for the predicament.
He calls “the great 401k experiment of the past 30 years” a “disaster,” and says the actual average 401(k) balance for 65 year olds is closer to $25,000 than the $100,000 claimed by the retirement industry. Siedle predicts, “a catastrophic outcome for at least a significant percentage of our elderly population is inevitable.”
He is just as pessimistic about pensions, warning, “Americans today are aware that corporate pensions have been virtually eliminated and that the few remaining private, as well as the nation’s public pensions, are in jeopardy. Even if you are among the lucky few that have a pension, you cannot rest assured that it will be there for all the years you’ll need it. Whether you know it or not, someone is busy trying to figure how to screw you out of your pension.”
Siedle says the crisis will affect the elderly in a number of ways.
Workers who retired after 2000 will go back to work full-time when they realize they can’t live on their savings and limited health benefits. Workers who have not saved enough will postpone retirement, even though some will face demotions, pay cuts or part-time status. Some will realize they can never fully retire and will work part-time for as long as possible.
Siedle says, “At some point, lack of savings, lack of employment possibilities and failing health will catch up with the overwhelming majority of the nation’s elders. Let me emphasize that we’re talking about the overwhelming majority, not a small percentage who arguably made bad decisions throughout their working lives.”
By contrast, Vice President Joe Biden said on February 25 that Americans are no longer worried about the economy.
“They are no longer traumatized by what was a traumatizing event, the great collapse of 2008,” said Biden, who added, “They are no longer worried, I think, about our economy being overwhelmed either by Europe writ large, the EU, or China somehow swallowing up every bit of innovation that exists in the world. They are no longer, I think, worried about our economy being overwhelmed beyond our shores. But, and I don’t think … there is very little doubt in any circles out there about America’s ability to be in position to lead the world in the 21st century. Not only in terms of our foreign policy, our incredible defense establishment, but economically.”
Almost every economic indicator other than the stock market might suggest otherwise. A survey of the economic landscape shows disturbing trends.
The Consumer Spending Index barely rose in February, climbing to 4.0 from 3.9 in January. (The index measures four components – tax burden, initial unemployment claims, real wages and real home prices.)
Consumer spending, which accounts for about two-thirds of the U.S. economy, also suffered in January. Spending increased $18.2 billion, or 0.2 percent. Chris Christopher, Jr. of IHS Global Insight, called that “anemic” and pointed to weak retail sales. He blamed the payroll tax cut, saying it “hurt many Americans where it counts – in their pocket books.”
The nation’s largest retailer, Walmart, blamed slow sales on higher payroll taxes, delays in income tax-refund processing and higher gas prices.
Americans’ personal income made the biggest drop in January in 20 years. While the administration was warning of dire consequences for the government once the sequestration’s 2.2 percent budget went into effect, ordinary Americans lost 3.6 percent of their incomes in the first month of the year, compared to the last month of 2012. That was a loss of $505.5 billion to Americans’ wallets.
The Commerce Department claimed that if you did not count such factors as December dividends to shareholders, income actually increased 0.3 percent in January. But many companies paid early dividends to avoid upcoming tax hikes. Additionally, the payroll tax cut expired in January, causing most workers to pay 2 percent more in taxes this year.
The Commerce Department reported the economy grew at a 0.1 percent rate from October through December, less than forecast.
Something keeping the U.S. stock market from falling may be little change in inflation. Over the past year prices rose 1.2, the smallest year-to-year gain since October 2009. The rate compares with the central bank’s goal of 2 percent. Excluding food and energy costs, prices climbed 1.3 percent in January from the same month in 2012, the smallest year-to-year gain since April 2011.
On February 26, Federal Reserve Chairman Ben Bernanke strongly defended the central bank’s monetary policy before a Senate committee, saying there was little risk of a spike in inflation in the near term.
Criticizing that policy, Sen. Bob Corker, a Republican from Tennessee, called Bernanke the biggest dove since World War II.
“You called me a dove, well maybe in some respects I am, but on the other hand my inflation record is the best of any Federal Reserve chairman in the postwar period – or at least one of the best,” Bernanke said.
Bernanke found blame elsewhere. “High unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole,” Bernanke said.
And WND reported the real unemployment rate for December 2012 was closer to 23 percent, not the 7.8 percent reported by the Bureau of Labor Statistics.
Commodities expert Jim Rogers, who once managed money with George Soros, says Bernanke has it all wrong and that his monetary policy is merely throwing fake money after bad debts.
In his most recent book, Street Smarts, Rogers says Bernanke “knows little about economics or finance, he has no idea how markets work, and the only thing he truly understands about currency is how to print it.”
He says Bernanke misread the crisis, and that’s why the economy is stagnant. Rogers believes the financial crisis was about subprime mortgage borrowers and European governments not being able to pay their bills. But he says Bernanke has treated it like a liquidity crisis, flooding the system with cash. That’s led to an economy without growth, and dogged by the prospect of inflation.
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