Thursday morning brought the release of the annual income, poverty, and health insurance numbers from the Census Bureau for 2008. As you might have guessed, the first year of the recession was pretty bad news for just about everyone. Median household income—the income right at the middle of the income distribution, with half of all households having higher incomes, and half lower—fell by 3.6%, the biggest yearly decline since these figures begin in 1967. All racial and ethnic groups took a hit: non-Hispanic whites were off 2.6%; blacks, off 2.8%; Asians, 4.4%; and so-called Hispanics, by 5.6%. Households of all ages lost income in 2008, with the exception of the over-65 set, who are protected by the cost of living increases in Social Security.
A few points. The one-year hit to incomes in 2008 is on a par with the multiyear hits taken in earlier recessions. For example, the 3.6% decline last year is larger than the decline we saw in the recession and weak recovery years of 1999 to 2002—three years of damage then more than condensed into one year of damage last year. And 2008 was only the beginning of the recession. Job losses didn’t accelerate, and unemployment didn’t really spike, until the fall of last year. The Economic Policy Institute estimates that this year’s decline is likely to be larger, in the 4.5–5.0% range. If anything like that happens, the total decline of over 8% will be the biggest recession hit to income since these numbers began 42 years ago. That’s coming after the weakest expansion in modern history. Gains during the 2001–7 expansion weren’t enough to reverse the declines of the previous recession years—the first time that’s happened ever. So before this recession is over—and I mean that not in the formal sense, but in the sense of how average people experience the economy, measured by the job market and household income—average incomes are likely to be 10% below where they were in 1999.
But not so the rich. A technical note before proceeding: these Census figures are derived from a survey of households. Because rich people don’t answer such surveys, and because there are so few of them that it’d be hard to find enough of them to take a meaningful sample, these annual reports miss things at the very high end. But you can get that from tax return data, which is available only with a delay of several years. The economists Thomas Piketty and Emmanuel Saez do just that, and their 2007 numbers were recently published. So while the bottom 90% of the population saw its income decline between 1999 and 2007, the richest 1% gained about 7%. The richest 0.01%, about 30,000 people, saw their income rise by 25%.
Not surprisingly, the poverty rate rose to 13.2% in 2008, from 12.7% in 2007. That’s the highest level since 1997; the Economic Policy Institute estimates that it will rise another 1.5 points this year to 14.7%, which would be the highest since 1992. For whites, the poverty rate was 11.2%; for blacks, 24.7%, more than twice as high. Among Latinos, it was 23.2%.
But some definitions are in order. Official poverty is defined as a pretax income under a specified amount that varies by family size; for a family of four, the line is just about $22,000 a year. This is a very undemanding standard; more honest definitions of poverty would set the line closer to $30,000, which would raise the poverty rate to around 20% or more.
And these figures are just snapshots of a given year. According to the Census Bureau, over the four year period ending in 2007, almost a third—31%—of Americans had at least one period in official poverty lasting two months or more. For a very rich country, we have a lot of poor people, and they are often very poor.
Finally, the number of people without health insurance rose by about 600,000 to 46.3 million. Measured as a share of the population, however, the uninsured remained at a constant 15.4%. But that means without insurance for the entire year; many more had bouts of uninsurance. And again, since the economy of 2009 was worse than 2008’s, the current levels are probably a lot higher—EPI estimates that it’s probably up by 5 million this year.
But apparently that’s not the way the Obama administration wants to count the uninsured. According to a very useful piece by Politico’s Carrie Brudoff Brown on what Obama said in Wednesday night’s health reform speech vs. what he actually meant, the administration says there are only 30 million uninsured, more than 16 million below the Census Bureau’s count. Where’d they go? Well about 10 million are undocumented immigrants, so they’re not worth talking about. Another 5–7 million are people who could go on Medicaid, but have not, for god knows what reason. Presto, 30 million. That’s a nice way to lower the bar, isn’t it?
And what a disappointing speech. Well, no, I can’t say that exactly, since I hadn’t expected much, but it’s terrible policy. The core of it is to require all of us to buy health insurance from private companies—with a $3,800 penalty if we don’t, according to Max Baucus’s proposal. Subsidies will be available for people with incomes of up to $66,000 (or $88,000, depending on which of the four bills floating around you read), but it will still be quite a burden for a lot of us. So instead of getting rid of the insurance companies, and their diabolical profits, executive bonuses, claims denials, and administrative overhead, the president will be delivering them ten of millions of new customers. This will do nothing to reduce costs.
And what about that public option? Well, as Brown’s Politico.com article reports, the insurance companies said they’d accept reforms requiring them to accept everyone, pre-existing conditions or no, only if the gov forced us all to become their customers. And the so-called public option, a government-run insurance company, would have to pay its way without any public subsidies, meaning that its premiums would probably be on a par with, or only slightly lower than, private insurers.
A friend pointed out to me the other day that the market capitalization—the value of all the outstanding stock—of the publicly traded health insurers is about $150 billion. Add a little premium to sweeten the pot and you could nationalize the lot of them for about $200 billion. The total administrative costs of the U.S. healthcare system, which are greatly inflated by all the paperwork and second-guessing of docs’ decisions generated by the insurance industry, are about $400 billion a year. Those administrative costs are about three times what a Canadian-style single payer system would cost. So that means we’d save about $250 billion a year by eliminating the waste caused by our private insurance system.
In other words, the nationalization could pay for itself in well under a year. But we can’t do that. It’d be Canadian or something.
Meanwhile, we’re hearing from a lot of Democrats/liberals/progressives/whatevers that we have to support health care reform, without much discussion of what’s actually in the proposal(s). ACORN, suffering from its own embarrassments, circulated an email last Thursday urging all of us to call our Senators and tell them to “stand up” to the insurance companies. Stand up for is more like it. Ilyse Hogue, spokestool for MoveOn.org, said in her Facebook status update just after Obama’s speech: “Finally, the president I elected.” What, the corporate-friendly one? That’s probably not what she meant, of course. Columnist David Sirota characterized Obama’s speech as sounding like it was delivered by President Rahm Emanuel. Well, no, it was delivered by President Barack Obama. It’s always the advisors, never the king, isn’t it?
Clearly we haven’t escaped the discursive grip of Ronald Reagan. Obama’s speech evoked the magic of the marketplace, in its fantasy of competition leading to cost control. And he concluded the address with a “God bless America,” a convention now that was introduced to modern American speechifying by Reagan.
Sure, many of these left-of-center supporters, who otherwise should know better, are inspired by the hideousness of so many of the president’s enemies, a gang of racist and ignorant cretins. But you’ve got to hand it to the right. They fight tirelessly for their beliefs, however nutty they can be. They don’t begin a struggle by pre-emptively compromising. I wish I could say the same for “our” side, whatever that is.