Truth, Justice, and the American way. TRUTH: Helping to correct people's misconceptions about history, science, and the state of the world. JUSTICE: Meant in the biblical sense. Fair treatment of other people, rational laws, and assisting the disadvantaged. THE AMERICAN WAY: A classless society where everybody has an opportunity to meet their potential and for economic advancement, regardless of race, ancestry, religion, gender, or sexual orientation.

Monday, October 12, 2015

We Can Predict the Next Deep Recession and it Will be Violent

World history has taught us that as the poor and middle class are better able to communicate if the disparity in income between rich and poor is growing, it results in civil unrest and sometimes violence. If wealth redistribution does not occur, eventually the government is overthrown and wealth redistribution occurs. The United States came close to widespread, deadly violence in the 1930's, but President Roosevelt convinced congress and corporate leaders to spend money to improve the living conditions of the poor.

The economic losses that caused the Great Depression were not much worse than the 2008 recession (even adjusting for inflation). The difference this time was that social programs were in place to help reduce homelessnes and hunger. But the US has still not recovered from the 2008 recession.

The US has still not recovered from the housing market crash of 2006, the stock market crash of 2008, and the recession of 2008. After adjusting for inflation, stock prices have not reached the highs of 2000. Because the US Military interventions in Southern Asia, Asia Minor, and North Africa have all be funded by borrowing, we can expect a serious (probably "double dip") recession between 2023 and 2028. A minor crash in real estate prices can also be expected during this period.

The median income per wage earner in the US has dropped by almost 60% since 1975 (adjusting for inflation). This has caused a drop in the number of families in the middle class, most adults think that all of the adults in a family have to work to keep the family solvent (eat, pay rent/mortgage, replace worn out houshold goods, pay for healthcare, and pay bills). This has resulted in a generation of children, most of whom have spen almost all of their non-school time without adult supervision. These children have less exposure to moral teachings and are more likely to join gangs and cults.

Even after inflation, the total wealth in the US is higher than 40 years ago, but household income is down by around 1/3. The extra wealth is almost all owned by the upper class. Over half of families in the US have no savings or retirement savings. Unsecured debt (mostly credit cards) in the US recently exceeded the US government debt.

If the rate of US concentration of wealth continues, a double dip recession can be expected to result in "viral" rioting. A viral riot is violence starting in one neighborhood triggering violence elsewhere, because of pent-up rage. When Congress added restrictions to bankruptcy, they increased the probability of a viral riot.

Why the national minimim wage should be over $15

US society owes every resident "Life, liberty, and property" and "Equal protection under the law." This includes medical care, unemployment insurance, retirement insurance, and other requirements of a healthy life. These were usually provided by churches and volunteers, but the availability was uneven. Then in the 1960's many who could provide this assistance started to believe that "Greed is good." In the 1980's this became part of the tax code and if government had not stepped in, we would be stepping over the corpses of the poor in downtown streets.

After accounting for inflation, the average lower and middle income wage in the US is less than 1/2 of the average wage in 1975. In 1974, the minimum wage was $3.10/hour - after inflation (excluding luxury items and services), that would be well over $20/hour today.

When I discuss living on a minimum wage, I mean a very modest lifestyle. Food for a healthy diet (which has more than doubled in price in the past 6 years) without EBT (AKA food stamps), shelter, medical co-payments (assuming the government pays the premiums), a monthly bus pass for each person, telephone, furniture replacement every 10 years, a separate bed for each child, and annual replacement of one set of clothes per person, sheets, blankets, and towels. If the items are purchased through a thrift store, they have to be replaced twice as often. Children's clothes have to be replaced twice as often. $50/year for toys and games for each child. This means no money to purchase of a computer, car, restaurant/take out food, internet access. It means brown-bag lunches.

Apartment rentals average $650/month nationwide, but one bedroom apartments in poor metropolitan neighborhoods average around $1500/month. The urban poor don't move to rural regions, because there are few jobs for them that pay enough to afford to live there (rent is approximately proportional to wages).

Apartment rental rates for one tenant apartments with a kitchenette and bathroom average over $1000/month in poor metropolitan neighborhoods. Health insurance co-payments, a bus pass, one set each year of new clothes, blankets, pillows, sheets, and towels, and food bring this to over $2000 per month. Taxes (including Social Security premiums and Medicare premiums) are approximately 25%, bringing the monthly costs for a single working person (living separately) to $2500, or $14.42/hour. In the common scenario of a single working parent with 2 children in a one bedroom apartment, rent is 50% higher and other costs are more than doubled for an estimated $3500 + taxes (which includes no money for child care). There are a huge number of famililies sharing homes that are designed for a single family.

In rural areas, housing costs are much lower, but a single parent raising two children (with no child care or government support) still needs over $2500/month to eat and pay all of the bills.

It is government programs that pay the difference between minimum wage and the cost of a very modest lifestyle. Essentially the government is is giving employers the money to allow them to keep wages low. Employers should be paying a minimum wage that allows a single worker with two children to survive on a full-time job.

About Me

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Canoga Park, California, United States
Software Engineer with Ph.D. in Computer Science. I have a deep background in the sciences and in computer-human interaction. I was a college professor for 11 years, followed by over a decade of work in industry.