The great disparity in economic wealth in this country is not abating. In spite of the slow but steady decline in expenditures, the federal government still spends far more than it takes in. The Congress refuses to deal with the problem.
Having fallen over the “fiscal cliff” and subsequently enacted the “unthinkable” Sequester, the Congress now believes itself to be finished with measures to create new income while continuing to deal with excessive expenditures. At the same time the Congress has created or helped to create the most massive income disparity in the history of the country. CEOs make unconscionable salaries while a significant portion of those who work in the financial industry adjust their salaries quite legally thanks to the Congress to hide significant sums often offshore in multimillion dollar IRAs. In addition to excessive salaries, various clever forms of sheltering and tax loopholes for many with nominal salaries in the millions allow many to pay little if any tax. With IRAs and other tax sheltering amounting to trillions of dollars taken out of the real economy, insufficient funds are left to run the country especially if the super-rich and nearly super-rich want an overly well-funded military to protect their assets.
Now, after a world wide financial disaster, the like of which has not been seen since the 1930s, the world faces serious adjustments which it is unlikely to be able to make without massive transformation of of the current economic system. One cannot, after all, have a consumer economy in which consumers have little if any money to spend. Further, an economy in which much of the work is increasingly done by machines is a world in which there is little need for new workers except those relative few with considerable skills. Costs nevertheless require constant downward adjustment otherwise businesses cannot be profitable whether we have fewer consumers or sizable numbers of consumers with less and less discretionary income.
In the current situation the value of housing was first destroyed and at the same time credit markets were effectively taken down by massive speculative losses within the financial industry. Many banks failed though the most massive banks, financial houses and other large industries were saved by “government bailouts.” Some payback of public funds has occurred, but the overall repair process has been slow.
Initially, we also saw a considerable losses in markets. Indeed by early of 2009 the value of stock markets was less than half what they had been a year earlier. Many in the middle class were suddenly stuck with about half the nest egg in their IRA that they thought they had accumulated toward retirement. The value of stocks in IRAs dropped about half their value in 2008-9 as did the value of their homes. In many cases they’d be unable to sell homes and clear what they still owed. Only those who were 10 years or more from retirement had any chance at all of making up the lost round and indeed it would take some time to even get back to where they were in 2007. Now in 2013 the markets are back but the value of housing is not. Of course, those who liquidated IRAs at low value in 2009 and held onto or had to use the cash, are worse off than they would have been had they held onto their diminished assets in 2009. Housing has bottomed and is thankfully starting to turn around, yet it is still a long way back.
Overall, we now observe a considerably diminished net worth in the middle class owing to the crash of the housing market in 2008. Also, IRAs and other forms of savings, while making a better comeback, are still diminished overall. At the same time the super-rich and the near super-rich have recovered from a catastrophic financial disaster which was largely of their making. Indeed, they have become even more clever about how to hide their assets–and with the help of the Congress they do it quite legally.
Now the Congress seeks ways to further protect the super-rich by providing them with a super-military to protect their assets. To do this they must cut costs while not causing the rich to pay more. They intend to take it from Social Security and Medicare, which are the only remaining ways of bleeding the middle class.