Federal Reserve looks
at numbers, sees reason
to continue stimulus
Federal Reserve Chairman Ben Bernanke was watching to right data in deciding to continue the stimulus. Click image to enlarge.
THE STOCK MARKET was caught flat-footed on Wednesday by the Federal Reserve Bank open market committee’s decision to hold steady on its massive stimulus of the economy.
Investors were surprised.
But, if they had been following the real news released earlier this week by the Census Bureau on inequality and poverty in America, they would not have been. The FOMC obviously has been watching as middle class incomes (and jobs) stagnate, while the top one percent (stockholders and corporate CEOs) thrives.
The picture painted by the latest Census Bureau report is not at all reassuring. And the FOMC was clearly paying attention – while stock investors were snoozing.
ACCORDING TO the U.S. Census Bureau’s report on Tuesday, incomes are stagnant while the poverty rate remains high.
The Census Bureau’s release on Tuesday about its latest report on incomes and inequality. Click image to enlarge.
“The U.S. Census Bureau announced today that in 2012, real median household income and the poverty rate were not statistically different from the previous year, while the percentage of people without health insurance coverage decreased,” the Bureau said in a news relase.
Household income was essentially flat from the previous year, after two years of declines.
“Median household income in the United States in 2012 was $51,017, not statistically different in real terms from the 2011 median of $51,100. This followed two consecutive annual declines.”
The report also found the poverty rate – 46 million people living below the official poverty line – was unchanged, yet again.
“This marked the second consecutive year that neither the official poverty rate nor the number of people in poverty were statistically different from the previous year’s estimates. The 2012 poverty rate was 2.5 percentage points higher than in 2007, the year before the economic downturn.”
Knowing all this, the Federal Reserve could see the weakness in the recovery and realized it could not withdraw the “kool aid” as former Fed Chairman Alan Greenspan so famously put it.
The New York Times story on the Census Bureau report on incomes and inequality in the United States. Click image to enlarge.
Investors should have been paying attention, but they were not, so they sent the market soaring on the news that the Fed would continue to print money at its current rate of $85 billion per month.
Meanwhile, in her story in The New York Times Household Incomes Remain Flat Despite Improving Economy Annie Lowery adds some insight:
“Despite the addition of more than two million jobs last year, soaring corporate profits and continuing economic growth, income for the typical American household did not rise in 2012 and poverty failed to fall, new data from the Census Bureau show,” Lowery wrote.
“Over a longer perspective, the figures reveal that the income of the median American household today, adjusted for inflation, is no higher than it was for the equivalent household in the late 1980s.”
In addition, no improvement in the poverty rate is evident, she added.
“The poverty rate held steady at about 15 percent in 2012, about 2.5 percentage points higher than before the recession began. Neither the number nor the proportion of people living in poverty changed from 2011 to 2012, the Census Bureau found.”
Then she adds what the Federal Reserve was probably looking at intently.
“While things have stopped getting worse, officials acknowledged that the economic recovery had failed to translate into improvements for most families.”
ON THURSDAY, the Center for American Progress published an in-depth analysis of the data and its relationship to the crazy debate in Congress over deficit reduction and the debt ceiling.
This chart from the Center for American Progress shows that deficit reduction is not a problem, as Tea Party radicals claim is it. Click image to enlarge.
In a fascinating report headlined Why We Must Reset the Fiscal Debate: 15 Charts by Michael Linden and Harry Stein, the Census numbers and federal government spending are related in graphic detail – 15 charts, to be exact.
“Some members of Congress are threatening a government shutdown on Oct.1 unless a new round of spending cuts are enacted – cuts that ignore the nation’s true, improved fiscal and economic outlook. Federal budget deficits have actually shrunk dramatically in recent years,” the authors write.
“The national debt is no longer on the brink of exploding. But our economy continues to struggle; the Census Bureau recently reported that income inequality is growing while middle-class wages are stagnant.”
The article then goes on to examine in detail the lunacy of Tea Party Republicans in demanding deficit reduction in the face of such bleak economic news.
“The 15 charts in this column illustrate how much the fiscal picture has changed, and why – in order to get the economy back on track – the debate must change with it.”
The columnists wrap up their conclusive report with a recommendation members of the GOP in the House of Representatives should study closely:
“Instead of working to grow our economy and get unemployed Americans back to work, Congress is approaching another self-created crisis over shutting down the government and defaulting on our financial commitments by failing to raise the debt limit.
“Not only do these unnecessary partisan battles pull the focus away from creating jobs, but they also risk further damaging our struggling economy …
“It’s time to reset the fiscal debate to focus instead on the economic crisis we have today.”
That is no understatement, but don’t hold you breath.
The right-wing ideologues in Congress are so blinded by their anti-Obama crusade they don’t care how much damage they do to the economy as long as they can pursue their foolhardy attempts to defund health care reform.
If they think this is the way to win the next election, they must be insane. And we are not the only ones to say that.
Where is the Occupy movement when we really need it?
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