Friday, October 7, 2011
Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008.
The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years. (See a timeline on the history of government benefits programs here.)
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor).
Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.
High unemployment and increased reliance on government programs has also shrunk the nation’s share of taxpayers. Some 46.4% of households will pay no federal income tax this year, according to the nonpartisan Tax Policy Center. That’s up from 39.9% in 2007, the year the recession began.
Most of those households will still be hit by payroll taxes. Just 18.1% of households pay neither payroll nor federal income taxes and they are predominantly the nation’s elderly and poorest families.
The tandem rise in government-benefits recipients and fall in taxpayers has been cause for alarm among some policymakers and presidential hopefuls.
Benefits programs have come under closer scrutiny as policymakers attempt to tame the federal government’s budget deficit. President Barack Obama and members of Congress considered changes to Social Security and Medicare as part of a grand bargain (that ultimately fell apart) to raise the debt ceiling earlier this year. Cuts to such programs could emerge again from the so-called “super committee,” tasked with releasing a plan to rein in the deficit.
Republican presidential hopefuls, meanwhile, have latched onto the fact that nearly half of households pay no federal income tax, saying too many Americans aren’t paying their fair share.
UPDATE: Nearly half of the population lives in a household that has at least one member who receives some kind of government benefit. An earlier headline incorrectly suggested that half of American households receive some government benefit. Due to differences in household size that isn’t the case.
Real Time Economics
When mortgage rates first fell below five percent in 2009, we called it an emotional landmark, a level that, while not significantly different from the previous week or month, would send up a flag to borrowers that it was time to buy or at least to refinance.
And they did.
Now the 30-year fixed has fallen below four percent, and it all seems suddenly like white noise.
As mortgage rates fell last week, so too did mortgage applications, for both refinances and purchases. Lower rates usually spur refinances, but those actually fell the most, down 5.2 percent week-to-week, according to the Mortgage Bankers Association. Applications to purchase a home fell just 0.8 percent, but they are at historic lows as it is, down 12 percent from a year ago.
The Mortgage Bankers said potential borrowers, "largely remained on the sidelines, seemingly unimpressed," by these rates, which we haven't seen since the 1940's. Perhaps they were unimpressed, or perhaps they were just scared straight by the impetus for the low rates, which was the rush to Treasuries spurred by a global economic crisis. Hmmm.
They may also be on the sidelines because, after a brief and delayed Spring bounce in home prices, values are slipping once again. Home prices fell month to month for the first time in four months, according to a new report from CoreLogic. Another index from Clear Capital, which uses a running quarter, found prices softening in September quarter to quarter, after several strong months. "The company forecasts additional declines through the first quarter and potential for a triple-dip in the housing market."
I'm not sure what a "triple-dip" is, since I'm not at all convinced we were coming out of the double dip that started after the end of the home buyer tax credit.
So many housing watchers fail to note that even in a crisis, housing continues to be a highly seasonal business, and prices always rise in the Spring, even if only slightly.
So we saw some price gains in the last several reports, but they were all still down annually, and down from some pretty weak numbers to begin with. Home sales bumped a bit, but not significantly and not nearly enough to spell recovery. This as foreclosure starts jumped nearly 20 percent in August from July to a 2011 high, according to Lender Processing Services.
So back to the new record-low mortgage rates. They will likely do nothing to spur home buying, but they will provide all kinds of fodder for the current administration to push some kind of enhanced refinance program, which is supposedly targeted at borrowers who are not behind on their mortgages. As the political season heats up, and housing cools down for the winter, there will surely be plenty of shouting at the wind over potential housing stimulus/bailouts, while behind the curtain, politicians, from those in power to those fighting for power, have largely thrown their hands up in despair.
The Netherlands became the 15th country to do that today, pledging to provide a 5.7pc chunk of the EFSF, or €25bn. Now only Slovakia and Malta are left to vote.
19.30 Channel 4 economics editor Faisal Islam has appeared on-screen, standing outside the Bank of England talking about today's QE measures, which he described as "magic money".
He asked the BoE governor Mervyn King for his thoughts on the current debt crisis:
The situation in 2008/9 around the world was so much easier than it is today. Those measures taken then did not solve the underlying problems.This is undoubtedly the biggest financial crisis the world has ever faced.
I would love to get back to a state where interest rates were at normal levels. In the long-term this country needs more savers, not less.
Asked if he feared a world collapse, he said: "I think the word collapse is not a well-defined phrase".
19.09 Mervyn King has just briefly appeared on Channel 4. Asked about the danger of QE causing inflation, he said:
I have enormous sympathy with the predicament of savers, particularly those who are retired, face. They are suffering from... an economic crisis they did not cause.
The full interview is at 7.30pm.
19.01 Until today we'd seen £200bn in quantitative easing from the Bank of England, and this latest round will take us up to £275bn. Will that be the end of it?
Yesterday we ran a poll here on this blog asking if we would see QE today. A (slim) majority of you got it right, with 36.7pc voting "yes". A further 36pc said it would come next month, but 27.4pc of you shot wide and voted "no". Thanks to the 676 of you who voted.
We've just launched another poll, you can see it towards the top of this page, asking if we're likely to see any further measures before this debt crisis is over. It may take longer before we can judge your results on this one...
18.43 We covered Mervyn King's interview with Sky News earlier, where he said that this crisis was the worst since the 1930s, if not ever. We also mentioned that a Channel 4 interview is to come later on this evening.
18.40 Angela Merkel has said there should be no hesitation before recapitalising banks, if they need it, but that "the first step is for banks to recapitalise themselves".
The German chancellor was speaking at a press conference with the heads of the IMF, the World Bank and the Organisation for Economic Cooperation and Development.
18.25 Mervyn King has been extremely busy today. First he unveiled £75bn in quantitative easing, then he embarked on an unprecedented round of television interviews.
Faisal Islam, Channel 4 economics editor, is tweeting quotes from an interview with the Bank of England governor that will be broadcast this evening.
Very harsh squeeze on living standards in the UK is now coming to an end. Monetary policy the right instrument because we can change it quickly, the Government can't change its spending programme quickly.
18.17 Reuters has created a clever widget that allows you to carry out your own bank stress test, without even leaving your desk. Visit this page, tweak the size of the haircut inflicted on each country, and see how many European banks are at risk.
Saudi police sealed off the village of al-Awamiya in the east of the country on Monday night after using live fire to disperse Shia protesters, according to exiled Saudi dissidents.
A group calling itself arabianrevolution have posted videos on YouTube which they claim show Saudi security forces in al-Awamiya, home to much of the Sunni kingdom's Sunni minority, firing on protesters on Monday evening.
In the video a makeshift roadblock of burning tyres can be seen as the sound of gunfire echoes in the background.
As the camera pans right, two security service vehicles can be seen with their headlights pointed toward the protesters.
Shouts of Allahu Akbar (God is great) are interspersed with the sound of gunshots.
The group have also posted footage purported to have been shot on Monday night in the eastern city of al-Qatif, near the bridge which links Saudi Arabia to Bahrain.
Bahrain, home to the US Navy's Fifth Fleet, called in security forces from Saudi Arabia and other Gulf Arab countries in March to quash demonstrations against King Hamad bin Isa al-Khalifa whose Sunni Muslim family rules over the majority Shi'ite population.
In the footage smoke fills the street as young men with covered faces stand in front of what appear to be security service vehicles with their lights flashing.
The stand-off ends as shots are fired and the protesters retreat.
So far Saudi Arabia has not seen the widespread protests that have led to regime change in Tunisia, Egypt and Libya.
King Abdullah has been making some concessions in an effort to avoid the bloody confrontations that are taking place in Yemen to the south and Syria to the north, announcing ten days ago that women would be allowed to run and cast ballots in the 2015 municipal elections andpardoning a woman sentenced to 10 lashes for defying the kingdom's ban on women driving.