While Americans are earning less, they’re going deeper into debt.
According to the latest Brookings Institution study, despite a “record low” 3.6 percent unemployment rate, 44 percent of all workers age 18 to 64, or roughly 53 million Americans, have a mere $17,950 median annual income and a median hourly wage of $10.22.
The average household income for these low-wage workers is $30,000 for a family of three and $36,000 for a family of four.
Last week, The New York Federal Reserve noted that household debt rose 0.7 percent during the third quarter of 2019, a steady climb over the last five years, now at $14 trillion.
TRENDPOST: It’s expensive to be poor in the United States (as it is throughout the rest of the world, as evidenced by the income inequality uprisings sweeping the globe).
As we have noted several times in the Trends Journal, 40 percent of Americans do not have access to $400 if they need it for an emergency.
For those with low credit ratings and with marginal income, “payday” loans are an extremely costly option. Seventy percent of payday borrowers use predatory lending companies for monthly rent and utilities. On average, the interest rate of paydays loan is 391 percent – unless borrowers are able to pay back the loan in two weeks.
For the “average” American, the average annual credit card percentage rate is 17 percent, the highest in 20 years. And for retail-specific cards, it jumps to 27.5 percent.
Now there’s legislation in America to cap interest rates at 36 percent. Yet, for the Wall Street money junkies dipping into the repo market, it’s under 2 percent.
Thus, the abyss between the rich and poor continues to widen.
Central banks keep the stock market fat with lowered interest rates and overnight repo operations, so the gamblers can keep gambling.
PUBLISHER’S NOTE: While the cheap money flow keeps the equity markets moving higher, it has taken a toll on the average saver. For example, at least one-fifth of the banks in Germany are passing on costs of negative interest rates to small retail consumers.
German cooperative bank Volksbank Fürstenfeldbruch said they will collect a charge of negative 0.5 percent on savings accounts with deposits of €1 and up.
Previously, only those retailers with very large accounts absorbed the additional charges to offset the bank’s low-interest loans, and the first €100,000 was usually exempt.
Again, this is another example of income inequality that favors the rich at the cost of the rest of society, an element sparking uprisings against the elite and the ruling class throughout the world.
Trickle Down Flows Up
As for President Trump’s tax cuts, according to a JUST Capital study of 145 publically traded companies, only 6 percent of tax-related savings went to workers, whereas 56 percent went to shareholders.
The proof is in the facts.
For example, in 2017, FedEx owed the IRS at least $1.5 billion in taxes with an effective tax rate of 34 percent.
FedEx founder and chief executive Frederick Smith did interviews on radio shows – one hosted by Larry Kudlow, now Trump’s chairman of the National Economics Council – selling the talking point that corporate tax cuts would stimulate capital investment.
It worked. FedEx helped champion the $1.5 trillion Republican tax cut in 2017, which lowered the corporate tax rate from 35 percent to 21 percent. Rewarded for its efforts, the company saved more than $1.6 billion in 2018.
In 2018, FedEx owed nothing, as their effective tax rate was zero.
TRENDPOST: As with all trickle-down mythology, FedEx did not increase investment in its equipment and other assets.
As we noted, analysis showed that the larger the company, the less apt it was to reinvest in itself.
FedEx spent less in capital investments in the 2018 fiscal year than it said it would before the tax law was passed. Its investment in 2019 was even less.
Instead, it spent more than $2 billion in stock buybacks in 2019, up from $1.6 billion in 2018 and at least double it spent in 2017.