Recession

The share of wages and salaries in Gross Domestic Product (GDP) has declined in most rich nations over the past 20 to 30 years. Over the same period, income inequality has grown in most of these nations, and rapidly in some of the largest of them, resulting in slow wage growth for most consumers. 

The Federal Reserve has released the most recent Survey of Consumer Finances (SCF) [pdf here] which covers 2007 through 2010 and presents additional evidence of the decline in both income and wealth during the recent recession. The report shows that American families’ median net worth fell from $126,400 in 2007 to $77,300 in 2010, representing a 40% drop.

SCF data support and are consistent with one of the key findings of our Assets Report Infographic. Data we relied on from Pew shows that between 2005 and 2009 black and Latino households saw disproportionate declines in their wealth, due in large part to the decline of their home values in the face of the housing crisis. This recent blogpost of ours looked at the role housing wealth plays in exacerbating the racial wealth gap.

On Wednesday, May 30, the Asset Building Program hosted two authors for a conversation about the history, politics and rhetoric of income inequality in the U.S. Reid Cramer, Director of the Asset Building Program, introduced Timothy Noah, Senior Editor at The New Republic and author of The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It, and David Corn, Washington Bureau Chief of Mother Jones and the author of Showdown: The Inside Story of How Obama Fought Back Against Boehner, Cantor, and the Tea Party.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include housing, women in poverty, access to public assistance, banking, student loan debt and inequality.

Last Thursday, The White House hosted the first ever Summit on Financial Capability and Empowerment.  Did you hear all about it?  Probably not – it somehow slipped the evening news. 

Yesterday, the House Agriculture Committee held a hearing about the Farm Bill that focused on some of the proposed reforms to SNAP. Notably, none of the panelists or representatives in attendance really had anything negative to say about the program. It was widely agreed that SNAP has lifted millions of Americans out of poverty, has provided a much-needed boost to the economy, and is one of the most efficient social welfare programs. Nearly 95% of federal SNAP funding goes directly to the benefits that allow families to purchase food; 93% of the benefits go to households with incomes below the poverty line; and fraud and abuse are minimal. So this all begs the question: what’s really driving the proposed SNAP cuts?

Millennials are the first downwardly mobile generation in decades, staring down a host of economic challenges--student debt, the rise of low-wage jobs, and the ballooning cost of tuition, food, and rent. Media regularly serve up sobering statistics about twentysomethings, while Occupy Wall Street struggles to stay on message. How will the Great Recession affect Millennials longterm? And do they have what it takes to fight back?

Monday, the House Republicans announced new domestic budget cuts to SNAP/Food Stamps, which would include lowering benefit levels and reinstating the federal asset test of $2000 for most families. The Budget Control Act pledged to cut budget deficits by $2.1 trillion between 2012 and 2021, with almost $500 million designated to come from defense. Automatic spending cuts would begin to take place in January—apparently prompting House Republicans to seek sufficient savings from other programs to fund future defense spending without resorting to new taxes. You’re reading that correctly, in order to prevent cuts in defense spending the House GOP has chosen to scale back food support for struggling families. Note the chart here that designates the amount of spending on the Defense budget and the amount of spending on the safety net (of which SNAP is a fraction.)In addition, these new rules will not only hurt millions of families struggling in the wake of the recession, but also impose additional administrative costs on states that are already dealing with their own budgetary shortfalls.

In response to longstanding criticism of the official poverty measure, the Census Bureau has developed a new supplemental measure that will likely do a better job of capturing people’s economic well-being. It will do so by making a more accurate accounting of in-kind benefits received from the government, necessary expenses (like child and health care), and regional cost differences. The new measure does not include a savings component to might reflect an additional dimension of vulnerability but it should be a major step forward.

My friend Juliane Baron is organizing a webinar this week focusing on what the supplemental measure tells us about children living in poverty. This will be particularly of interest since it should provide a fuller picture of the Great Recession and how our public policies have both mitigated and compounded its impact.

The lineup and webinar details are below:

The Asset Report 2012’s new data on retirement reveals just how difficult it is becoming for Americans to save enough money to support themselves once they have stopped working, particularly in the wake of the recession. To start, fewer employers are offering retirement plans and fewer workers are participating in them; in fact, the level of participation in employer-sponsored plans is at its lowest level in thirty years. Additionally, the majority of workers who benefit from retirement plans are in higher-income jobs. Likewise, because virtually all of the funds the federal government allocates for retirement are in the form of regressive tax subsidies, workers in higher income brackets disproportionately benefit.  This policy in turn has a disparate impact on women and people of color, who are more likely to hold low-wage jobs without benefits.