Neil Shah wrote a piece in the Wall Street Journal entitled, “American Incomes Face Tough Slog Over Next Few Decades.” His article highlighted the research by two economists, Richard Burkhauser of Cornell University and Jeff Larrimore of Congress’s Joint Committee on Taxation. They see two trends that will impact the economy negatively in the future. First, Baby Boomers will start to retire in record numbers which means more senior citizens with lower incomes. Second, the increase in the Hispanic population will result in a minority workforce with reduced incomes.
Since consumer spending is vital to businesses prospering and economic growth, this doesn’t bode well especially for small businesses. Incomes reflect economic prosperity. Incomes rise during prosperity and tend to decline or become stagnant in a lackluster economy. We have the latter situation by all indicators.
I think Burkhauser and Larrimore’s study ignores certain other factors which will also work against the economy. Incomes will be lower in the near future due to ObamaCare. The law will take a major bit out of incomes. Health insurance premiums will rise despite what Obama says. You cannot subsidize millions of people without a corresponding rise in premium rates. Only the naive would think otherwise.
Another factor is inflation. Inflation is a hidden tax on incomes. It lowers the value of the dollar so that you need more dollars to buy the same goods that cost less yesterday. We are already seeing inflation in the cost of food as well as other commodities. Once the federal Reserve allows interest rates to rise, inflation will hit the American public with a vengeance.
There is the fact that 7 out of 8 jobs created now are part-time jobs. This is due to ObamaCare and is drastically changing the economy. Part-time jobs represent a decline in the money flow needed to sustain the economy which has serious implications for the private sector of the economy and the nation.
At least 32% of households nation-wide have at least one spouse unemployed due to the stagnant economy. Companies are not reducing wages but cutting workers to stay solvent. This reduces the money flow needed to sustain the economy.
Unemployment is higher than the government statistics indicate because the Obama Administration changed the formula of accessing unemployment to hide the abominable high rate of unemployment. The stagnation of the economy reflects the true nature of unemployment in this nation, not the unemployment rate.
The final factor is welfare. According to government statistics the middle class is declining. The middle class and the poor are getting poorer. As welfare rolls continue to increase, it is straining government resources. This is why the Democrats who are responsible for the ballooning welfare numbers need to raise taxes. But a raise in taxes will mean less income for the employed Americans also. Less income means lower tax revenues. Lower tax revenues created more debt and so forth. It becomes a vicious cycle.
When you connect the dots of debt, deficit spending, entitlements and over-regulation of businesses to achieve a utopia which can never be, you see that political power is the goal of the Democrats. Unfortunately, many Americans are too naïve, too ignorant or in denial to see the consequences of this reckless spending and government growth. The reasons cited above are why it will get worse.
Obama and the Democrats have created a vicious cycle that is restraining the prosperity of the United States. Only when it hits more people in their pocketbooks will they start to see that they have been duped by Obama and the Democrats.