Private pay shrinks to historic lows as gov't payouts rise

[cory777]

Source: USA Today

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.

At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.

Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. "This is really important," Grimes says.

Read more: http://www.usatoday.com/money/economy/income/2010-05-24-income-shifts-from-private-sector_N.htm

[JDPriestly]

1. Tax imports more highly than you tax domestically manufactured goods.

Employing Americans at good wages will be profitable. Factories will open. There will be enough jobs, and the jobs will pay better. We get a better quality of products in our stores. People will not retire as young. Less money will go to unemployment insurance and food stamps. Problem solved.

For a change, the American government needs to think about taking care of Americans, not just watching out for those poor people in other countries. Americans built this country. The Indians can build theirs, as can the Chinese, the Columbians, the Mexicans, all countries.

And all of us in all countries need to reduce consumption. For some countries that means reducing the birth rate. For others it means reducing the use of fossil fuels and the purchase of manufactured products. For Americans it means all that and eating less. We need to live simpler lives.

[Donnachaidh]

2. +1000000 n/t

[proudohioan]

9. Thank you for pointing this out! +1000! n/t

[AtheistCrusader]

14. Where is Columbia?

Why do you hate Missouri so?

[caseymoz]

21. You mean he misspelled "Colombia?" How lame of you.

If you're going to correct spelling, please correct the spelling.

[AtheistCrusader]

25. It's called a joke.

It helps people remember in the future.

But I'd like to see what happens when you tell a nation like China, or Japan, each holding nearly a Trillion in US debt, that we are going to slap a huge tarriff on their goods. This will end well.

I'm all for bolstering the economy at home, but I think there's a small detail that has been overlooked in that post.

[JDPriestly]

30. Actually, that will end well.

And if you just placed a VAT on all consumer goods (not food or children's clothing and pharmaceuticals), you would actually be placing a tax on imports.

Our creditors would probably be very happy because we could pay them back out of the money we collected from the taxes.

Western European countries have huge VAT taxes and have had them for years. That's why, in spite of the propaganda and talk of crises in Europe, their economies with a couple of exceptions are doing better than ours. Germans are still working in industrial jobs. We aren't. And they are a much smaller country with absolutely no domestic oil. They have a VAT. All imports and all domestic goods are taxed at the pay-point. We need that same thing. It distributes the tax burden fairly among domestic and imported products.

Our current income tax system by itself is not working. We will continue to have huge deficits at all levels until we change it.

We should lower the income tax on low incomes and increase taxes on capital gains while we are at it.

Every penny of every Wall Street bonus should be subject to hefty taxes.

[JDPriestly]

29. Sorry. My misspelling.

[SemperEadem]

15. I totally agree

[bulloney]

17. How about the government taking care of American PEOPLE and not CORPORATIONS?

And by taking care of people, I don't mean handouts. Our government, through corporate influences, has been throwing the lower and middle class under the bus through lax enforcement of regulations, allowing the foxes to guard the henhouse, and dismantling safety net programs.

As for our government watching out for the poor in other countries, those in charge in this country usually think of the poor from foreign countries as little more than cannon fodder, especially if they're from a country that has a resource (oil) that our government feels this country is entitled to.

[melm00se]

20. a few points:

Tax imports more highly than you tax domestically manufactured goods.

and what happens when those countries place retaliatory tariffs on our exports to their country? (and before you say "what exports? we don't make anything", the US exports $1.84T in goods and that is 8% of the total economy) if that gets crimped in any significant manner, the economy will tank, especially as many of these exports are the higher margin, non-commodity type products.

And all of us in all countries need to reduce consumption.

less consumption = less stuff made = fewer jobs = less consumption = less stuff made = fewer jobs =...which, in turn, then interferes with tax revenue impacting:

the American government needs to think about taking care of Americans

Economies are now so intertwined, co-dependent that some of the "old" styles of doing things are just nowhere near as effective as they once were and, in many ways, they can have far ranging (negative) repercussions.

[JDPriestly]

31. Pray tell. What consumer goods do we export?

We used to export food, but we are now importing food from all over the world.

What precisely do we export? What do we even manufacture here?

Most of our exports are probably in the form of intellectual property -- movies and the like.

We also export weapons -- which are not going to be subjected to taxes by foreign governments since they buy those products.

I can't honestly think of anything else that we export. Please tell me what products you are thinking of.

I would say:

Higher taxes on incomes = lower take-home wages = less consumption = less stuff made = fewer jobs = less consumption, etc.

Here is the scenario we have now:

Taxes on incomes = higher wages here = less stuff made here = fewer jobs = less consumption == lower tax revenue.

Further,

Lower Social Security and food stamps = lower incomes for the poor = more homeless and hungry people = more crime = higher government costs = higher taxes on those who are working = higher wages here = less stuff made here = fewer jobs = less consumption = lower tax revenue

Governments at all levels are going broke. Cutting so-called entitlements will just move the burden of costs of caring for the unemployed, the disabled, the poor, the elderly to a different level of government. I used to work for a non-profit project for homeless people. It costs too much to raise private funds and private donations are unreliable. They just aren't there in the amounts you need when you need them.

How would you raise the money to keep our government, our society going in this economy in which there are far too few jobs and there are far too many imports.

And, if we are exporting so much, how much tax revenue comes from the production of the stuff we export? It obviously is not nearly enough.

[Lagomorph]

35. A few things we export....

http://oilprice.com/Geo-Politics/North-America/America-Export-Nation.html

[JDPriestly]

36. If we are mostly exporting factory equipment, we would not need to

worry about retaliatory VAT taxes. The other countries that export factory equipment already have VAT taxes. It is unlikely that countries that need the equipment we export to build factories to produce goods we import are going to want to raise the costs to us of the things we import by imposing more import taxes than they already have (and I bet they already impose hefty ones on the things we export).

What do you suggest as an alternative to VAT taxes? If I could think of anything else that would work, I would advocate for it.

But as I see it, VAT taxes are the only solution for our balance of payment, deficit and personal indebtedness problems. And please note that all of those problems are linked.

Too much of what we consume here comes from goods on which our governments get no revenue.

Don't just knock down my idea. Suggest a better one, one that won't throw millions more Americans out of their homes and into the streets, please.

[melm00se]

37. seeing you asked

What precisely do we export? What do we even manufacture here?

Most of our exports are probably in the form of intellectual property -- movies and the like.

Semiconductors
Complete civilian aircraft
Automotive parts and accessories
New and used passenger cars
Other industrial machines
Pharmaceutical preparations
Telecommunications equipment
Organic chemicals
Electric apparatus
Computer accessories
Plastic materials
Medicinal equipment

that accounts for $450billion of US exports

"Consumer" products aren't high profit margin items and are, traditionally, made where the labor costs are the lowest. now it's China, before that Mexico, before that Taiwan, before that Japan etc etc etc.

[JDPriestly]

41. VAT applies to consumer goods.

We should have the VAT. The companies that produce these goods pay employment taxes and other taxes on their production.

It is unlikely that the companies into which we export our sophisticated goods will want to tax them on entry more than they already are. They only buy things from us that they cannot obtain more cheaply elsewhere.

We need to tax imports just as much as we tax domestic products.

[AngryAmish]

23. Mr Smoot, I'd like to introduce you to Mr. Hawley...

[melm00se]

27. shhhhh

those are dirty words and the implications of the Smoot/Hawley Act are anathema here at DU

[JDPriestly]

32. Check out the VATs in Europe. Contrary to the recent news,

they have been working quite well for a long, long time.

[JDPriestly]

34. We were the creditor nation back in the days of Smoot Hawley.

We are now the debtor nation. We need to discourage imports. We will get the opposite effect that we got under Smoot Hawley.

[boppers]

3. Boomers.

We have 20-30 years to expect in increases in government benefit costs, with all of the post-boomers paying for it. It's just how the system works.

[eridani]

4. Boomers are the only generation taxed in advance for our own Social Security as well as that --

--of our parents. That happened in 1983, and in the 2030s FICA rates can be cut again.

[boppers]

5. More details please?

I am ignorant about this, and would appreciate knowing more.

[eridani]

7. See Thom Hartmann and Ravi Bhatra

http://blog.buzzflash.com/hartmann/10015

Coincidentally, the actuaries at the Social Security Administration were beginning to get worried about the Baby Boomer generation, who would begin retiring in big numbers in fifty years or so. They were a "rabbit going through the python" bulge that would require a few trillion more dollars than Social Security could easily collect during the same 20 year or so period of their retirement. We needed, the actuaries said, to tax more heavily those very persons who would eventually retire, so instead of using current workers' money to pay for the Boomer's Social Security payments in 2020, the Boomers themselves would have pre-paid for their own retirement.

Reagan got Daniel Patrick Moynihan and Alan Greenspan together to form a commission on Social Security reform, along with a few other politicians and economists, and they recommend a near-doubling of the Social Security tax on the then-working Boomers. That tax created - for the first time in history - a giant savings account that Social Security could use to pay for the Boomers' retirement.

This was a huge change. Prior to this, Social Security had always paid for today's retirees with income from today's workers (it still is today). The Boomers were the first generation that would pay Social Security taxes both to fund current retirees and save up enough money to pay for their own retirement. And, after the Boomers were all retired and the savings account - called the "Social Security Trust Fund" - was all spent, the rabbit would have finished its journey through the python and Social Security could go back to a "pay as you go" taxing system.

[katmondoo]

12. The Government has used the Social Security funds to pay for their wars

started with LBJ and continues. Nobody talks about that. Thats why Gore wanted the funds in a lock box. Medicare is raided too.

[Lasher]

22. That is a problem for the general fund that borrowed from the trust funds.

The general fund needs to deal with this and other debt, such as that owed to other countries.

[boppers]

39. Wow, thank you.

Learn something new every day, I guess... but as the article says, that money was immediately spent, so it's not actually "there" anymore, is it?

[Go2Peace]

6. This is a dishonest hit piece. Many state and local governments have wage freezes and furloughs

and layoffs. (furloughs are days without pay). Most of the increases that might be see are additional health care premiums. Nobody is better off with this downturn except the rich.

[totodeinhere]

18. It's government-provided benefits that are increasing, not so much wages and employment benefits...

paid to public employees. And of course the obvious reason for this is the severe economic downturn that we have gone through. People have been laid off causing private payrolls to go down, while at the same time unemployed people have to depend more on government benefits. As the economy improves and more people find jobs, they will because less dependent on government benefits and these statistics should change.

I don't see how pointing this reality out translates into a "dishonest hit piece."

[JDPriestly]

33. It's the outsourcing boomerang.

We outsource our jobs, get back cheap products. We lose the tax revenue that we used to earn on the wages that were paid to Americans to make the products. We have to change our tax system -- completely. Top to bottom. Products both domestic and foreign-produced should bear an equal share of the tax burden, the burden of supporting government and services and debt in our country.

If you can think of an alternative solution, please let me know. I would love to hear it.

And don't come back with the VAT is regressive.

I'm on Social Security. I have almost no income, therefore, I buy virtually nothing. I don't pay much in taxes now. (I always paid my fair share when I worked.) I also don't spend much other than on food, seeds and soil and, rarely, cheap clothing.

VAT taxes would mostly increase taxes on the wealthy.

[Go2Peace]

40. Your right. I misread it.

[notesdev]

8. Tax policy encourages offshoring and guess what

we lose jobs here to the point where much of the national household income is being charged to the grandkids' credit card with no end in sight.

Hope them grandkids are super productive - they are going to need to be!

[slay]

10. Tax the mega-rich a LOT, legalize and tax weed, end the wars in Iraq and Afganistan, buy American

That way the average person won't have to pay any more in taxes but we'll still be able to have a nice society with the taxes that are paid and the money that is saved - even if government is expanded we could afford it. If we want manufacturing jobs back, we have to make it too expensive to import from China. It all depends what we want out of life. There are solutions to these problems but those in power wouldn't have much power if these problems actually got solved would they? Kind of like how cancer researchers will be out of a job if there is ever a cure. The solution is not lower taxes - it's higher taxes on the rich, a living wage, taxing marijuana, ending the wars, and making it too expensive to buy shit from slave labor shops in China. Duh. :crazy:

[Delphinus]

16. I like your solution:

The solution is not lower taxes - it's higher taxes on the rich, a living wage, taxing marijuana, ending the wars, and making it too expensive to buy shit from slave labor shops in China.

[slay]

26. Thanks, me too

now if only someone in power gave a shit.. :(

[TexasObserver]

11. That's worrisome.

[LawnKorn]

13. Bring our troops home, end corporate welfare, put a huge environmental tax on fossil fuel

We should create new American jobs by massively funding clean, renewable energy. The research and development of renewable energy can be funded by a huge new tax on big oil, like BP for instance.

[Vinca]

19. There's one way to turn this around: don't offshore our jobs.

This seems to be a real mystery to politicians and the media. A bought and paid for mystery I imagine.

[tiredtoo]

24. Had a discussion with a right winger just yesterday

regarding this. He was complaining about his tax dollars going to support all those "bums" on welfare and/or unemployment. He mentioned a fellow in his late 40s that works all winter dismantling nuke sites. Then he comes home in the summer and lives off $250 a week unemployment. The guy told him, "I work hard all winter and deserve the break in the summer" ? I then told him about a fellow I know that is a retired GM executive. This guy now does taxes for one of the largest tax firms in America. He also collects unemployment after tax season. This man is a Sarah Palin supporter and sees no problem with his actions. Gets a nice pension, social security and unemployment.
Having said that, I also think the outsourcing of jobs is the main culprit here.

[tranche]

28. Private industry competes against low wage labor and currency manipulation.

Service jobs are all that's left and it's too hard to organize for that. Government, you can get your hands on and make demands. That's hard to do in the open market. It's a tough business. We've got to get this figured out because there will be backlash 10/20 years from now.

[fascisthunter]

38. want to know what brought America to it's knees

not terrorism, or war, but greedy business people who only think of themselves and their money. They destroyed this country.

This is just one more symptom of unregulated capitalism... I lay fault with all free-market fundamentalists.