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Economy: Effects

Our economic policies affect the quality of your life in many ways. In this section we'll report on those ways.

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U.N. poverty estimates far exceed Trump administration's

2018-Jun-25By: (External links)

The U.N. says 18.5 million Americans are in 'extreme poverty.' Trump's team says just 250,000 are.

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Top 1% saw 95% of recovery from recent recession

2013-Sep-24By: Barry Shatzman

If you've been reading about the country's economic recovery but wondering why you're not feeling it, you're not alone. About 95 percent of the gains went to those making at least $394,000 a year, according to a recently published report.

The report by Emmanuel Saez, director of University of California at Berkeley's Center for Equitable Growth, shows that the top one percent of wage earners (those making more than $394,000 a year) saw their incomes grow by more than 30 percent between 2009 and 2012. Average incomes for those earning less that that rose by less than half of one percent in that same time.

Prior to the recovery, incomes for the bottom 99 percent fell by the largest amount in any two year period since the Great Depression of 1929-1933 - more than 11 percent between 2007 and 2009.

Saez attributes the disparity between the recoveries of the top one percent and the rest of the population over the past three years to several factors, including...

o The increase in the share of total wages earned by the top one percent - from 5 percent in 1970 to 12 percent in 2007.

o The decline of progressive tax policies and worker protections.

Drastic cuts in the federal tax on large estates could "accelerate the path toward the reconstitution of the great wealth concentration that existed in the U.S. economy before the Great Depression," he adds.

To read the 10-page report titled Striking it Richer: The Evolution of Top Incomes in the United States, click here.

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3 out of 4 Americans lack sufficient emergency savings

2013-Jun-26By: Rob Dennis

Three-quarters of Americans are living paycheck to paycheck, according to a new study.

The survey of 1,000 adults found that only 24 percent have enough money in their savings account to cover at least six months of expenses. Half of those surveyed have less than a three-month cushion. And 1 out of every 4 Americans has no savings at all.

The main reason - according to who reported the study - is stagnating wages, leaving people without the extra cash to put aside in case it might be needed later.

For those who do save, three out of every five Americans keep those savings in a traditional savings account. That might be the safest place for it, but you won't see its value appreciate. For a $1,000 balance, 95 percent of banks pay less than $2.50 annually in interest.

And fees can negate even that small amount. Fees vary from bank to bank, but they can range from having no activity for six months to making more than three withdrawals in a month, according to Consumer Federation of America (CFA).

For more, read this New York Times story.

To see the results of the survey, click here.

To read the CFA report on savings accounts and banks, click here.

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Economy recovering as a whole, but not for most Americans

2013-May-31By: Rob Dennis

The stock market is at a record high and the real estate market is steadily rebounding, yet the average American has rebuilt less than half the wealth they lost in the recession, according to a report by the Federal Reserve.

Households lost a total of $16 trillion between 2007 and 2009. The majority of those have only have been able to recapture about 45 percent of that, the report shows.

Most of the recovery - 62 percent - has come from stock market increases. That means most of the benefit has gone to those with much of their wealth in stocks.

Younger people, those with less education, and black and Hispanic families tend to have most of their assets in their homes, as well as having higher levels of debt and less money saved. These families lost the most in the recession, and have recovered the least.

For more, read the Washington Post story.

See our discussion on tax rates for a better understanding of how the wealth in America is distributed.

To read the full 34-page report from the St. Louis Federal Reserve (actual content is only 10 pages), click here.

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Congress votes to relieve air travel delays

2013-Apr-26By: Rob Dennis

Update May 1: The president signed this bill, HR-1765: Reducing Flight Delays Act

Congress has approved legislation to end Federal Aviation Administration furloughs that have snarled air travel this week. The FAA attributed an average of 1,000 delays a day across the country to the furloughs, which left the system with 10 percent fewer air traffic controllers.

The House of Representatives passed the bill 361-41 on Friday after the Senate approved it unanimously the night before.

The bill is a stopgap measure that provides money to pay the salaries of air traffic controllers only through the end of this fiscal year. The money would be moved from a grant program used for airport improvements.

A competing bill in the Senate proposed by Kirsten Gillibrand would have provided the money by raising taxes on corporate jet owners.

The Obama administration indicated earlier in the week that it was open to such a bill, though the president has said he prefers a more balanced approach rather than one that targets a few specific programs.

The specific programs rescued will be those that are popularized and used by those who have influence, Ezra Klein of the Washington Post wrote.

"It's worth saying this clearly: The pain of sequestration will be concentrated on those who lack political power," Klein wrote.

For more, read the story in The Hill
Note: The links to the Senate and House bills in this story provide a deeper understanding of what was discussed here.

You can read Ezra Klien's analysis in his Washington Post blog.

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Air travelers feeling the impact of the "sequester"

2013-Apr-24By: Rob Dennis

Air travelers are seeing long delays now that mandatory budget cuts have kicked in, forcing furloughs of air traffic controllers.

The Federal Aviation Administration (FAA) on Sunday started furloughing its 14,000 employees for two days a month to help achieve $637 million in cuts mandated by the sequester.

Flights were delayed by up to two hours across the country Monday and Tuesday as the system operated with 10 percent fewer air traffic controllers. The FAA attributed more than 1,000 delays each of those days to the furloughs.

FAA Administrator Michael Huerta told the transportation subcommittee of the House Appropriations Committee on Wednesday that the agency already had cut as much as possible from other areas and had no choice but to implement furloughs.

This exchange between Rep. Harold Rogers and Huerta demonstrates some of the difficult situations the sequester has created (video uploaded by Rogers)...

Despite Rogers' show of surprise by the impact, it had been well documented over the previous months.

Transportation Secretary Ray LaHood warned in February that sequestration would lead to furloughs creating flight delays of up to 90 minutes.

Similar warnings were issued by the Obama administration in February - in its list of state-by-state impacts of the sequester and in one of Obama's weekly video addresses.

White House press secretary Jay Carney said Wednesday that the administration would be open to legislation eliminating the FAA furloughs, but added that it would be a "Band-Aid measure," leaving many other negative effects of the sequester in place.

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More Americans delaying retirement due to economy


Many Americans are planning to work longer because they can't afford to retire, a study by the Employee Benefit Research Institute (EBRI) has found.

Nearly half of surveyed workers have little or no confidence they will have enough money to afford a comfortable retirement, according to the study by the Employee Benefit Research Institute. That's up from 29 percent in 2007.

Workers are focused instead on their struggle with day-to-day expenses and debt - only 2 percent said saving and planning for retirement is their most pressing financial issue. Only half said they could come up with $2,000 if they had to in the next month.

Twenty-six percent expect to retire when they are 70 or older. Seven percent don?t expect to retire at all. Twenty years ago, only 11 percent of workers planned to work beyond the age of 65.

You can read the report on the EBRI website

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Corporate profits high, salaries remain low


In the past five years corporate earnings have risen by more than 20 percent annually, while disposable income for most Americans has increased by less than 2 percent, the New York Times reports.

Though corporate profits have soared since the end of 2008, workers' salaries have stalled and unemployment remains high. The gulf could be made wider by the across-the-board spending cuts known as the "sequester", as more than half a million jobs might be lost. The impact on corporate profits likely will be minimal.

Some factors include:

o Large multinational corporations are taking advantage of growing markets in countries such as India and China.

o A large number of unemployed Americans means more people competing for fewer jobs, allowing companies to keep salaries down.

For more, read the New York Times story.

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How will the sequester affect you?


Like most Americans, you're probably tired of hearing about the across-the-board budget cuts known as the "sequester." So here's a bit of good news. If you're wealthy, it really won't affect you that much. So no need to spend the five minutes it'll take to read this.

You're not wealthy? Here's why you might care about the policy set to begin March 1...

o In California, about 15,810 fewer children this year would receive vaccines for diseases such as measles, mumps, rubella, tetanus, whooping cough, influenza and Hepatitis B. Head Start and Early Head Start services would be eliminated for about 8,200 children.

o In Texas, about 930 primary and secondary teachers and aides could lose their jobs. About 172,000 fewer students would be served and about 280 fewer schools would receive funding.

o In Virginia, about 90,000 civilian Department of Defense employees would be furloughed. The maintenance of 11 Navy ships in Norfolk would be canceled.

o New York would lose about $780,000 in grants supporting law enforcement, prosecution and courts, crime prevention and other programs.

o Kentucky would lose about $414,000 to help respond to public health threats including infectious diseases, natural disasters, and biological, chemical and nuclear events.

o Nationwide, FBI furloughs would cut the equivalent of 1,000 agents. U.S. Customs and Border Protection would cut work hours by the equivalent of more than 5,000 agents and 2,750 officers. The Food and Drug Administration would conduct 2,100 fewer food safety inspections.

o Recently approved aid for Hurricane Sandy relief efforts would be put at risk, and travelers should expect airport delays.

This is a small sampling of the White House's state-by-state breakdown of the impact of the sequester.

Half of the cuts - $85 billion this fiscal year and $1.2 trillion over the next decade - would come from military spending and the rest from non-defense discretionary spending, including many grants to state and local agencies. It would not hit mandatory programs such as Social Security and Medicaid.

While the sequester would affect all states, it would not affect all Americans equally. In general, the poorer you are, the more you would feel it. But the cuts also would hit the middle class, particularly in military towns.

For example, restaurant and shop owners in Kileen, Texas, are "worried sick" about what will happen if 6,000 of Fort Hood's civil service workers are furloughed for one day each week, according to the Washington Post. It is the largest Army post in the country, and it drives the local economy.

Because of the nature of the cuts, big cities and military communities like Kileen would be hit the worst, while middle-class suburbs and rural areas could get by relatively unscathed. Still, few Americans will remain untouched.

For more, read the Washington Post story.

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Least discussed tax taking biggest toll on most Americans


The tax increase that will have the greatest impact on most Americans was barely discussed in all the debate in late 2012 about the so-called "fiscal cliff." A 2-percent cut in the Social Security payroll tax, which took effect in 2011, expired at the end of 2012. The restoration of this tax is especially painful to lower-income Americans.

The Social Security tax is paid on income up to $113,700. So if you earn less than that amount, you pay Social Security taxes on your entire earnings - and thus will be paying the extra 2 percent on your entire income. For example, a couple that earns $100,000 this year will have an extra $2,000 (2 percent) taken out of their paychecks.

Anyone who earns more than $113,700 will pay the Social Security tax (and also the extra 2 percent) only on their income up to that amount. All of their income above $113,700 is exempt from Social Security taxes (but not exempt from other income taxes of course).

In economic terms, this is known as a regressive tax. (What is a regressive tax? View Lobby99's primer on tax rates and you'll understand.)

The battle lines over the "fiscal cliff", however, were drawn over raising the marginal tax rate for the wealthy. Ultimately, Congress approved a tax increase for couples making more than $450,000 a year, along with increased capital gains and estate taxes.

Only 2 percent of American households earn more than $250,000 a year, so the overwhelming majority of Americans will never make anywhere near enough money to be affected by the higher income tax - even if Congress had lowered the threshold to the $250,000 that President Barack Obama originally proposed.

Half of all Americans earn less than $53,000, according to the U.S. Census.

Economists estimate the tax increase will reduce the country's overall disposable income by about $120 billion (again, most of this is coming from those earning less than $113,700). Read the New York Times report on the impact the payroll tax increase is having on millions of working Americans who find themselves juggling bills and cutting spending to deal with their shrinking paychecks.

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The "Fiscal Cliff" - How might it affect taxpayers?


This slide presentation at lists a few scenarios that could affect typical taxpayers if Congress takes no action on Bush-era tax cuts set to expire at the end of 2012.

The bulk of the cuts were enacted in 2001 and 2003. They were set to expire in 2010, but in 2010 they were extended for two additional years. The 2010 extension also included a 2 percent reduction in payroll taxes for employees.

Hint: You can view the presentation as a single page by clicking the "print" link at the top of the article

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