“If poor people knew how rich rich people are, there would be riots in the streets”, entertainer and comedian Chris Rock told New York Magazine writer Frank Rich.

The wealthiest 20 individuals in the United States — a group small enough to fly together on a Gulfstream jet — have as much wealth as the 152 million people who comprise the bottom half of the U.S. population, The Institute for Policy Studies reports in “Billionaire Bonanza: The Forbes 400 and the Rest of Us“.

But what’s really driving the widening gulf between the haves and the have nots in America?

Among the more widely appreciated reasons for declining economic growth is the advance of automation. But other factors have begun to collide with technology to launch what may be a Perfect Storm: reshaping the economy to a “new normal” marked by economic uncertainty.

Another culprit is the rise of lopsided trade deals in the 1980s and ’90s, which have provided greater incentive to offshore jobs. The late billionaire and financier Sir James Goldsmith in his book “The Trap” predicted that poorly crafted free trade deals would produce a “net job loss”. In the early 1990s, Goldsmith testified before Congress advising against entry into another globalization deal known as GATT. Goldsmith also called out the Clinton administration on the Charlie Rose show in opposition to NAFTA, again predicting an outflow of jobs and capital.

If the wage stagnation of the late 1970s had not persisted to the present — some four decades! — the average American would earn $92,000 per year, reports Forbes in “Average America vs the One Percent“. In today’s dollars, those who identify as middle class are less secure than families that relied upon on a single breadwinner in the 1960s and earlier. We have gone from a society that can pay its bills and raise a family on a single income — and often a blue-collar income at that — to one in which the norm is for two able-bodied adults to work full time to support a family. (And because this is the new normal, illness and divorce are now the leading causes of child poverty and personal bankruptcy, according to the book “The Two-Income Trap“.) During this same period household debts have grown and savings diminished.

While cynics use these economic indicators to berate Americans — promoting the simplistic conclusion that Americans are eager to live beyond their means — reality is far more nuanced. In recent years recessions have gone deeper, last longer and recoveries are that much weaker. In part this is because our economy is nearly 70 percent dependent upon consumer spending for its health. Economic growth has instead remained tenuous in ways that economists typically ascribe to “lack of consumer confidence”. Behind the euphemism lies the unsettling reality that fewer Americans have the discretionary income necessary to stimulate the economy. More than 2/3 of Americans struggle to come up with $400 in an emergency.

Economic recoveries are indeed hampered by weak consumer demand. What is lesser appreciated is that job growth and wage growth face similar constraints. This traps the American economy in a self-reinforcing cycle in which GDP remains weak largely because the American middle class is poorer than the middle class of decades past. For many households, fixed expenses consume a higher percentage of Americans’ take-home pay. In some of the nation’s strongest job markets, for example, housing costs exceed a third of median income earners’ monthly take-home pay. For other households, tax burdens combined with rising healthcare costs consume nearly half of their incomes. Food, housing and childcare costs are also up.

America’s broken bookkeeping also helps explain why we’re headed for a Perfect Storm. We rely upon inflationary measures that do not account for many of the unavoidable fixed expenses all Americans, at every income segment, incur. We calculate the federal poverty line to account for the cost to feed a family of three for a year — with no provision in the formula for energy and shelter! As long as our government insists on papering over its public policy failures with misleading federal statistics, economists will continue to fret over equally misleading economic indicators. A primary concern among economists, for example, is how to promote greater levels of inflation to counter the risk of deflation when, in fact, the rising cost for healthcare, food, childcare, housing and higher education amount to significant inflationary pressures on American families.

The final and least appreciated aspect of this Perfect Storm, which deserves a much broader discussion among voters, is the dysfunctional relationships between career politicians and their leading campaign contributors. Although we hear it time and time again, it is difficult to wrap our minds around how lopsided the playing field really is. Democrats and Republicans alike have failed to commit to closing tax loopholes that allow companies like GE, Verizon and Google to pay zero — even negative! — federal taxes. Influence buying will undoubtedly continue as long as Citizens United, and Supreme Court decisions like it, continue to give Corporate Citizens a bigger megaphone with which to petition elected leaders. Continue Reading »

The 2016 presidential election year in many ways reflects the way in which reality TV — never at a loss for drama, exhibitionism and outrage  — has begun to influence political theater. Political races have always been, to an extent, a dog-and-pony show. But GOP candidate Donald J. Trump’s out-sized assertions and foot-in-mouth moments don’t seem to have cost him to the degree they would have cost a presidential candidate in elections past. Aided by the let-it-all-hang-out evolution of social media, what passes for reasonable discourse rests at an exceedingly low bar. The question is, just how much success can a presidential candidate enjoy using this provocative formula?

Perhaps Trump’s success, beyond the fact that his outrageous statements attract a great deal of media coverage, would not succeed if The Donald did not also tap into a growing populist frustration, signaling a sea-change the political establishment can no longer afford to ignore.

For all his grandiosity, Trump has managed to tap into very real American concerns. Continue Reading »

If one were to jump into a time machine to travel back to 1995 or thereabouts, what would the publishers of newspapers and magazines have to say about the “Internet”? One might assume, at first glance, that the Internet would be a publisher’s dream: unprecedented reach beyond the usual regional scope, access to new readership, more advertising opportunities and expanded market share. But that’s not what happened. Hundreds of publishers, both regional and national, found themselves struggling, instead, to make sense of how to translate the digital venue into an improved bottom line. It didn’t help that this digital medium spawned a paradox: more readers, less circulation; more ad potential, less ad revenue. The very same readership who could be reached at unlimited distance through the Internet now enjoyed a smorgasbord of competing blogs, news and social media outlets from which to gather information. It proved too much, too fast, leaving print media to quibble over an increasingly fragmented market. That the print industry is struggling to remain afloat is widely appreciated now. But what’s only beginning to be appreciated is that much of the economy — bricks-and-mortar retailers, in particular — will face the same paradox: greater sales reach in the face of diminishing returns.

The chopping axe is coming for the traditional retail space now. But are retailers any better prepared than their print news counterparts?

Retail as We Know It — but for How Long? Continue Reading »

Can the United States of America afford a decades-long war with ISIS? Can the U.S. contain Russia should it annex its neighbors? Can we confront North Korea if its dictator teams up with a nuclear-armed Iran? Will Big Government have an incentive to secure our borders if we need new and future taxpayers — legal and otherwise — to service the interest on our debt?

There’s no doubt the United States has the best-equipped military in the world. But that may not add up to a whole lot of security if we don’t get a handle on the national debt — before it’s too late.

“I.O.U.S.A.” is as relevant today as it ever was when it debuted in 2008 on the heels of former Comptroller General David Walker’s two-year Fiscal Wake-Up Tour. The only difference? Instead of ~$9 trillion the U.S. is running a deficit today in excess of $18T. That works out to a staggering $3 million per minute — for a figure currently in excess of $56K per American!: