As the Dow Jones industrial average crossed the 13,000 milestone for the first time on Wednesday, it marked yet another record closing on Wall Street. Over the past six months, record-setting days have become almost commonplace at the nation's financial hub.
In fact, today the Dow industrials closed at 13,105.50 for their 18th advance in 20 days. And the Dow was not alone in its success. All of the major Wall Street indexes are set to complete their fourth straight winning week, the longest such streak since October.
This week also saw the Standard & Poor's 500 index close at its highest since September 2000, and the Nasdaq close at its highest since February 2001.
How good has this streak been? Well, it took just six months for the Dow to surge from 12,000 to 13,000. These are heady days on 'The Street'. By comparison, it took 7 1/2 years for the blue chips took to go from 11,000 to 12,000.
Why the recent successes? Corporate earnings. Profits at big U.S. companies have soared, and we've just witnessed a record-setting run of 14 consecutive quarters of double-digit growth. According to the Commerce Department, large U.S. companies saw their profits jump 21.4 percent last year on top of a 12.5 percent gain in 2005. Those are very nice returns.
But the period since October has been particularly remarkable for the Dow. The blue-chip index has hit 36 record closes since the beginning of October. While that's absolutely remarkable, it's also likey to be entirely unsustainable.
All of this is good news for anyone who owns stocks -- particularly blue-chips -- and that amounts to millions of people. But for about half of our fellow citizens, stock market gains have no relevance whatsoever.
Fifty-one percent of Americans don't own any stocks at all. Though some Americans have done quite well during this stock market boom, and period of record corporate earnings, others are still struggling and haven't realized the same gains or good fortune.
Though worker productivity has increased significantly this decade, wages have lagged behind. The median household income for American families, adjusted for inflation, has fallen for for five straight years.
The stock portfolios of many Americans are set aside expressly for retirement. But with just under half owning stocks, the rest will have to count on some other form of retirement income. Right now, the prospects for them don't look very good.
Less than 20% of U.S. workers are in employer pension plans, and many of those plans are underfunded. Many people will rely solely on Social Security for retirement, but that typically replaces less than 40% of pre-retirement income. People would have to downsize an awful lot, to the point of austerity, to make that work.
According to government figures, 37% of U.S. households do not have a retirement savings account of any kind. And according to a 2004 report by the Congressional Research Service, the median value of existing accounts was just $27,000. Considering that the median household income in 2005 was $46,326, those retirement accounts won't last long.
More than half of all Americans (52%) have less than $25,000 saved for retirement, and that includes 39% in the 55-plus-category. Since that group is closest to retirement age, they're the ones that should really be worried.
Income inequality has also become a big problem in America -- so much so that Congress seems to be concerned, or at least they're trying to convince us they are.
Executive pay packages at public corporations typically equal 500 times the salaries of workers at those companies. But just 15 years ago the average CEO made 140 times what a worker at his company earned. And the average CEO of a Standard and Poor's 500 company now receives $14.78 million in compensation. Nice work, if you can get it.
So last week the House voted to give shareholders at public corporations a voice when companies losing money or laying off workers are paying executives eight- and nine-figure salaries, plus retirement packages.
According to Rep. Brad Miller, a Democrat from North Carolina, the aggregate compensation of the top five executives is now 10.3 percent of the profits of public corporations. To put it bluntly, that's out of whack.
The bill passed 269-134 and now goes to the Senate. However, it was opposed by the White House and most Republicans. Presidential hopeful Barack Obama also introduced a similar bill in the Senate last Friday.
Economic growth has been good for many Americans these last few years, but not for everyone. The current minimum wage has been frozen at $5.15 an hour since September 1997 -- the longest period without an increase since the standard was first established in 1938.
That amounts to $10,712 annually for someone working full time. Adjusted for inflation, the minimum wage is currently at its lowest level in 50 years. To give some perspective, it now takes more than a full day of work for a minimum-wage worker to fill their gas tank -- assuming he/she can afford a car.
According to the Department of Health and Human Services (HHS), the federal poverty threshold is $10,210 for an individual. So a person working full-time at the minimum wage would just barely clear that level -- by $502, to be exact.
But the poverty threshold for a family of four is $20,650. If both parents earned minimum wage, their combined annual income would amount to $21,424, putting them $774 above the threshold. Many single people, especially those in big cities, would find it quite difficult to live on less than $21k a year, never mind four people trying to get by on that amount.
A Congressional agreement that would raise the minimum wage to $7.25 over two years could be voted on within days. Democrats promised to raise the minimum wage during the campaign leading up to last fall's elections.
After reaching a 26-year low of 11.3% in 2000, the number of Americans living in poverty increased to 12.7% in 2004, or by nearly 5 1/2 million people. Sadly, 37 million people were below the official poverty thresholds in 2004. That number remained unchanged in 2005, meaning that more than one in 10 citizens -- the highest percentage in the developed world -- live below the poverty line in the U.S.
To illustrate how disparate wealth inequality in America has become, consider this; according to Census Bureau data, the top 20 percent of earners make over half the national income. At the same time the bottom 20 percent take home just 3.4 percent.
America prides itself on being the "land of opportunity." That may be so. The United States has 269 billionaires, the highest number in the world.
Over the last two decades, America has had the highest or near-highest poverty rates for children, individual adults and families among 31 developed countries, according to the Luxembourg Income Study, a 23-year project that compares poverty and income data from 31 industrial nations.
So, while milestone days on Wall St. may be cause for joy and celebration for millions of Americans, many millions more are not sharing in that celebration, or that prosperity.
Sean M. Kennedy, Money Correspondent:
Money Matters, by Gather Correspondent Sean M. Kennedy, is published every Thursday to Gather Essentials: Money.
Money Matters is a practical look at money and how developments in the American economy may affect you.
Sean is a freelance writer based in Los Angeles.
Keep up with Sean’s other postings and Gather activity by joining his Gather network at skennedy.gather.com
You’ll find Sean and other Money Correspondents, plus celebrity content and plenty of other Money experts, at Money.gather.com
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Comments: 21
It's true that some of the pay packages corprate executives have made are absurd, especially for some companies that have actually underperformed the market. However, I don't think the government should regulate their pay. Not only is it a bad idea ideologically, but they've tried it before and it didn't work (they put a salary cap in the 80s, and then the executives invented stock options grants). I think a better idea would be to give the shareholders more of a say on how much they get paid. If an executive is loosing them money, shareholders won't be inclined to pay them too much money.
When is enough money enough? How many homes and yachts do they need?
How about sharing with the folks that actually do the work?
Instead of stealing their pensions , cutting their benefits , and reducing their "real" wages.Why don't the folks that just give up looking for work get counted as unemployed?????
When will congress pass the "promised" raise in the minimum wage????
Yeah everything is just "grand" , puleeese..........................
Our society has all manner of shadowy platitudes for accepting and supporting the disparity. One of them is the nagging thought that one day, if I play my cards right, "I" might be part of that upper tier; and I'd hate to say anything now that might regret then.
Part of this mentality stems from the psychological effects of the Great Depression on the public's psyche. So many lost so much that they had thought was un-losable, that the psyche over reacted into thinking a solution to never losing everything would be to have increasingly excessively amounts of everything.
Alas, we still see that their hoarding does not influence them from the random twists of fate, let alone some critical fault or failing that might exist in themselves or in others.
A piece of knowledge that seems to have become lost in the noises of our current cultures is that the only cushion against catastrophe is an ability to rely on family or community. Individually focused accumulation, personal hoarding and an overly imbalanced sharing, access, and dispersal of resources does not strengthen the bonds of community.
It strengthens positions of isolated power.
The economic activity of this country could easily provide health and educational cradle-to-grave care for every citizen; if not for the great intellectualized wall that divides the resources.
The notion that the average Joe can aspire to make it into the upper echelons, which tamps down resentment and anger, is increasingly obsolete. Our public education system is failing our middle classes even as people require more knowledge to compete for those high-paying jobs. If you can't send your child to a good private school and you don't have the time and energy to make sure he or she works hard and is well served by a public school, that child is in big trouble. He'll emerge without the knowledge or the network that he needs to get into the "right" college and the "right" jobs. There's lots more to be said on this subject, but suffice it to say that it's a vicious cycle. For me, the bottom line is: invest as much as you can, invest early, and invest wisely. You need to make your money the third wage earner if you want to get ahead. Good luck!
So who's fault is that?
1) Drop the $90,000 Social Security cap.
2) Increase the tax rate for those over 1 million to 50%. That should slow them down......
3) If a company loses money the top execs. should refund a percentage of their salaries -- since they usually get a bonus if they make a profit.
Let's be reasonable.
Impeach Bush and Chaney. That would help too...........
As for your cheap health insurance, market-driven, my brother- and sister-in-law and their two kids don't have group insurance, and they are about as healthy a bunch as you would ever want to meet. They pay about $15,000 a year for insurance that has a huge deductible and riders that are actually in contravention of the Georgia state law. They've taken advantage of the health savings plan, but it is of little use. As is true of most of Bush's "market" schemes, it has a negative impact on the health care system, drawing off the healthiest, wealthiest people from the system and leaving the rest in a higher risk pool. I'm a big believer in the market economy (I've never been described as either a Democrat or a liberal on the economic front), but I'm well aware that it is not a panacea. Personally, I have a government health care plan plus medicare: I'm well covered, but it costs far more than the amounts you've cited.
Remember, the rich control the media and have the lawmakers in their pocket. They write all kinds of laws protecting the rich and few protecting the common man. The STOCK MARKET is basically a rich man's concept. Truem the little guy can make money there but it's the big players who usually make the killing.
As for taxes. Anyone who earns $10,000 a day in salary is grossly overpaid in my book and I'm not ashamed to tax them 50% -- which by the way is the tax rate of most middle class working folks pay. Before 1960 the highest tax rate was 90% and I didn't see any economic disaster looming.
Anyway, the rich only pay 38% and pocket the Social Security sucking tax and laugh all the way to the bank.
I can see no reason to allow manipulators to abuse honest people out of their earned income. The average CEO in the top 500 companies earns about 15 million dollars a year. Do they do 15 million dollars of work? Not hardly! They use cleverness and hucksterism to promote themselves. Do they make jobs? No. Most executives in these companies cut jobs to increase the bottom line to get bigger bonuses. Those executives in jail now for fraud are only the tip of the iceberg and all your moaning and groaning and statistics or political statements aren't going to change them into honest people. Perhaps the top 20% pay 80% of the taxes but they get 95% of the income. If I was in the bottom 5% of the money tree why would you expect me to pay 20% of the taxes anyway?
Lastly, the reason medical care is so expensive is INSURANCE. People have demanded all kinds of ridiculous medical procedures and spent insurance money to get them. Many medical procedures today are based on earning money and not for the benefit of health. Read Bypassing Bypass -- a book which shows how far the medical community will go to make a buck.
About 80% of Medicare funds are spent in the last 60 days of the patient's life. This indicates more that anything the use of funds for unnecessary and often harmful medical interdictions. If any person is removed from the actual cost of a procedure then they will have it... not having to actually pay for it themselves they have nothing to lose. In Europe, Dialysis was denied anyone over the age of 55. In this country most dialysis patients are over 65. Before this treatment was government funded there were about 5,000 people on dialysis now there are over 100,000. I've seen people on dialysis begging to be allowed to die and being over-ruled by others with an economic interest in keeping them alive.
Well baby care and prevention is 95% more effective in solving medical problems than having 85 year old diabetics getting bypass surgery costing $100,000 and then dying in a few months. Many of the people who die within 6 months of surgery would have lived years if they hadn't had the procedure. When California doctors went on strike the death rate dropped 90% -- when they came back off strike it went back to 'normal'. You can't see the problem?