Saturday, March 31, 2018
The national debt now exceeds $21 trillion. Consequently, the interest payments on that debt are rather massive.
Case in point, the Treasury Dept. this week had to borrow nearly $300 billion, the most for any single week since the financial crisis in 2008. It’s worth noting that as recently at 2007, the federal deficit was just $161 billion. Consider that: the government is now borrowing nearly twice that amount in just one week.
Federal revenues are declining due to the Republican tax bill. All by itself, aside from any new spending, the law will add $2.3 trillion to the debt over the next 10 years, according to the Treasury Dept. Of course, the Trump Administration argues that the cuts will spur the economy and thereby pay for themselves. That’s a spurious argument since it has been tried repeatedly and has never worked, except in the short term.
Despite this, spending goes on, unabated.
Just last week, the House and Senate passed a massive 2,232-page, $1.3 trillion spending bill that significantly increased federal spending. The bill boosts domestic spending by $128 billion and defense spending by $160 billion over two years.
Where are the Tea Party Republicans when you need them? Congress and the White House are controlled by the GOP. Remember when they used to call themselves "fiscal conservatives" and "fiscally responsible," and some people took them seriously?
So, the government is simultaneously reducing revenues while increasing spending. It is a terribly reckless policy.
Remember, this is being done willfully, as opposed to during an economic crisis, when the government can’t control the collapse in revenue. The prescription in those times, in the absence of consumer and corporate/business spending, is typically a temporary increase in federal spending to uphold the economy.
It’s as if the government is trying to hasten an economic and fiscal crisis.
This all comes at a time when Donald Trump is threatening a trade war with China, which holds $1.17 trillion of US debt, In fact, China owns of more Treasury bonds than any other foreign country.
Meanwhile, the Federal Reserve is finally ending the bond-buying program it initiated during the financial crisis. Yet, somebody has to finance America’s deficit spending, which is only increasing. The United States ran a $215 billion deficit in February, the biggest in six years.
The federal government is on track to borrow nearly $1 trillion this fiscal year, the highest amount of borrowing in six years and almost double what it borrowed in fiscal 2017.
According to the Congressional Budget Office, trillion dollar deficits are now the norm and stretch into the future as far as the eye can see.
The Committee for a Responsible Federal Budget, a fiscal watchdog group, recently warned that interest payments on US debt could quadruple to $1.05 trillion by 2028 if the current course is maintained.
This is like one of those Hollywood thrillers, in which a speeding train is on course for a massive collision. All of the rail and public safety officials know it, and everyone is rushing to avert a tragedy.
However, our current predicament isn’t a fictionalized Hollywood tale and there isn’t a hero who will save us in the end. This speeding fiscal train is heading for a cataclysmic disaster and, just like the Hollywood version, all the officials know it.
The difference is that this inept, selfish group of officials (Congress and the White House) is doing nothing to stop it. To the contrary, they’re speeding up the train.
Wednesday, January 17, 2018
Government funding shouldn't be treated as a hostage negotiation.
The extraordinary level of dysfunction on Capitol Hill is on display once again. Congress has just days to act before a government shutdown takes place. It never should have come to this; Congress had far too much time to agree on a budget for their backs to now be against the wall.
The federal government's fiscal year -- its accounting period -- runs from Oct. 1 to Sept. 30 of the following year. So, fiscal 2018 began on Oct. 1, 2017.
Passing an annual budget is the fundamental job of Congress. There are twelve standard appropriations bills that fund the federal government's discretionary programs each fiscal year. They are supposed to be enacted into law by Oct. 1.
Yet, 3 1/2 months into this fiscal year, Congress has failed to pass a budget... again.
When Congress and the president fail to agree on and pass appropriations bills, a continuing resolution must instead be passed. This has already been done three times since Oct. 1. Congress must continually turn to these stopgap measures because they can’t even agree on their basic function — how to fund the government.
Without passing a budget or, at the least, another continuing resolution, the federal government will shut down at midnight on Friday, January 19.
The government has only shut down once in this century, in 2013. Prior to that, the last shutdown was from Dec. 1995 to Jan. 1996.
Republicans want to lift spending caps on defense, while Democrats want to lift the caps for domestic programs. Those caps are the remnants of the 2013 sequester, which was supposed to enact some constraints on federal spending. It would trigger an automatic $6 billion in cuts this fiscal year. But no one in Congress truly wants to cut spending; they just want to increase it.
That’s on top of the fact that the new GOP tax law will increase the nation’s debt by more than $1.4 trillion over the next decade, according to an analysis by the Joint Committee on Taxation, a congressional scorekeeper. It is wildly hypocritical for Republicans to have consistently sounded alarms about deficits in recent years and then vote for their deficit-inducing tax proposal.
The federal government is already more than $20 trillion in debt. Yet, no one seems to care in the slightest.
Republicans say they will have to pass another continuing resolution, which would probably last until mid-February, because there is no budget deal currently in place. Even if there was, they wouldn’t have enough time to draft a bill.
This is government at its most dysfunctional. Congress can’t even perform its most basic duty. Republicans love to complain about “unelected bureaucrats” in government, but they are not the problem; the elected bureaucrats are.
It cannot be overlooked that Republicans currently control the White House, the Senate and the House. The government has never been shut down when it is controlled by one party. Such a shutdown would be unprecedented and the Republicans surely know that.
In May, 2015, the GOP-led Congress passed a full budget for the first time in six years. In other words, this kind of obstinance and narrow-mindedness has a long history in the capitol.
The Senate did not pass a budget resolution for FY2011, FY2012, or FY2013 and it passed the FY2014 budget resolution on March 23, 2013, 23 days before the April 15 deadline set by the No Budget, No Pay Act of 2013. Yes, it took the threat of temporary salary restrictions to get Congress to act.
Government funding now seems to be tied to DACA (Deferred Action for Childhood Arrivals), which affects nearly 800,000 undocumented immigrants illegally brought to the US, as children, by their parents. It’s fair to say that these people were simply along for the ride and are living with the consequences of their parent’s actions.
No matter your view on DACA, government funding should not be tied to this or any other non-spending issue. If Congress is going to engage in customary horse trading, as it has for hundreds of years, it should pertain only to budget/spending matters. Bi-partisan legislation regarding the so-called “dreamers” should be an entirely separate proceeding.
The cost of another government shutdown would be significant.
In December, S&P Global analysts said a shutdown would cost the economy about $6.5 billion per week. S&P predicts a shutdown would increase the deficit because of the added cost required to stop and start federal programs. In essence, it is more expensive to shut the doors of government than to keep them open.
The 2013 shutdown cost $24 billion in lost economic output, or 0.6 percent of projected annualized GDP growth, according to the Standard and Poor’s ratings agency. Similarly, Moody’s Analytics estimated the impact at $23 billion.
The White House Council of Economic Advisers estimated that during that shutdown, the economy created 120,000 fewer private-sector jobs than it otherwise might have that October.
In other words, another shutdown would have real and potentially lasting effects.
Yet, here we are... again. The only thing standing between yet another shutdown is yet another continuing resolution, which would temporarily keep the government operating.
A continuing resolution basically keeps government agencies funded at the same level as the previous year, even if the needs of a given agency have changed. Under this arrangement, Congress cannot reduce or eliminate programs that have run their course.
Yet, the federal government has been operating under continuing resolutions more than one-third of the time for the past nine years.
This is no way to run a government; it is terribly inefficient. Agencies have no certainty about how much money they’ll have.
Congress seems to enjoy this game of brinksmanship, but there are enormous expenses associated with their foolishness. Another shutdown could cost tens of billions of dollars and tens of thousands of jobs.
Congress proved that it never cared about these things in the past and it’s unlikely that they care about them now.
Congress only cares about the rich donors who put them, and keep them, in office.
Monday, November 20, 2017
The GOP — allegedly the party of fiscal responsibility — has proposed a tax cut that they claim will cost $1.5 trillion. However, a preliminary debt calculation by the non-partisan Congressional Budget Office concludes that the plan would add $1.7 trillion to the national debt over the next decade.
That $200 billion difference is critical since it exceeds the limit Republicans agreed to for their reconciliation bill. They must restrain the cost of the bill to $1.5 trillion in order to retain the special “reconciliation” status of their tax proposal in the Senate, which would allow them to pass it with only 51 votes instead of 60. That means they could pass the massive deficit increase without a single Democrat’s vote.
This has set the stage for all manner of machinations, manipulation and massaging to get the bill below that threshold. You could call it smoke and mirrors or sleight of hand. In other words, don’t believe the $1.5 trillion figure for a minute.
The Republicans have railed against the deficit and the debt for decades but, as customary, when a fellow Republican occupies the White House, they have selective amnesia.
The GOP claims to loathe deficit spending — though the GOP-controlled Congress approves deficit spending each year, right along with the Dems — yet they have no issue with deficit-inducing tax cuts. Ultimately, they have the same result; spending takes money from the Treasury at the back end, while tax cuts take money at the front end.
We’ve got plenty of recent experience with the onerous cost of tax cuts and just how much they weigh on the deficit and debt.
The non-partisan Congressional Research Service estimated the 10-year revenue loss from extending the 2001 and 2003 Bush tax cuts beyond 2010 at $2.9 trillion, with an additional $606 billion in debt service costs (interest), for a combined total of $3.5 trillion.
A commensurate $3.5 trillion in deficit spending would result in a lot of howling by the GOP, but the same impact to the deficit from tax cuts is met with cheering and applause. It’s dubious, if not delusional.
This enthusiasm for exploding the deficit comes at a time when the national debt stands at $20.5 trillion and rising. The fiscal 2017 budget deficit was $666 billion and the fiscal 2018 deficit is $440 billion (that’s before the tax cut), meaning that our “leadership” in Washington has added more than $1 trillion to the debt in just the past two years.
Meanwhile, bipartisan pressure for additional money for defense, infrastructure and other domestic demands could add nearly $100 billion in additional spending next year alone.
The Congressional Budget Office forecasts that deficits will total $10.1 trillion over the next decade.
No less a conservative authority than Forbes has called the Republican party a “deficit fraud.”
To that point, there are other estimates that the GOP tax cut plan will cost a whole lot more than advertised.
The plan outlined by the White House and Republican leaders in the House and Senate could cost more than $2 trillion over the next decade, according to a preliminary estimate by the Committee for a Responsible Federal Budget, a nonpartisan advocacy group.
During his presidential campaign, Donald Trump insisted that he could eliminate the national debt in eight years. That would be laughable if the danger of our ever-expanding wasn’t so frightening.
This whole tax cut plan is being sold on the premise that it will spur economic growth. We’ve heard those rosy projections many times in the past and they haven’t panned put. This time will be no different.
George W. Bush and his fellow Republicans pledged that tax cuts would spur economic growth and ultimately pay for themselves. It’s an old canard that goes back to at least the Reagan Administration. So, what happened in the aftermath of the 2001 and 2003 Bush tax cuts?
Let’s take a look at economic growth by year, since 2001 (source: World Bank):
If only we could cut taxes and release the animal spirits of the economy! Just take the shackles off!
The above GDP numbers should be viewed through the following lens: Historically, from 1947 through 2016, the annual GDP growth rate in the US averaged 3.23 percent. Yet there have been just two years since 2001 in which economic growth reached even 3 percent. Furthermore, over the past 16 years, economic growth has averaged a paltry 1.79 percent.
Are you feeling conned yet? The whole notion that tax cuts spur economic growth — much less “tremendous” economic growth, as Trump would say — is pure snake oil.
Voters seem to have caught on to this ruse. Overall, the GOP tax plan is not popular with Americans. Even Republican voters worry about what this tax cut will do to the deficit, according to recent polling.
An NBC News/Wall Street Journal poll released this month found that just 25 percent of Americans think President Trump’s tax plan is a good idea.
A subsequent Quinnipiac University survey had the same result: just 25 percent of voters approve of the Republican tax plan.
We all dislike paying taxes and we’d all like to pay less. But this tax plan will only accelerate our insolvency — the moment of reckoning where we have to accept that the government can’t pay for the promises it has made. Then we will have to suffer the dual pain and indignity of less government services and much higher taxes.
For nearly five decades, our government has consistently spent more than it has taken in. Since 1970, the Federal Government has run deficits in all but four years (1998–2001). Without a doubt, Washington has a spending problem.
That’s why creating an even deeper revenue problem amounts to madness.
The idea of simplifying the tax code and eliminating the dizzying array of deductions, exemptions and credits would be a great start and one that is long overdue. There are a whole host of special interests that have inserted their pet deductions or exemptions into the code and they will fight like hell to maintain the status quo.
Businesses aside, no individual taxpayer should have to spend numerous hours and hundreds to thousands of dollars just to pay Uncle Sam — it amounts to rubbing salt in a wound.
Additionally, the tax code should not be used to reward or punish tax payers or to incentivize or dis-incentivize certain behaviors/activities. If you have kids or buy a house, for example, the rest of society that doesn’t have either of them shouldn’t be subsidizing your decisions. The government shouldn’t be favoring certain groups or activities above others, nor should it be penalizing childless people or apartment dwellers.
The one thing that Republicans pushing tax reform have right is that all deductions, exemptions and credits should be permanently eliminated — all of them. Poor people should helped out by paying a lower rate. That’s why the tax code has been progressive, with multiple tiers, for many decades and it’s why it needs to remain so.
A flat tax would be punitive to the poor. Here’s why: According to the Social Security Administration, 50 percent of wage earners make less than $30,000 annually, and a lot of them come from single-income households.
Taking 20 percent, for example, from someone who makes just $30,000 a year is much more painful than taking that same percentage from someone who makes $1 million, or even $500,000 annually. Though the dollar amount is higher for latter group, their lifestyle isn’t altered by a 20 percent income tax.
Whether the tax code should have three, four or five brackets is up for debate, but I won’t argue for one of them here. Suffice to say that the progressive tax code must remain… without ANY exemptions, deductions or credits.
Once Congress does that, it will simultaneously wipe out most lobbying and lobbyists.
Wouldn’t that be nice?
Saturday, September 16, 2017
The Census Bureau reported this week that median household income rose to $59,039 in 2016, a 3.2 percent increase from the previous year and the second consecutive year of healthy gains.
To be clear, household income is the amount of income earned by an entire household, whether it’s a single occupant, a couple, or roommates.
Let's explore the term 'median', which denotes the midpoint. The median is the "middle" value in a list of numbers.
When it comes to median income, this means that half of earners have incomes above that amount, and half have incomes below that amount.
The fact that median household income rose last year is obviously good news, but before we pop the champagne, let’s have a little perspective.
Middle-class households are only now seeing their income eclipse 1999 levels. The Census Bureau reports that in 1999, median household income, adjusted for inflation, was $58,655.
Yes, it took us 17 years just to get back to where we started. Are we really supposed to celebrate that?
According to the Social Security Administration, 50 percent of wage earners make less than $30,000 annually, 61.5 percent make less than $40,000 and 70.5 percent make less than $50,000.
Again, 50 percent of all wage earners make less than $30,000 per year, and a lot of them come from single-income households.
The proportion of Americans who live alone rose to 27 percent in 2013, according to the latest Current Population Survey from the Census Bureau; that’s more than one-in-four people. Obviously, these are single-income households and a lot of them are surely earning less than the median.
As of 2012, 60 percent of married couples with kids had dual income households. Among the households with just one income earner; the father was the sole earner in 31 percent and the mother was the sole earner in 6 percent.
The average American household consisted of 2.53 people in 2016.
So, the median household income is generally a byproduct of two earners. That suddenly makes $59,000 seem a lot less impressive.
The incomes of the richest households are much further apart from those at the median than those at the median are from the bottom households. In other words, the difference between the households at the top and those in the middle is much more vast than the difference from those in the middle to those at the bottom.
Consider how different the earnings are among those above and below the median income.
According to the Internal Revenue Service (IRS), the top 1 percent had an adjusted gross income of $465,626 or higher for the 2014 tax year.
Clearly, the top 1 percent are not all billionaires.
Remember, a significant majority of earners take home less than $40,000 per year. Thirty-seven percent of earners take home less than $20,000. However, the lifestyles of those two groups aren’t as radically different from each other as they are from those who make at least $465,000 a year.
Roughly 534,000 Americans made more than a million dollars in 2013, according to the latest IRS data available.
The mega wealthy — a fraction the top 1 percent — now earn an average of $1.3 million a year. That’s more than three times as much as the 1980s, when the super rich "only" made $428,000, on average, according to economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.
The top fifth of earners are taking home more than half of all overall income, a record.
The top 1 percent take home more than 20 percent of all income.
However, the bottom 50 percent collect about 12 percent percent of national income.
This is why the savings rate was just 3.5 percent in July. People simply don’t have enough left-over income to save. Most Americans are spending everything they make just to get by and are using credit cards to make up the difference, even for basics like groceries and gas.
Credit-card debt in the U.S. recently surpassed the peak set just before the 2008 financial crisis. Outstanding revolving credit, which includes credit-card debt, rose to $1.02 trillion in June, according to a monthly report from the Federal Reserve.
Low incomes and slow income growth are having some rather glaring effects, especially on younger Americans.
Last year, the Pew Research Center reported that 32.1 percent of 18- to 34-year-olds lived at their parents’ homes in 2014, exceeding the 31.6 percent of young adults who were married or living with a partner in their own household.
Yes, one third of young adults — people up to the age of 34 — are still living with their parents. Yet, the findings were even worse the following year.
Almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia.
It should be noted that 1940 was the end of the Great Depression, so the current state of affairs is quite troubling.
This huge percentage of adult children living with their parents has added at least one additional working adult to millions of households. Assuming the adult child lives with both parents and is working, it results in at least three income earners in millions of households.
Once again, that $59,000 median doesn’t seem so impressive.
Yes, it’s nice that median household income went up last year, but we’re still only back to 1999 levels and it’s clear that the masses are still struggling.
Remember, the bottom 50 percent collect just 12 percent percent of national income.
That’s important to consider, if you’re celebrating the rise in median household income.
Sunday, September 03, 2017
Labor Day, the first Monday in September, is a celebration of the American worker. As you might expect, this day of tribute was created by the labor movement. Since labor has always had less capital than management, its strength is always in its numbers.
The day is an acknowledgement of the American workers who built this nation, and continue to do so, while advancing it economically and socially.
Though municipal ordinances were passed in 1885 and 1886, the first state to officially recognize Labor Day by law was Oregon, on February 21, 1887. Colorado, Massachusetts, New Jersey, and New York all followed suit later that year, and by 1894 a total of 28 states had adopted the holiday in honor of workers.
Finally, on June 28 of that year, Congress passed an act making the first Monday in September of each year a legal holiday in the U.S.
Labor unions, such as the American Federation of Labor, the Brotherhood of Carpenters, the American Railway Union and the International Association of Machinists were instrumental in fighting for betters working standards, as well as promoting a holiday to celebrate the working man (and later, working women).
Fighting for better labor standards, such as the eight-hour work day, the five-day work week and the minimum wage, etcetera, have raised the living standards of all workers and led to higher economic and political principles for all.
While Labor Day also symbolizes the unofficial end of summer and is celebrated with beach parties, backyard barbecues and retail-sales events, no American worker should ever lose sight of the true meaning of Labor Day, or the sacrifices that the labor movement made over the past century to improve work and living standards.
In the late 1800s, the average American worked 12-hour days and seven-day weeks to simply get by. Children as young as five or six worked in mills, factories and mines across the country, earning a fraction of their adult counterparts’ wages. Conditions for all workers were poor and often terribly unsafe. Many employees lacked access to clean air, toilet/wash facilities and work breaks.
There were examples of workers living in company-owned buildings, in company-owned towns, where the workers’ only option was to spend their hard-earned money in company-owned stores.
These circumstances drove workers to organize and strike for better conditions, hours and pay. At times, these strikes turned violent and dozens of workers died in protest. Chicago was the scene of the infamous Haymarket Riot of 1886 and the bloody Pullman strike in 1894, the latter of which resulted in federal troops being deployed to crush the rioting workers.
These violent, brutal events led President Grover Cleveland to sign the Labor Day holiday into law just days later.
The incidents also led to common labor statutes that are now accepted as standard, such as child labor laws, mandatory breaks, paid overtime, vacation time and even paid holidays.
The unfair, unsafe, often inhumane labor practices of the 19th Century ultimately resulted in United States labor law, whose basic aim is to remedy the "inequality of bargaining power" between employees and employers.
The Fair Labor Standards Act of 1938 requires a federal minimum wage and discourages unhealthy working weeks over 40 hours through time-and-a-half overtime pay. The Occupational Safety and Health Act of 1970 requires that employees have a safe system of work.
The Clayton Act of 1914 guarantees all people the right to organize and the National Labor Relations Act of 1935 gave the right for most employees to organize over unfair labor practices without punishment.
None of these things would have resulted if not for the struggles and organization of American workers. We owe better pay, better hours, paid overtime and safe workplaces to the workers who fought for these things.
There is still a long way to go in order for most workers to be fairly compensated for their labors.
The federal minimum wage has remained at $7.25 an hour since 2009. Adjusted for inflation, it peaked in 1968 at $8.68 (in 2016 dollars), according to the Pew Research Center.
Contrary to popular belief, minimum wage workers are not all, or even mostly, teens. Less than half (45 percent) of the 2.6 million hourly workers who were at or below the federal minimum in 2015 were ages 16 to 24.
If a minimum wage worker puts in 40 hours per week and works 52 weeks a year (no vacation time), his/her annual earnings would be $15,080. The federal poverty guideline in 2017 for a family of two (one working parent, with one child) is $16,240. In other words, that minimum wage worker is below the federal poverty line.
This isn’t theoretical; it's real life for millions of Americans. According to U.S. Census Bureau, there were 23 million single-parent families in 2016 and the vast majority were headed by single mothers. Today, 1 in 4 children under the age of 18 are being raised without a father and almost half (40 percent) live below the poverty line.
It’s not just minimum wage workers who are a struggling. A reasoned argument can be made that most American workers are underpaid, which is a major factor in our troubling income inequality problem.
Sadly, America ranks among the worst in the world in this category. Of the 35 developed countries in the Organization for Economic Development (OECD), only three have worse income inequality than the US (Turkey, Mexico and Costa Rica).
Today the top 1 percent take home more than 20 percent of all U.S. income. Meanwhile, the bottom 50 percent earn barely 12 percent of income.
According to the Social Security Administration, in 2015:
- 50 percent of wage earners made less than $30,000
- 61.5 percent of wage earners made less than $40,000
- 70.5 percent of wage earners made less than $50,000
Unionized workers are rarely minimum wage workers. Many are skilled laborers who rightfully earn more. The problem is that there are relatively few union workers left in America today.
The share of American workers who actually belong to a labor union has been falling for decades and is at its lowest level since the Great Depression, according to the Pew Research Center.
As of 2013, only 11.3 percent of wage and salary workers belonged to unions, down from 20.1 percent in 1983, according to the Bureau of Labor Statistics.
At their peak in 1954, 34.8 percent of all U.S. wage and salary workers belonged to unions, according to the Congressional Research Service.
In many ways, American workers have come a long way over the past century, but they clearly have much further to go.
However, the labor movement's past achievements are worth remembering and celebrating on this, and every, Labor Day.
Saturday, August 19, 2017
August 2nd was a rather auspicious day this year. That’s because what is known as Earth Overshoot Day (EOD) fell on the second day of August — the earliest it has ever arrived.
What is Earth Overshoot Day, you may be asking?
It is the date on which humanity’s resource consumption for the year exceeds earth’s capacity to regenerate those resources that year. The problem with EOD arriving on August 2nd is that there were still five months left in the year. From this point forward, humanity is stealing from its own future.
In a normal, healthy world, humanity would not use up all its available resources until Dec. 31. In fact, until the past few decades, humanity didn’t even come close to depleting all of the earth’s renewable resources on an annual basis. In 1963, humanity used just 78 percent of the earth's biocapacity.
Yet, Earth Overshoot Day has been arriving earlier than the previous year on a rather steady basis since the early 1970s. Look at where it fell at the start of recent decades:
1971 - December 21
1980 - November 4
1990 - December 7
2000 - November 1
2010 - August 21
Notice the trend? The arrival of EOD has really accelerated over the past two decades. As recently as 1975, EOD fell in December. The last time it fell in November was 1985. At the current pace, it will arrive in July in 2019.
Aside from representing the day when the human population overshoots its environment, economically speaking, EOD also represents the day on which humanity begins its ecological deficit spending.
This earth contains finite resources, some of which are renewable if given adequate time to replenish. Therein lies the problem; humanity is using these resources far faster than they can be restored annually.
Obviously, this has limits, which are recognizable in the form of shrinking forests, topsoil erosion, species loss, fisheries collapse, diminishing fresh-water supplies and higher commodity prices.
Earth Overshoot Day is calculated by Global Footprint Network, which calls itself, “An international think tank that coordinates research, develops methodological standards and provides decision-makers with a menu of tools to help the human economy operate within Earth’s ecological limits."
According to Global Footprint Network’s calculations, our demand for renewable ecological resources and the services they provide is now equivalent to that of more than 1.5 earths. The data shows us on track to require the resources of two planets well before mid-2000-century.
As you may know, there are no additional earths from which to extract precious resources. That poses some rather obvious problems, the kind that don’t have easy answers.
The obvious solution is to change our behavior, but humanity has never been very good at that. However, reality doesn’t negotiate. It’s terms are firm and irreconcilable.
Environmental groups, such as Global Footprint Network and the World Wildlife Foundation, recommend some fairly simple remedies, such as eating more vegetarian meals and cutting food waste. Yet, those are tough sells in America, where people believe in “American exceptionalism” and don't like being told what to do.
Big problems usually don’t have easy solutions. The above suggestions are fairly straight forward and achievable. However, getting big industries to stop deforestation and overfishing, for example, will be much more challenging.
The earth needs more trees, not less. Without a massive tree-planting campaign, the forces of climate change will evolve more quickly and be more devastating.
Every single minute, an area of forest the size of fifty soccer fields is cut down. Some 129 million hectares of forest — an area almost equivalent in size to South Africa — have been lost since 1990, according to the United Nations' Food and Agriculture Organization (FAO).
Overfishing has left vulnerable the millions upon millions of people around the world who are dependent on the sea for food and income. Nearly 90 percent of global fish stocks are either fully fished or overfished, based on an analysis from the UN’s FAO.
Ocean species are not the only animals vanishing from the earth at a dangerously rapid pace.
A report from World Wildlife Fund found that more than half the globe's vertebrates — mammals, birds, reptiles, amphibians and fish — were wiped out in a mere four-decade span. Specifically, these populations declined by 58 percent between 1970 and 2012.
The world’s topsoil, which is vital to growing crops, is in a perilous state; about a third of it is already degraded and the decline is projected to continue. Generating three centimeters of top soil takes 1,000 years, and if current rates of degradation continue all of the world’s top soil could be gone within 60 years, according to a senior UN official.
The global population is presently 7.5 billion. The United Nations predicts it will increase to 10 billion by 2050.
This means, by that time, the world’s farmers, ranchers, and fishers must find a way to produce more food than they have in all of human history. That will prove daunting since farmland is decreasing instead of increasing.
In 1960, there were 1.1 acres of arable farmland per capita globally, according to data from the UN. By 2000 that had fallen to 0.6 acre. Clearly, productive farm land and the human population are moving in the opposite directions.
Fresh water scarcity afflicts much of the world. Only about half of the world’s population has a connection to a piped-water supply in the home, whereas 30 percent rely on wells or local village pipes, and about 20 percent have no access at all to clean water.
Though 71 percent of the earth’s surface is covered by water, only 3% of all the water is freshwater, meaning it is safe for drinking. However, most of this is unavailable for human use. Roughly three-quarters of all freshwater is part of the frozen, and largely uninhabited, ice caps and glaciers. What remains for our use is about 1 percent of the total.
While a concerted, global effort is needed to stop and ultimately reverse the exhaustion of the earth’s resources, much of the developed world remains woefully unaware of the crises that are currently unfolding.
People who live in places where massive deforestation has occurred and continues, such as the Amazon, are well aware the emergency. People in fishing communities around the world come face to face with empty nets on a daily basis. The half of the global population without a piped water supply in their homes likely views clean, drinking water as the vital, precious resource that it is, while the other half likely takes it for granted.
Governments around the world need to act unilaterally, and quickly, to solve these problems or the entire planet will be facing multiple, crushing resource shortages all at once, just a few decades from now.
For much of the world, these issues are already at full-blown crisis levels right at this very moment.
Friday, August 11, 2017
U.S. housing inventory hit a record low this year and the trend in tightness shows no sign of abating.
The inventory of homes for sale was down more than 11 percent in June, year over year, according to Zillow, with steeper drops in big markets like San Francisco (minus 26 percent), Minneapolis-St. Paul (down 30 percent), Washington, D.C. (down 20 percent) and Seattle (minus 24 percent).
Remarkably, housing inventory experienced a year-over-year decline for the 104th consecutive month, dating back to October 2008, according to RE/MAX.
Homebuilders haven’t picked up the slack by constructing more homes. Though housing starts have increased dramatically from the crash-era bottom, they’re still below average. In short, building hasn’t caught up with demand yet, which has kept supply painfully low.
“There are about as many homes for sale now as there were in 1994, except there are about 63 million more people in this country now than there were then,” reports Svenja Gudell, chief economist at Zillow.
That has driven home prices to record highs. The June 2017 Median Sales Price of $245,000 was the highest in the history of the RE/MAX National Housing report.
Unless supply rises quickly and dramatically, or unless demand suddenly falls due to lack of affordability, expect the housing crunch to continue.
Though median household income rose to $56,516 in 2015 (the latest data available), according to the U.S. Census Bureau, it remains 1.6 percent lower than in 2000, when it hit $57,790, and 2.4 percent below the 1999 peak at $57,909.
However, homes were much less expensive back then. The median U.S. home value was $119,600 in 2000, according to the U.S. Census Bureau. Because homes are far less affordable today, relative to incomes, it will lead to more defaults and foreclosures in the next, inevitable, recession.
This isn’t the only evidence that Americans are living beyond their means.
Credit-card debt in the U.S. rose again in June, surpassing the peak set just before the 2008 financial crisis.
Outstanding revolving credit, which includes credit-card debt, rose to $1.02 trillion in June, according to a monthly report from the Federal Reserve.
This has consequences; defaults are once again on the rise. The New York Federal Reserve observed a 7.5 percent rise in the share of credit-card balances that were seriously delinquent, or at least 90 days past due, in the first quarter.
Mortgage debt ($14.4 trillion), credit card debt ($1 trillion), student loan debt ($1.4 trillion) and auto debt ($1.2 trillion) have all piled up to record levels. Consequently, U.S. household debt surpassed its pre-crisis peak in the first quarter. Total household debt increased to $12.73 trillion, surpassing the previous record level seen in 2008.
If you’re looking for a ray of light in this story, it might be that household income is now higher than in 2008. However, it still remains lower than in 1999 and 2000. That’s not good news.
Another positive view: in the fourth quarter of 2007, when many of us realized that the wheels were coming off the wagon, Americans were devoting 13 percent of their disposable personal income to household debt service. By the first quarter of 2017, that percentage was 10 percent.
Maybe that means that everything ok and Americans have it all under control.
But there’s no escaping the fact that wages have been very sluggish, rising just 2.5 percent over the past year. Wages typically grow by 3.5 percent to 4 percent when the unemployment rate is this low
However, inflation has also been sluggish, remaining below the Federal Reserve’s 2 percent target for five years. In fact, the Consumer Price Index rose just 1.7 percent, year-over-year, in July.
So, though wages have remained weak, inflation has remained even weaker.
Yet, the CPI is misleading. Things such as college tuition, prescription drugs and home prices are all far above the overall inflation rate. For example:
* Tuition at four-year public colleges has risen 225 percent over the past 20 years, according to College Board data. Student loan debt has now risen to $1.4 trillion.
* From about mid-2015 to mid-2016, prescription drug costs jumped by nearly 10 percent. Furthermore, according to an AARP study, the price for an AARP-selected basket of widely used prescription drugs rose from $4,140 in 2005 to $11,341 in 2013, an average annual increase of 13.4 percent and a total jump of 174 percent.
* The median U.S. home value rose 96 percent from 2000 - 2016, according to the U.S. Census Bureau, meaning it roughly doubled over 17 years. That’s an average annual increase of 4.1 percent, well above the inflation rate.
Though consumers may have seen modest increases for consumer goods, such as clothing and footwear, the bulk of our money is spent on much more expensive items, such as housing, tuition, prescription drugs, health insurance and healthcare. None of those things have undergone modest price increases.
The heavily inflated costs of these components are creating enormous and unhealthy debt levels. Record-high debts should be seen as a canary in the coal mine.
The last time debt levels were this high, it didn’t end well. In fact, we’re still grappling with the aftermath a decade later.