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Liquid asset poor

By Staff | Mar 7, 2019

One revelation highlighted by the recent government shutdown is just how many Americans are on the edge of being broke. Many get paid every other week because they need to be paid that often and if they miss one or two pay-checks they have no money. They have no savings, they have no credit line, they have no banker to talk to, their parents may be just as tight on cash, they probably can’t even get one of those high interest payday loans with no paycheck as collateral. People. . .families, workers are under stress right away. Those like Commerce Secretary Wilbur Ross cannot even begin to relate to that.

We have this fantastic spectacular economy that Trump takes credit for with people having jobs, they are working and yet, they are still broke. The cost of living leaves them no margin to get ahead to build a cushion to absorb even what many would consider to be a modest financial challenge. Many Americans do not have $400 in savings. Those impacted by the government shutdown who are government employees are considered to have good jobs. They are not the bottom of the financial totem pole and the fallout from the government shutdown showed how far up that pole that financial stress exists. No wonder why Bernie Sanders generated such excitement.

Despite this great economy the New York Fed says that the delinquency rate for credit cards went up 5 percent, defaults on student loans rose with 9.1 percent of the $1.5 trillion in total student debt…delinquent. They also pointed to rising delinquencies in auto-loans as overall consumer debt hit a record. Even the modest hike in interest rates seen made homes unaffordable for many household budgets. None of these people own stocks, have CDs, or pay enough taxes to even notice Donald’s tax cut.

Four of every 10 Americans are considered to be “liquid asset poor” so that they are just one-pay-check away from financial disruption that they feel as a crisis. It is a crisis when they cannot afford the co-pay for a doctor’s visit or the prescription at the pharmacy. That is why Medicare for all sounds very good to a lot of people. This concept of having basic needs met being socialist just doesn’t register with them.

When they talk about the disparity of wealth in this country it is more than just an abstract condition to those living at the bottom of economic stratus. You can have a job and still be financially strapped. You can have a good income and still be “liquid asset poor.” The economy is not strengthening in rural areas. The weak ag economy is dragging it down. Attendance at the Northwest Iowa annual outlook trade show was down again as farmers are just not in the mood to think about spending money. They did not even offer a free meal. Even those who have money have shut the checkbook until they can see how long the financial grind is going to last. Nobody is making money farming right now and they like to be making money before they spend money.

They thought that 2018 was going to be the turnaround year for ag and it went bust. Ag fortunes in 2019 are up in the air pretty much in Trump’s hands as to whether the year works out for farmers. His trade policy and RFS policies are harming the Ag economy more than his tariff relief checks are offsetting. In rural areas, what happens to the ag economy does trickle down. Most all of the counties in Northwest Iowa continue to experience population loss as folks seek economic opportunity elsewhere. I expect that is consistent with rural populations most everywhere.

So, the national debt is rising now by $1 trillion per year as a result of the Trump tax cut. They say this is a problem to Americans. How would this matter to the 40 percent of Americans who are on the edge of their personal financial crisis? They didn’t even experience the tax cut. That went mostly to Trump’s buddies and maybe a little trickle down to us but left half of Americans totally high and dry. The tax cut created the expectation for Americans that they would pay less in taxes and get a larger tax refund. What actually happened was that this set up some great disappointment when it didn’t happen. Millions of Americans got smaller refunds because the tax law nixed some deductions that they were previously taking advantage of and that offset the benefit.

For many families their tax refund was their extra money, their cushion and now how it feels to them, that was taken from them too. Another irony is that while the wealthy did benefit from the tax cut which is why the federal deficit is soaring again, the entitlements: Medicare and social security, that these folks that are living today paycheck to paycheck see as financial relief in the future, will not be solvent when they get there. Not without reform that the politicians will not touch. They are an illusion to many of the ones struggling.

Politicians love to hand out cash but are loath to legislate austerity. So again…we have this fantastic spectacular economy where the rich are doing very well as the federal government borrows money to reduce their tax load and they cannot begin to relate to what government workers, who missed a pay-check, went through. How the rich see it, is that if they just got rid of the government workers then the deficit would be smaller. They could afford to get along without these government services. That will be their solution to the national debt. Little do they appear to know that by increasing financial disparity of wealth, that in a democracy it will lead toward more socialism. I think that they have a plan for democracy too.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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