Sunday, 22 July 2012

Poverty Under the Microscope

A couple of weeks before the November election....you will be shocked to find one day these statistics from the 2010 Census finally released.  What people are now expecting (with news giving you an indicator this weekend)....is that poverty in America is headed back to the standard that we had in the 1960s.  The catch here...is that everyone will say that the fall of the American people is a terrible thing, and that only the US government can bring people up out of poverty....like they did in the 1960s.

I sat and pondered over these comments.

It's an odd thing....if you admit some vast poverty increase, and then reference it to the 1960s, and indicate government savors coming to the rescue.....then the US economy will come to a complete collapse.  We have one key difference between 2012 and 1966....we are marginally surviving right now, with no real boost on the horizon, unlike 1966 when the US economy was at least in a fairly positive trend.  If you started talking various government programs which cost cash and require more taxes.....then we'd collapse within six months.

I sat back and looked at our condition of poverty today.

First.....a number of guys came up in the decade prior to 2008 and retired with million-dollar IRA accounts.  They were in great shape.  Today....they've probably lost around a third of their account, and cut back drastically on what they are removing each month.  Between their $1,400 social security check and the $800 from the IRA account....they do OK.  Are they borderline poverty?  Well....it's close.  They probably don't take big vacations anymore and they quit the golf membership in 2009.  They probably wish the million-dollar IRA had been bigger or better suited for a bad economy, but at age 69.....you can't wish for unicorns anymore.

Second, if you are living in a house that you paid $300k for, and it’s currently valued at $240k....you are locked into a mess. You probably are paying your entire paycheck for the mortgage, which you cannot refinance or work up a new deal, or sell the house because of being underwater. So you pay your monthly salary toward the house and utility bill. You are existing off your wife’s paycheck, which you use to pay for two cars, insurance, food, and various essentials of life. To be honest, you are pretty much living on the margins of life and have the poster of “poverty” above your head. You aren’t middle-class anymore because one entire paycheck is paying for a stupid mortgage that you really can’t afford but you were stupid enough to convince yourself you could.  Somehow, you fell into poverty and you can't get up.

Third, all those toys you bought a decade ago are coming back to haunt you.  You spent $16k on a fancy Italian-made motorcycle which sits in the garage now.  You made payments on it for five years and never drove it more than twenty times a year.  You can't sell it today for any real money because no one would pay you the former used value which it had in 2008.  The fancy boat sitting in the garage, which had a used value of $22k in 2008....might fetch $7k today.  To be honest, you haven't put the boat in water for at least sixteen months, and the state tag....you let it expire because you just didn't have the money for that.  You toyed yourself up with fancy guns, a $10k ATV, a $9k fancy horse, a $5k pool table which sits in the basement....and you sit there on the borderline of poverty....with lots of fine toys.

Fourth, you gaze around at your neighbors.  The guy across the street is a meth dealer and does everything in cash....from his rent to the used 1995 Toyota that he drives. On paper, the meth guy is poverty class, but you know he's pulling in $8k a month in cash.  The gal two houses down?  She has two fine gentlemen who show up one day a week and spend several hours at her house.  The $300 they leave for her?  Well....it's not going to appear to the IRS or any other idiots.....so she looks marginal and is listed at poverty level, but has $15k a year she makes on the side is never noticed by the government. The kid in the trailer?  He has one official income of $1k a month from the Deli Shop where he works for twenty hours a week, but he does drywall work for cash, drives a tractor trailer rig over weekends, and is pulling in an extra $28k a year which is all cash and never is on the scope of the government.  The guy with the flea market operation?  Well....it's best to never admit his real income each year but he's listed as a poverty guy while he keeps a wad of $70k in his garage safe, and buys just about everything in cash.

So as these numbers come out a couple of weeks prior to the election.....you might stand and ask some stupid questions.  What the Census guys found....isn't really a complete picture.  And if you think that the government solution solves your problem.....you might be wrong in this case.