[A-List] 80 Percent of Americans Have Experienced a Falling Share of US Income

["Charles Brown" <charlesb@xxxxxxxxxxxxxxxxxxxxx>]

80 Percent of Americans Have Experienced a Falling Share of US Income
No Escape from War and Unemployment

By PAUL CRAIG ROBERTS

New Hampshire voters have chosen warmonger clones of Bush/Cheney for  
their party's presidential candidates. The only candidates not in  
Israel's pocket are Kucinich, Paul, and Gravel, who have no chance  
for their party's nomination.

Obama, who provided some hope for change, undercut his support on the 

eve of the New Hampshire primary by declaring that he would invade  
Pakistan in order to protect America. It is a mystery why Obama  
thought this message would motivate those inclined to support his  
candidacy.

This means change is unlikely. Neocon think tanks, media, evangelical 

preachers, President Bush, Vice President Cheney, and many other  
members of the government have succeeded in turning a majority of  
Americans into scared Islamophobes and in denying Americans any  
reliable information about the cause of the conflict.

Unfolding economic events during 2008 are likely to increase fear  
among the US population--the fear that comes from recession and  
indebtedness.

As the German National Socialists said, a fearful population welcomes 

a savior. The Bush Regime has put into place all the necessary pieces 

for rule by the executive.

The Greenspan Fed created money and low interest rates to hide the  
effect on the US economy of job loss from offshoring. The low prices, 

achieved by substituting low-cost Asian labor for American labor,  
masked the inflationary impact of the Fed's monetary policy.

The low interest rates created artificial increases in home prices by 

reducing the carrying costs of mortgages. Most people buy according  
to monthly payment, not purchase price of the home.

Many homeowners refinanced to capture and spend the rise in home  
equity produced by the low interest rates. This spending and the  
construction boom misled people about the strength of the economy.

So did US productivity and GDP statistics. As Susan Houseman has  
shown, US statistics have not been adjusted for offshoring and  
include in US productivity and GDP growth both the lower labor costs  
and the real output of offshored goods that are in fact part of Asian 

GDP.

Performance-driven executives at financial institutions were suckered 

into purchasing subprime derivatives, which have crashed, leaving the 

financial system with serious problems.

Bailouts require yet more liquidity, but the exchange value of the US 

dollar has been reeling from US budget and trade deficits. Creating  
more dollars makes holding existing dollar assets even less  
attractive to the foreigners who finance US deficits.

The dollar has retained its reserve currency role despite its loss of 

value, because there is no clear alternative. The euro is a currency  
without a country, and might be adversely affected by differential  
interest rates arising within the EU membership. The UK economy is  
comparatively small and faces similar problems to the US. The rising  
Asian economies are not ready to assume the role.

As I have documented repeatedly, job growth in the US has been  
confined to domestic nontradeable services. The US is now far more  
dependent on imported manufactured goods than it is on imported  
energy. Offshoring makes it impossible for the US to balance its  
trade as offshoring turns US GDP into imports.

Offshoring is now reaching beyond manufacturing into high-end service 

jobs. Princeton University economist Alan Blinder, a former vice  
chairman of the Federal Reserve, estimates that there are as many as  
30 million US service jobs filled by college graduates that are  
susceptible to offshoring.

As long as China continues its currency peg to the dollar, lower  
prices from a continuation of offshoring can hide the new round of  
Fed money creation. But can a new round of money creation create  
enough new consumer spending by over-indebted consumers to mask the  
jobs lost to offshoring with more employment for waitresses and  
bartenders, or will the new liquidity be used up in saving the  
troubled financial institutions? Access to more credit does not help  
people who are maxed out and cannot pay their bills, especially when  
they are losing their jobs.

Studies by economists with the Economics Policy Institute report that 

as of 2006, the most recent data, the typical American family's  
income remained $1,000 below its peak in 2000. Six years of "economic 

recovery" were unable to put the real median family income back to  
its previous peak. The combination of massive indebtedness,  
offshoring job loss, and recession is likely to produce further  
decline in US living standards.

Last month (December 2007) the Congressional Budget Office released  
its report on household incomes. The CBO data show that 80% of  
Americans have experienced a falling share of US income, and that the 

top 1% of the income distribution has received almost the entire  
income gain of the top 20% of Americans. Keep in mind that some of  
this measured income gain is in reality phantom income according to  
the research of Susan Houseman.

An economy that concentrates its income gains at the very top while  
wiping out high value-added jobs by sending them abroad, thus  
dismantling the ladders of upward mobility, is an economy headed for  
serious troubles even without subprime derivative and currency
problems.

All of the presidential candidates currently in the running have  
authoritarian personalities. America's next president is likely to  
seize upon rising domestic economic hardship and growing resistance  
abroad to US hegemony to complete the dismantling of America's  
constitutional system.


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