From Volume 37, Issue 40 of EIR Online, Published Oct. 15, 2010

U.S. Economic/Financial News

How Poor Are Americans?

Oct. 6 (EIRNS)—For the first time since the government-defined "poverty line" for Americans' income was developed in 1958, it was lowered by the Bureau of the Census in 2009, by about $500/year to $22,000 for a family of four, reflecting the outrageous claim by Obama Administration economists of "deflation" in household costs. The median income of U.S. households fell—also for the first time in the history of the statistics—from $50,112 to $49,777.

Despite the Administration's attempt to mute the big increase in impoverishment of Americans in 2009, "official" poverty jumped to 9% for seniors, 15% for working-age people, and 21% for children—an average rate of 14.3% or 43 million people. Both are records for as long as the statistic has been kept.

Although their numbers rose by nearly 4 million in the year, the total income share of "officially poor" Americans fell to 3.4%. The top 5% of income earners—15 million people—earned 9 times as much as all 43 million officially in "poverty" combined. That and other ratios of inequality of wealth were at the highest levels ever seen in America.

Some 20 million Americans were designated by the Census as now in "deep poverty"—an income below $10,500 income for a family of four! The sane description would be "complete destitution"—20 million in households which cannot own cars, homes, rent their own apartments, afford medicines which require any kind of payments, afford new clothes for children, computers, etc.—or pay anything toward their children's education.

But the Census Bureau has another "official" poverty definition, which it will not publish until next year—after the Nov. 2 general election—which integrates the real weight of medical and housing costs in the standard of living. This measure would put the official "poverty line" at $27,000 (not $22,000) for a family of four; 54 million Americans, or 17%, would be below it.

Even that level is completely inadequate. A comprehensive study by EIR's economics staff 15 years ago determined the minimum income standard for a family of four to be $28,000/year at that time. Today that standard would be considerably higher.

'State' Bankruptcies No Substitute for Glass-Steagall

Oct. 5 (EIRNS)—A growing number of financially stretched towns, cities, and other local governments are seeking refuge in programs that many states provide as alternatives to Federal bankruptcy court. In Pennsylvania, the widely publicized bankruptcy of the capital city of Harrisburg will make it the 20th city in its program, if it receives approval. Michigan now has 37 in its program; New Jersey has 7; Illinois, Rhode Island, and California each have at least one. The large municipalities of Detroit, Mich., and Toledo, Ohio, while not in their respective state's programs, are each said to be considering the move.

The New York Times today notes the "worries" of some state officials that these "faux" bankruptcy programs could boomerang on the states, and drag them into bankruptcy "from below." This exact situation confronted Arkansas during the Great Depression, causing the only default on state bonds in the country's history. Showing that this is no substitute for a Glass-Steagall reorganization of the nation's financial system, Harrisburg comptroller Daniel Miller told the Times that these programs are like "giving you a life preserver, but never pulling you into the boat"; he thinks the city's chances might be better in Federal bankruptcy court.

Obama's Mass Layoffs: 'It's Not Just Census Workers Anymore'

Oct. 8 (EIRNS)—The mass layoffs of government workers at all levels under the "anti-FDR," Barack Obama, got much worse in September, and point to a rapidly worsening collapse of U.S. employment as a whole during the Fall.

The Bureau of Labor Statistics (BLS) reported that the Federal government dropped 83,000 workers, net, in September; and that increasingly bankrupt state and local governments eliminated 76,000 jobs, an explosion after the slow fuse of 8-10,000 layoffs/month since the July 1 start of states' and cities' fiscal year. This job loss will get much worse in October, when 150-200,000 Federally funded local jobs are eliminated with the end of the Stimulus/TANF program alone.

These government employment loss figures, as BLS reports them every month, are relatively complete and accurate—the private-sector job figures Obama has been touting lately, are not; there is new evidence out today, that they are faked.

Despite that, the overall September employment report is another pre-election blow to the Obama White House and the Democratic Party leadership: 25 million officially unemployed and part-time/underemployed Americans were chasing 3.2 million job openings! Six million others had given up. Another 95,000 jobs were eliminated in September, the BLS said, and 128,000 more Americans dropped out of the labor force.

Given the consistent, years-long faking of the BLS employment reports, the Gallup polling organization has started publishing a competing survey, its "Underemployment Index," which came out on Oct. 7 for September. Gallup has been making 400 household calls every night since January 2010, and publishes a 30-day running average, with no seasonal or "virtual" adjustments. Gallup found that national unemployment among Americans in the workforce, actively looking for work, was rising sharply during September, going from 9.6% in mid-September to 10.1% as of Sept. 30, with "underemployment" rising to 18.8%.

FDIC's Bair: Zero Interest Rate Creating Bond Bubble

Oct. 5 (EIRNS)—Federal Deposit Insurance Corp. chair Sheila Bair has warned that the continuation of 0% interest rates is creating new bubbles in the economy. "Eventually [rates are] going to start going up, and what happens?" Bair said on CNBC on today. While speaking guardedly, and without a solution, Bair clearly sees the hyperinflation ahead: "A bit of a bond bubble it appears—and so how do we deal with that? I think there's a lot of liquidity out there, a lot of money looking for return to chase, and so trying to stay ahead of that and look at where it's going and what type of new risk that might present, I think is something we need to be very aware of."

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