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Forum Post: Inconvenient Truths : America

Posted 8 years ago on Oct. 16, 2011, 3:40 p.m. EST by Rico (3027)
This content is user submitted and not an official statement

Myth: The American System is a Failure

Truth: Available data shows the system has created unprecedented affluence

Referencing http://tinyurl.com/CensusEconomicData median / mean household income is $50,046 / $68,259, our median / mean family income is $60,609 / $79,338, and 84.5% of us have health insurance (!).

Referencing http://tinyurl.com/CensusHousingData 65.1% of us own our homes while only 34.9% rent. The median value of owner-occupied residences is $179,000, down from a peak of $197,500 in 2008 (only 10% loss). Of the owner occupied homes, only 67.8% have a mortgage, and their median monthly cost is $1496 per month ($17,952 per year). 32.2% of owner occupied homes (21% of all housing !) are owned free and clear with a median monthly cost of $432 ($5,184 per year). The 34.9% of us that rent incur a median month cost of $855 ($10,200 per year).

Referencing http://tinyurl.com/CensusHomeHistory , the percentage of Americans owning their own homes (65.1%) remains greater than any period from 1900 – 1990, and is down only 0.9% from 2000 levels. Furthermore, the value of those homes has only fallen about 10% since the peak in 2008. These figures hardly describe complete collapse. In addition, with 84.5% covered by health insurance, we are hardly suffering from an crisis in health care coverage. Finally, the healthy difference between American income and housing costs in 2011 provides some indication of or substantial level of disposable income. Unfortunately, we've been irresponsible with our income.

Referencing http://www.federalreserve.gov/releases/housedebt/ we see that Americans spent not only their disposable income, but started borrowing at unprecedented levels starting in 2000 to buy foreign made goods. By 2008, fully 20% of disposable income was going toward household debt payments to pay for all those foreign goods. Our purchase of foreign goods produced a trade deficit that averaged 714 billion per year between 2005 and 2008, or $2.1 trillion in total cash outflow over a three year period ( http://tinyurl.com/CensusTradeData ).

The good news/bad news is that Americans finally decided their debt was too high, and they've being spending much of their disposable income to retire that debt. Per http://www.federalreserve.gov/releases/housedebt/ we see that, in only 3 years, Americans have reduced their debt as a portion of income to levels (11%) we haven't seen since 1995 ! That's good, but it also means they are not spending as much of their income buying products, and that creates a problem in the economy.

If banks had acted like our parents, they would not have have let people borrow so much money ! The banks, however, were making a lot of profits lending us that money so why would they be the ones to tell us “NO” ? WE borrowed the money, and WE spent it on foreign goods. Now WE have little money and few jobs.

The American System is NOT a failure. It has created a very affluent society and a standard of living unprecedented in human history. We The People have been irresponsible in our borrowing/spending habits and buying decisions. We DO seem to understand we made a mistake in borrowing so much, and we're retiring our debt at a record pace. We ALSO need to understand we made a mistake in sending so much money overseas, and we need to consider buying some American made products when we start spending again !

Finally, please do not take my message to mean I don't support this movement. I do. See my post at http://occupywallst.org/forum/one-percenter-ready-to-join-if/ . I just think we be more effective if we're armed with facts !

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25 Comments


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[-] 1 points by ddiggs690 (277) 8 years ago

You had a lot of stuff there, but I wanted to focus on this.

"65.1% of us own our homes while only 34.9% rent"

This is very misleading. If you pay a mortage on your home, you do not own that home, the bank does. If for some reason the market takes a dive and you can afford the payment, the bank is allowed to take that home without reimbursing any principle you may have made. This is not ownership. Actually of the bottom 80% of income earners, only roughly 7% own their property. This idea that everyone can "own" a home in America is a great lie perpetuated by a ficticious "American Dream." Not everyone can own a home. The most everyone can hope for is to pay a mortgage and hope for the best.

It looks like you really did your research, but you need to take into consideration the angle in which the data is presented. The system itself really is a failure based on false hopes of abudance through hard work. In reality, the harder you work for a firm, the more profits they will make. This rarely translates to higher wages and actually real wages have remained stangnant for the past 30 years while companies continue to become more profitable. What is the point of making things less labor intensive, if less people are reaping the rewards. It should only be fair that wages increase with profits. At the rate we are discovering and implementing new technology, we will eventually be able to produce nearly everything we need without the need for human labor. This would have a devastating effect of employment and would not be the fault of the people, but the result of a prosperous society. If we don't have a cultural awakening, we are going to have an abundant world but only a few able to reap the rewards. This is disgusting that people would rather see the technologically unemployed have nothing as a result of human technology and inovation rather than sharing this abudance we all created. We are all humans damnit and we all contributed to these technologies. Lets make them work for us. Humans will always seek out the most for his or her labor. Shouldn't our common goal be to use this technology so we all can work less and focus more on things that make us happy. This is not laziness, but part of human nature.

[-] 0 points by Rico (3027) 8 years ago

Agreed, I SHOULD have said "35% rent and 21% own their home free and clear while the remaining 44% carry mortgages."

I personally know a number of people who have "lost their homes" (by YOUR definition this statement is improper as it was never "their home"). Of those I know who "lost their homes," many were INVESTORS who were playing the "Flip This House" game, got upside down, then walked away from the investment at the expense of the banks and those of us that ultimately had to pay. Some of the folks I know who "lost their homes" were in a similar position for a different reason; they took out second mortgages and had a lot of fun with the money, but then discovered they were "upside down." A few others fall into the class of the "average man" who simply did not have sufficient savings to survive an economic downturn. I personally WATCHED these people spend every penny they made, and very FEW of them had any sort of regular commitment to savings ( financial advisors are unanimous in recommending you have at LEAST one year's salary in savings, and you can't AFFORD a home that consumes so much of your income that you can't save any income). This is not to say they're aren't people suffering, but it DOES highlight the importance of REQUIRING some classes in financial management as a requirement for graduation from High School.

If you have equity in a house, but can no longer afford to make your payments, it behooves you to sell it before foreclosure. If you have substantial equity, you might even want to declare bankruptcy to buy some time to sell the house. Unfortunately, many of the people in trouble don't HAVE any equity. They may THINK they do, but the value of your home is what you can SELL it for, and it's not easy to sell at ANY price today. You can thank the real-estate speculators, including Americans playing "Flip That House" for that.

The record corporate profits we're seeing today are largely the result of capital investment in computers and robots (see http://occupywallst.org/forum/set-the-tax-rate-to-the-unemployment-rate/#comment-160874 ) COMBINED with a HUGE increase in INTERNATIONAL sales. This makes the charts people like to show comparing the percentage of wealth held by the AMERICAN worker versus Corporate profits VERY misleading. If I have a company with 1,000 American employees and 100,000 foreign workers, are my American employees somehow entitled to a percentage of all my international profits ? What about the case where my profits are the result of my investments in computers and robots? The folks who MAKE those computers and robots ARE getting a lot of my profits, but are my 1,000 office workers somehow entitled to those profits AS WELL ?

If the workers of a company want to share in ALL profits of the company they work for, they need only buy STOCK in those companies. I could even support some sort of incentive/tax break for companies that ENCOURAGE employee stock ownership plans as I think it would be good for the companies AND the workers. I personally own stock in the company I work for that is now worth over $100,000. I accumulated this stock over a 30 year period by just buying a little every month.

[-] 1 points by ddiggs690 (277) 8 years ago

"(by YOUR definition that this statement is improper as it was never "their home")"

Lol ok ok, you came back to bite me for that!

I completely agree that those speculative bets on the housing market was the biggest contributor to housing and banking collapse. There are currently no laws out there or any laws being proposed that will act as a deterrent for these speculative bets. Hell, even as we speak, banks are holding on to there properties speculating on the prices going up in the future.

Since we are specifically on the topic of land speculation, i wanted to ask if you are familiar with economic rent and land taxation? If we were to implement a tax purely on land, this could eliminate or greatly reduce the speculative incentive of land ownership. No longer would anyone or any corporation be willing to take a loss in hoarding land, but rather would always want to seek out a buyer or renter and in doing so, will maximize the productive capacity of the land. This would have a stabalizing effect on the market and, if implemented properly by taxing only the land value and not infrastrucure, we can realize a perfect equalibrium in land supply and demand. Best of all, by taxing land, it is a non-avoidable tax and non-intrusive on production. Read on if you aren't familier with this theory.

The theory of economic rent has been around for some time, but land taxation has seldom been implemented throughout history. It is well known that the factors of production are composed of land, labor and capital. Land, in the economic sense, can be explained as anything with a productive capacity that has not been created by men or women, but has value created by the community. Labor is any human energy spent , whether by the mind or through brute force, that contributes to a means of production. Capital is mainly what is spent from savings for future production. Under the current system, mainly labor and capital are taxed, while the landed elite make out like bandits with the rents that are created by the community! It is no surprise that civilizations have suffered from vast inequalities since the founding of the first governments.

What we need to fight for is a redistribution of these economic rents for the sake of the people, while at the same time reducing the tax rates on labor and capital. These rents from land are the source of all wealth and are presently held by a small number of wealthy people who will speculate and slow there productive capacity in order to increase profits.

This demand goes out to the people of OWS! If there is one thing we need to change in order to promote equality, environmental protection and job creation through increased productive capacity, this is the solution we need. Please read about economic rent and land taxation in order to fully grasp the concept.

This is something proven in theory and not based on anyone's personal opinion or ideology. While we are divided on many things, it's time to come together with some real demands to benefit the majority of unrepresented individuals of the world. Lets show the top 1% that we know where their unearned wealth is coming from and that we know exactly what is needed in order to bring them back to the real world!

[-] 0 points by Rico (3027) 8 years ago

I'm not sure we'll EVER get to the point where we don't have "bubbles" of one sort or another. For some reason, every now and then, a BUNCH of people get the idea "you can never lose money in <fill in the blank>" The Dutch had their Tulip Panic, the Spanish their South American Land bubble, and the French their Louisiana Land bubble. Note these are but a FEW of the panics we've seen in the past, and THESE three occurred while the world was on the beloved gold standard.

I recently had a discussion with a man here who said "I bought because they said housing prices would only rise and that my income would rise over time so my investment wouldn't seem so costly." I did a quick 30 second Google search and showed him that homes DID in fact fall in value in the mid 70's, mid 80's, and mid 90's. I also admonished him for making decisions based on what ANY seller is saying whether they be a guy on Craigslist or a mortgage broker. He's one person who would have REALLY benefited from a High School class in basic finances !

One of the largest criminals in my mind regarding this last housing bubble were Fannie Mae and Freddie Mac. They virtually DEFINE the term "affordable" via the conforming loan limits they establish (which also defines the ability of the lender to resell the mortgage). Under pressure from the Realtor, laborer, electrician, and carpenter unions ( see http://www.opensecrets.org/orgs/list.php ), Congress kept pushing Freddie and Fannie to raise the conforming loan limit MUCH faster than the historical average, and this FUELED the bubble. Note the LARGEST bail-out of all was the $200 billion we sank into Fannie/Freddie which ALSO came with $5 trillion in loan garentees we are now responsible for. I also have plenty of blame for the rating agencies that rubber stamped all those mortgages as "AA" and thus facilitated their resale in tranches on the global market. These rating agencies violated their fiduciary responsibility, yet I haven't heard a WORD about anyone trying to improve our oversight or regulation of THEM.

I am NOT familiar with the "economic rent and land taxation" topic. I'll go study up. Do you have a helpful link to get me started ?

[-] 1 points by ddiggs690 (277) 8 years ago

You seem very willing to do your own personal research. To get a basic overview of economic rent, wiki will suffice to familiarize yourself with the topic. An in depth analysis is done in the book "Progress and Poverty" by Henry George. The link below is a free pdf version, re-written in modern English.

http://www.henrygeorge.org/pdfs/PandP_Drake.pdf

[-] 0 points by Rico (3027) 8 years ago

I am an autodidact and a FIRM believer in autodidacticism; things are best understood by following our curiosity and thirst for knowledge rather than by absorption of factoids memorized to gain credentials. It's the difference between knowledge and understanding. Many famous people were autodidacts, see http://en.wikipedia.org/wiki/List_of_notable_autodidacts . In my own case, I dropped out of high school and have no college degree, yet I have ascended to the very highest Engineering ranks in a major Fortune 500 company (and hold a few patents)... all through self-education. I make a POINT of never standing still and make sure to learn at LEAST one new thing each and every day !

Thanks for the link ! I'll start reading tonight... gotta get some WORK done today or my capitalist masters won't want to pay me !

[-] -1 points by ddiggs690 (277) 8 years ago

I also research just about everything I hear and come to my own assumptions. I wish more people thought like that. We would have a much more informed public if people took just a small part of their day to fact check. Enjoy reading the book. I have a feeling you will be hooked and want to learn more about this subject after just one chapter. Oh and BTW, don't piss off your capitalist masters :D

[-] 1 points by Rico (3027) 8 years ago

Bravo for you! This "Twitter Generation" has created what I call "Social Facts" that differ from "old fashioned" facts in their lack of any objective supporting evidence. Browse through the forums here and look at how often people provide links to OTHER people simply repeating their opinion as though these are "references" that somehow support their position ! Unfortunately, a "Social Fact" cannot be discussed constructively as anyone who dares QUESTION what we all "agree" is true is ostracized and marginalized. I see this same phenomenon at work where "Engineering" is often displaced by "Opinioneering," especially among the younger folks.

I, like you, am VERY careful about what I allow into my head. If someone says something that piques my interest or is otherwise important, I CHECK it before allowing into the collection of things "I know."

OK, OK, I'm CLOSING this window !

[-] 1 points by Quark (236) 8 years ago

America was built on lies and denial. It is a failure! It couldn't even replace the trade center. America is old, suffered many strokes like the oldies who run it. A ruthless, amoral country, that stands for nothing it pretends.

You are in serious Denial About life!

[-] 1 points by Rico (3027) 8 years ago

We heard a lot of rhetoric like this back in the 1960's during the First Youth Rising. Oh so full of idealism yet void of understanding or experience with practical realities. Most of the "hippies" now run the "system" so hated by the youth of today. I wonder what YOU'LL be doing in 30 years !?

You should hit the history books to get a little perspective. Average life expectancy 100 years ago was on the order of 40 years. Infant mortality was so high that people didn't even NAME their children until the 6th week of life. Mothers often died in childbirth, and it was common for every family to lose at least one gown child to sickness. Flu, smallpox, and polio ravaged the population. The children of the unemployed were put into orphanages. A good portion of the population would starve during a downturn or, like the Irish, emigrate in mass to another country.

As noted in my original post, Americans enjoy a standard of living far above that enjoyed by most in the world or that of our living ancestors. We don't need to destroy millions of lives by tearing everything down and starting over. We need to look at the facts, decide where the problems are, and refine the system to address those problems.

P.S. I'm an "oldie." Shall I call you a "child" ? The "system" you hate so much is what ALLOWS you to have the time and means to complain so loudly. If it weren't for the "system" you'd be out working your father's farm 12-14 hours a day, 7 days a week, just to help feed your family. You would have no TIME to gather in mobs complaining about how "hard" you have it !

[-] 1 points by Quark (236) 8 years ago

You can't even figure out if the horse comes before the kart. Leave this place your mind is CLOSED. The Olympians will defeat the Titans, again.

BTW you have no idea what you are talking about. A broken record in a broken society with your eyes closed while I'm listening to mp3s. Your turn in the sun is over. GO!

[-] 1 points by Rico (3027) 8 years ago

Wow ! I see "civil discourse" and "fact based reasoning" aren't in your lexicon !

Spewing hatred is fun and soooo much easier than actually working through facts and debating things in a civil fashion. Since hatred and unsubstantiated opinion seem to be a your forte, I'll indulge myself and respond on your own terms...

You call yourself an Olympian, but appear Lillipution in mind, ability, and contribution.

While it's VERY hard to imagine ANYONE ever hiring you, it IS fun to imagine you dressing nicely, perhaps even wearing a tie, sitting up straight, shaking hands firmly, and answering questions with a polite "Yes sir" and "No sir" when you apply for a job. LOL ! Such a BIG man ! This image is likely false, however, as I imagine Mommy and Daddy will be supporting you for the foreseeable future. After all, you're MUCH too smart a man to WORK for a living, and how could ANYONE expect such a man to take ANY job except at the very top of the order right out of college ! You know so much MORE than everyone else, so why should you have to work for ANYONE? Quark is King ! Long live King Quark !

You are INDEED a rare kind of man, one who speaks but cannot listen, one who destroys but cannot build, one who takes but does not give, a burden on society, and a curse on all Man.

May you remain unemployed and impoverished, may you remain forever the victim of forces beyond your comprehension, and may the hatred you spew echo unheard in the empty halls of your mind.

Good luck with life little man-child !

P.S. Your MP3 player, Cell Phones, Computers, Internet, GPS, and all the gadgets you take for granted are PRODUCTS of the "system" you so hate. They were created by Engineers and Scientists like myself who developed a fundamental understanding of the Laws of Nature combined with the investors and bankers who built manufacturing plants costing literally BILLIONS of dollars apiece. You and many of your cohorts are like primitive apes fascinated by and dependent on technologies which are nothing but magic to your simple minds. As far as employment goes, it's not so much the "Haves vs. Have-Nots" as the "Knows vs. Know-Nots." My net worth exceeds $1.5 million simply because I "know" while you and yours are likely to take service jobs... serving me and mine ! Go smoke THAT little man !

EDIT: I let my emotions get the best of me. You are young, and your brain is not yet mature ( http://neuro.cjb.net/content/21/22/8819.full.pdf+html ). You'll grow up. We all do. Sorry for being harsh.

[-] 1 points by George1234 (82) 8 years ago

One Point Program for OWS should be Tax reform.

  1. All Taxes should be abolished
  2. We ask for a single simple tax collection process. Tax all bank transactions by 2%.
  3. Revenue required for Government program can be easily collected by taxing all bank transactions by 2%. There is no need for multiple taxes, e.g income tax, sales tax etc, etc.
  4. This process will eliminate all record keeping for individuals, businesses and organizations. No preparation and filing of tax forms. No audits
  5. This will make life easy, and more enjoyable.
[-] 1 points by FuManchu (619) 8 years ago

Why tax all transactions? I keep hearing about these revenge like ideas. Are we trying to fix the system or punish people for being rich?

[-] 1 points by MechanicalMoney (208) 8 years ago

So many king size words...i'm crying

[-] 1 points by Rico (3027) 8 years ago

LOL... sorry, that happens after I've had a few beers. I fixed it.

[-] 1 points by anotherone773 (734) from Carlyle, IL 8 years ago

I actually read all that and you failed to impress me but your off and on caps made my eyes bleed.

Yes people spent beyond their means. No Banks should not have gave them the loans. Banks are in the business of making good financial decisions. People are not. That is why banks have loan officers AND underwriters.

Banks therefore are more guilty than people are. If they bank says you can afford it and they are in the business of making a good financial decision then you assume you can afford it. Not all people are money smart.

Also most people owe student loans cause everyone everywhere told them to be successful and make a good living you have to get a higher level education. And everyone wants this. So they all tried to go to school to get a good job. Only when they got out of school....no jobs to be had.

[-] 1 points by Rico (3027) 8 years ago

Sorry about the CAPS ... that happens after I've had a few beers. I've fixed the post.

In America, we give people the freedom to make their own decisions. In doing so, we also give them the freedom to make mistakes. People wouldn't just assume that everything a guy on Craigslist says about the car he's selling is the unmitigated truth, so why on earth are people taking what a loan officer says as the truth?

I'm a lender on Proposer.com. When I lend, I know I'm going to see a lot of defaults (about 25% on average), so I jack up my interest rates across all loans to compensate for my anticipated losses. The fact is, I have no way to know for sure who's really a "good" risk and who's "bad." In fact, I suffer a higher default rate on those with high credit scores than low (for figure). Thus, I have no choice but to play the averages and charge enough to cover my historical loss rates. Note, by the way, that my portfolio of loans have rates in the 25-35% range, but my net return after defaults, fees, and taxes, has been around 6%. If I were to pay myself a minimum wage for all the work I do, that figure would fall down to 1 or 2%.

About 6 months ago, a guy on Prosper wanted to borrow $2000 to make a house payment. His story was that he needed to borrow to make the payment to avoid foreclosure, but had accepted a job that would allow him to get out from under the debt. His credit score was awful (very high debt to income), but he HAD been keeping up with it except for some very recent events. Something about him made me believe in him, so I loaned him the money at 35%. Frankly, this was reckless on my part as there was appreciable risk he'd never pay me back and even if he did, I would get little interest from him because he was very clear that he intended to pay me back ASAP. Fortunately, he paid me back in full a month later, but I made very little money in exchange for risking my $2000 on him.

Had the Government declared I could only charge this man 15% interest, I would not have lent to him. Had the Government declared I could only lend to people who can afford to borrow, I would not have been able to loan to him. There is simply no set of general rules that are good for everyone, and sometimes such rules actually hurt those with the greatest need. Under our system, both he and I made a decision based on the individual case, and it worked out for both of us.

The same logic applies to student loans. No amount of "people saying..." going into debt for something is wise, removes the need for the borrower to make his own decisions based on his own research into the job market, the pay-off of the loan as an investment etc. Folks, can still work their way through college can they not? Nobody forces anyone to take out a loan do they? Heck, in my personal case, I decided that my chosen field was so specialized that I'd be better getting into the job market as soon as possible rather than take four years out for school. I saw large immediate demand, but also saw a lot of folks my age entering the pipeline ahead of me so I "leapfrogged" to the front of the line. I took a very low wage to start, and essentially "apprenticed" my way to the very top of my profession. I certainly can't say this would work for everybody, but my personal decision turned out to be the right one.

Note that all bubbles are also traceable to "people say... ," usually in the form of "you can't lose money in _." For some reason or another people occasionally get a "fever" and start making really stupid decisions. The Dutch did it regarding tulip bulbs, the Spanish regarding land in South America, and the French regarding land in Louisiana, etc (all gold based economies, by the way). In more resent times, we did the same in the "Dot-Com" period and again in housing. It takes not even 20 seconds on Google to see that housing prices have in fact reversed in recent history; they did so in the mid 70's, mid 80's, and mid 90's. People were simply listening to what "they said" rather than doing any sort of research before they invested, and every one of them had to sign a Federal Truth in Lending Act form that is very specifically designed to expose any "fine print" and put the deal in simple terms so they would understand what they were signing up to. I'm not sure what else Government can or should do other than to make sure the deal is clear.

[-] 1 points by reasonthis (3) 8 years ago

Why do people think there is a need to get "washington" to notice and take action? "Washington" is the problem hence there is no need for action from Obama nor from any state government as they are all useless. 21st century revolves around internet communication and allows for some serious amounts of unification here. Take control from Washington, we don't need washington's permission. Start with demanding simple things such as the taxpayer bill of rights actually being honored so the IRS has to stop abusing taxpayers. I took on the IRS with no accountant and no attorney and I beat their attempts to shake me down. Let's make my story very public! Then I will follow it up with stories about how Property Tax assessors are allowed to breach Title 18 Chapter 12 and the state of NJ and Division of taxation don't care. Start building around specific case studies that show how existing "washington" has become not only useless but ABUSIVE of innocent tax payers!

[-] 1 points by humboldt11 (11) 8 years ago

Less capital letters please. Leave your emotional emphasis at home.

[-] 1 points by Rico (3027) 8 years ago

I fixed the post.

[-] 1 points by Gogetajob (31) 8 years ago

Good job and great references. Any time now we should see someone spew baseless unproven theories on how you're wrong or change the subject all because they're confronted with facts.

Thanks for taking the time to cite sources

[-] 1 points by Rico (3027) 8 years ago

Yep.

See the comment above at http://occupywallst.org/forum/inconvenient-truths-america/#comment-134396 and my response at http://occupywallst.org/forum/inconvenient-truths-america/#comment-139093 .

I have to admit, it's MUCH more fun to be insulting, though it's a LOT of work to do it well ;o)

[-] 0 points by occupytheworld (55) 8 years ago

Which bank do you work for again?

[-] 2 points by Rico (3027) 8 years ago

I don't work for a bank, and I actually SUPPORT this movement, but we need people to have some FACTS in hand and stop all the EMOTIONAL HYPERBOLE.

See my suggestion for TAKING OUR GOVERNMENT BACK at http://occupywallst.org/forum/we-the-people-in-order-to-a-proposal/