9.4 Million More Americans Below Poverty Line Than Pre-Crisis
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
According to Janet Yellen, we are still on pace to raise rates in 2015. While the rate hike was supposed to happen this month, it got derailed by the August market selloff, volatility in China, lackluster work force numbers, and a variety of other factors.
Despite the Fed continuing to kick this down the road, they continue to claim that we are in the middle of an ongoing recovery. There’s just one problem with that: things are getting worse than pre-crisis levels for millions of the poorest Americans.
It’s true that the wealthiest 10% of Americans have finally seen their household incomes rise above the levels last seen in 2007. It’s also true that median incomes have “recovered” from the worst of the 2008 disaster. Median earners were -8.1% worse off in 2011, and now they are only -6.5% worse off according to most recent data for 2014 released by the U.S. Census Bureau last week.
However, when we look at the lowest 10% of income earners, the situation is much more precarious. In 2011, the bottom 10% of households were -9.0% worse off in terms of income than they were pre-crisis. Since then, it hasn’t gotten any better: they now are making -11.6% less income than they were in 2007.
Possibly even more concerning is the fact that the amount of Americans living below the poverty line has soared since 2007. There are now 9.4 million more people that can claim to be a part of this unfortunate group, and the total contingent living below the poverty line now makes up 14.8% of all Americans. This is also an increase from the 12.5% figure from before the Great Recession.
What’s the difference between 2007 and today? One stark contrast is the fact that the Fed’s balance sheet has exploded by adding $3.5 trillion of phony money to its balance sheet (that’s about the size of Germany’s economy) with its Quantitative Easing (QE) program. As part of the same experiment, it kept rates artificially low at near 0% for a record amount of time to encourage both lending and economic growth.
However, it is seven years later, and we are starting to see the fruits of this experiment especially in terms of wealth inequality. Studies and economists are starting to sound off, noting that QE and ZIRP have been a failure for America’s poorest. We explained the basics in a previous chart, but here’s some other articles worth reading from Forbes, WSJ, and SCMP that help show the effect of these policies.
By the way, the St. Louis Fed has essentially admitted QE was a mistake, while the Philadelphia Fed also admitted that these policies likely helped cause income inequality. Even fragilista economist Joseph Stiglitz has said this summer that ZIRP has helped increase income inequality.
Wealth, real wealth, is the natural resources of the earth with labor added to them to produce things (goods) that other people desire enough to trade that which they have produced for them.
We no longer produce wealth in this country as the basis for our economy, which is why the traditional productive classes (middle and upper lower) are losing ground while the financial manipulating classes are gaining ground (manipulations are much easier than production, and unaffected by lack of it).
I’m not judging this as good or bad, just pointing out what the situation is and (indirectly) what needs to be done to change it one way or the other as we collectively see fit.
According to the top chart, the top 10% have increased their income 1-1/2$% since 2011? Am I reading that correctly? If I am correct, all the talk of income inequality is bullshit! If the top 10 % have only increased their income by less than two percent in four years, please stop with all the crying about how the rich are thriving. They were wealthier before the economic storm, they are wealthier as this economic slog continues. If the top 10% have only improved by a horrid 1 1/2% since 2011, things are much worse than the Administration cheer leaders in the media portend and the nonsense of income inequality is a diversion.
Tom
The problem isn’t the top 10%. It’s the top .01%.
The last time our nation’s wealth was as divided and consolidated was in 1928.
Figure out what’s coming.
For a small, connected, segment, primarily those closest to government teat and mandate, the recovery seems real.
Which is why the teachers and PTA (here, primarily made up of upper income stay at home mommies) are shocked, *shocked * I tell you, that is parents are so cheap, and year after year in this recovery, the fund raisers continue posting shrinking results.
They don’t believe me when I tell them health taxes, and use, for the rest of us is bleeding us dry.
I have the feeling that not a one of them will be able to speak of recovery in a couple more years.
I just received a pamphlet called “Annual Notice of Changes” for my AARP Medicare Rx Plan; the damn thing is about ½ in. thick. Yeah like I’m going to read the whole damn thing. They send you so much information it’s impossible to ferret out the parts where you’re getting screwed.
Anyway I went straight to the premium page to see if by any chance they might have gone up.
Oh – I guess so—18.5 % increase in premiums.
The whole co-pay structure is difficult to fully understand but I see in some places the co-pay is double .
Yellen says there’s no inflation?