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Sears v. Butler: SCOTUS Considers A Washing-Machine Class Action
Walter Olson
So here’s the sequence:
1. Government strong-arms production of new designs of environment-friendly front-loading washing machines.
2. The new front-loading washers turn out to have novel maintenance issues. In particular, they may develop musty smells unless owners practice some combination of leaving doors open to vent, wiping down surfaces, and other steps. Some consumers are irritated at this and regret the purchase, others not.
3. Trial lawyers sue all the major makers in class actions on behalf of all purchasers saying the new designs are defective, even though Consumer Reports rates the new category of washer “best in class” despite its drawbacks.
4. One of these class actions lands before Judge Posner at the Seventh Circuit, and he rules for letting it go forward on a theory of “predominance” (do these plaintiffs all belong in the same suit, when many are experiencing no problem at all?) that varies interestingly from what people assumed the Supreme Court’s thinking was on that subject.
5. The U.S. Supreme Court decides (coming up momentarily) whether to grant certiorari in Sears v. Butler.
There isn’t actually a strong logical chain linking 1) through 5); it’s kind of happenstance that the case threw up an issue involving predominance that the Supreme Court may find worth its attention, as opposed to merely presenting an overall profile of “hasn’t the whole system just become a crazy way to enrich lawyers?” Because “hasn’t the whole system just become a crazy way to enrich lawyers?” doesn’t count as a well-formed question for certiorari. [Background: Ted Frank, more, Daniel Fisher]
[cross-posted in slightly adapted form from Overlawyered]
View full post on Cato @ Liberty
Police State • Re: The modern-day ‘slave class’ is anyone who cannot do mat
That last sentence about stop watching television is probably the most insightful comment of all.
It is the systematic brainwashing of unthinking citizens.
Statistics: Posted by Deo Vindice — Fri May 24, 2013 11:59 am
View full post on opinions.caduceusx.com
Education And Science • Dear Class of ’13: You’ve been scammed
Dear Class of ’13: You’ve been scammed
Commentary: How the College-Industrial Complex drove tuition so high
By Brett Arends
Class of 2013,
No one else is going to tell you this, so I might as well.
You sit here today, $30,000 or $40,000 in debt, as the latest victims of what may well be the biggest conspiracy in U.S. history. It is a conspiracy so big and powerful that Dan Brown won’t even touch it. It’s a conspiracy so insidious that you will rarely hear its name.
The dean of the Tuck School of Business at Dartmouth College says his MBA graduates still aren’t heading into finance jobs in the numbers they did before the financial crisis.
Move over, Illuminati. Stand down, Wall Street. Area 51? Pah. It’s nothing.
The biggest conspiracy of all? The College-Industrial Complex.
Consider this: You have just paid about three times as much for your degree as did someone graduating 30 years ago. That’s in constant dollars — in other words, after accounting for inflation. There is no evidence that you have received a degree three times as good. Some would wonder if you have received a degree even one times as good.
According to the College Board, in 1983 a typical private American university managed to provide a bachelor’s-degree-level education to young people just like you for $11,000 a year in tuition and fees. That’s in 2012 dollars.
Instead, those of you at private colleges paid this year an average of $29,000.
And back then a public college charged in-state students just $2,200 a year in tuition and fees — in today’s dollars. You could get a full four-year degree for $8,800. Today that will get you one year’s tuition, or $8,700.
Notice, please, we are not even counting the cost of all the “extras,” like room and board. This is just the cost of the teaching.
It is, as a result, no surprise that total student loans are now approaching $1 trillion. They have easily overtaken credit-card debts and car loans. According to the Federal Reserve Bank of New York, total student loans have basically tripled since 2004. Fed researcher Lee Donghoon says that in the last eight years the number of borrowers has gone up by about 70%, and the average amount owed has also gone up about 70%.
Reuters
Sarah Azad, a senior majoring in telecommunications at New York City College of Technology, waits to meet with potential employers at the Big Apple Job and Internship Fair.
Donghoon calculates that about 17% of those with student loans are more than 90 days’ delinquent on their interest payments. Yet he also calculates that 44% haven’t even entered the repayment period at all.
If you turn to the pages of any newspaper, you will read a lot of hand-wringing about this. You will hear attacks on “predatory” student-loan companies and “predatory … for-profit colleges.” You will hear about cutbacks in Pell Grants and federal aid and proposals to lower the interest rate on subsidized federal loans. But all of these comments ignore one basic problem.
It’s the cost, stupid.
U.S. colleges are a rip-off. Two decades ago I spent six years at Cambridge and Oxford universities, and it didn’t cost me a nickel. Admittedly, one reason was social policy: The taxpayers paid the bill (and a very good return they earned too, given the British taxes I paid once I graduated and started work). But the second reason was that these universities did not charge an arm, leg and other appendage for the act of teaching.
My undergraduate course at Cambridge largely consisted of one hour a week with a tutor, a weekly essay question and research list, and a library card. This teaching model hadn’t changed much, really, since the days of Aristotle. Student, teacher, discussion. See you same time next week.
How on earth do colleges today ramp up costs to $40,000 a year?
http://www.marketwatch.com/story/dear-c … lcountdown
Statistics: Posted by yoda — Fri May 17, 2013 10:15 am
View full post on opinions.caduceusx.com
Political Correctness • Scenes from the Democrat ruling class
May 12, 2013
Scenes from the Democrat ruling class
Thomas Lifson
A lengthy criminal investigation of the son of prominent Congressman Chaka Fattah is underway in Philadelphia. It is always a bad thing to have the feds looking into throwing you in the slammer, but if it’s going to happen, then it really helps to have blood ties to the Democratic Machine. They know how to shake money out of trees.
We learn from the Philadelphia Inquirer’s Craig R. McCoy and Mark Fazlollah,
Former Gov. Ed Rendell and former Mayor W. Wilson Goode have launched a fund-raising effort to pay the legal bills of U.S. Rep. Chaka Fattah’s son, who has been under federal investigation for months.
Rendell said he agreed to pitch in after Rep. Fattah contacted him for help.
Rendell, in an interview, estimated that the Philadelphia congressman and his wife had spent $250,000 to help Chaka "Chip" Fattah Jr., 30, and said the costs had become a "little bit of a struggle" for the family.
Imagine that: he’s not even under indictment, but they have laid out a quarter mill for legal talent. Must be the best, the kind of guys who charge $500 and up for an hour of their time, so maybe 500 hours or so of legal attention so far, with multiples of that to come should criminal indictments lead to a trial. It kind of sounds like that’s what they’re expecting.
Dad earns almost $175k as a Rep, and stepmom is a news anchor on Channel 10 in Philly. So this glamour couple, this Philly Power Elite Pair, probably pull down at least mid six figures.
Well, if you have a former governor and a former mayor asking you, I guess it will be difficult to say no, especially if you do business with, are regulated by, pay taxes to, or otherwise come on the radar screen of government, especially in the Commonwealth of Pennsylvania. I mean, Ed Rendell says Chip is a "wonderful kid" and assures you that this has nothing, absolutely nothing to do with his father, the powerful congressman who has been a bedrock of the Congressional Black Caucus since 1995.
"I’m not doing it because he is Chaka Fattah’s son, though I have a good relationship with Chaka. I’m doing it because I have a good relationship with him."
Late in February, the public first learned of the investigation via the Inquirer:
Federal authorities are investigating why a company owned by the son of U.S. Rep. Chaka Fattah was paid $450,000 by an education firm that has received millions in contracts from the Philadelphia School District, according to sources familiar with the probe.
Agents from the FBI and U.S. Treasury Department served two search warrants early Wednesday for Chaka Fattah Jr.’s records, the first at his apartment at the Residences at the Ritz-Carlton. They also seized Fattah’s records and a computer from the Logan Square law office of David T. Shulick. He is president of Delaware Valley High School, a for-profit company that contracts with school districts to educate students with discipline problems.
The younger Fattah, 29, known as "Chip," is owner of a consulting company called 259 Strategies L.L.C. that works as a subcontractor for Shulick’s companies. Fattah Jr. has working space at the law office.
The $450,000 payment from Shulick’s company is more than 10 percent of the approximately $4 million that Delaware Valley will receive from the School District this year.
Now, I am certain it is just a coincidence that finding money for education – especially money for those labeled "disadvantaged" — happens to be one Chaka Fattah, Sr.’s principal legislative accomplishments. He staked out that territory first with the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) which, even though you may never have heard of it has passed out a cool 4 billion bucks to help "disadvantaged" youth get ready for college. Since those early days, the Congressman has been busy getting more federal money for targeted recipients.
It may be that this investigation will result in no indictment. Or even if an indictment is issued, Chip will be found not guilty. In which case, he will be very lucky indeed to have found some good friends to help him out. What I find noteworthy is how cushy it can be to be born into the Democrat ruling class.
You might assume that because he had working space at a law firm that Chip was a lawyer. Sorry, not even a college grad; dropped out of Drexel. Before he got into "consulting," he ran a "concierge firm catering to the wealthy, such as by chartering them private jets on short notice." A high end gofer. I wonder what other sorts of things he procured for people rich enough to chargetr a jet but not quite rich enough to own one? Maybe some of his ex-clients there will kick in. In any event, it helps to have friends in powerful places.
Living at the Residences at the Ritz Carleton in Philly is not exactly slumming, either. "The 48-story contemporary masterpiece accented by a dramatic crystal spire, the new tower has transformed Philadelphia’s skyline and forever redefined condominium living"
Rendell and Goode have already badly bungled this project, at first laughably claiming that the donor list would be kept private, and that the Congressman would not know who had contributed:
Craig Holman, a lobbyist with Public Citizen, a nonprofit organization that advocates for more transparency in Washington, said the Fattah Jr. fund could be a magnet for "businesses and special interest groups who have a lot of money and who are looking at ways to throw more money at the feet of the congressman by any means possible."
Holman said any plan short of full disclosure would have had problems. Even if a donor list had been kept from Rep. Fattah, Holman said, he would likely learn the donors anyway. "You can bet the lobbyist for the [donating] company is going to let the congressman know about it," Holman said.
Under congressional rules, legal defense funds that benefit officials must disclose donations, and the size of donations is capped. Those rules apply to funds for the officials, not their relatives.
On Friday, Burrell said all donations, amounts of donations, and all fund expenditures would be made public "to be fully transparent."
Making no judgment as to the merits of the possible case against Chip Fattah, it should be obvious that the massive amount of spending on government education (we spend more money per student than any other major country) has become a piggy bank for the Democratic Machine. The recycling of money through union dues laundered into political contributions for the Democrats is the mostly (but not completely) visible component. Grants, contracts, administrative fees and the like are another target of opportunity for politicians seeking bucks, and maybe for their offspring with no professional education.
http://www.americanthinker.com/blog/201 … class.html
Statistics: Posted by yoda — Sun May 12, 2013 10:00 am
View full post on opinions.caduceusx.com
Cheap Money Bankrolls Wall Street’s Bet on Housing (The Fed screws the middle class yet again.)
Wall Street firms have swept in buying up foreclosed homes all over the country with the idea of becoming “super landlords.” If a firm can buy up a a hundred rental units at a reasonable amount with virtually free money (which is likely to remain free for a good while) and then turn around and rent the units to the people who have been foreclosed on, then hey, why not?
This is yet another example of how all the Fed’s printing is benefiting the firms which originally were saved by TARP even though they should have died.
Goldman Sachs, which was over leveraged (to be kind) and which should have perished in 2008 was saved by the US taxpayer. In some cases that taxpayer has now been foreclosed on. Goldman managed its books far worse than most foreclosure victims, but now because the average person doesn’t have direct access to the Fed window, Goldman gets to be the master of the people who paid to save Goldman. This is just sick.
On top of this, in places like Las Vegas housing prices are again lurching skyward as Federal Reserve funny money finds its way into the housing market. So former homeowners, now with terrible credit, are likely to remain former homeowners as Wall Street, enabled by the Fed, bids up prices.
And Just wait until the hedge funds take over Fannie Mae.
Tell me how the FOMC politburo helps the average person. Tell me why the average person should not want an end to the Federal Reserve.
(From CNBC)
Local real-estate broker Fafie Moore says private-equity firms and hedge funds have largely “crowded out” local buyers like Marchillo. That’s because the investment firms have broadened beyond their initial focus —buying homes at foreclosure auctions. Now, they are also bidding for homes listed by private owners and banks.
In a sign of how freely the money is flowing, Moore notes around 60 percent of all sales are in cash these days.
Fellow broker Trish Nash said she has seen cases where a home gets listed and quickly draws a dozen bids, many in cash. Realtors are talking about a mini-bubble forming here.
View full post on AgainstCronyCapitalism.org
Comcast v. Behrend: Class Certification at the High Court
Walter Olson
Confirming the pattern of 2011’s Wal-Mart v. Dukes, the issue of class action procedure continues to generate a sharp 5–4 ideological split at the Supreme Court. On Wednesday, replicating the general Dukes line-up, the Court’s five conservatives ruled against certifying a large antitrust class action against Comcast over its conduct in the Philadelphia cable market, finding that the plaintiffs’ model of economic damages did not suffice to justify handling the case as a class action. (The trial court had knocked out three of the plaintiffs’ four theories of recovery; the majority found the plaintiffs’ economic model did not distinguish among the theories in such a way as to enable a court to recognize distinct damages attributable to the surviving theory.)
Despite protest from a few pro-antitrust commentators and sweeping claims of victory by a few on the defense side, Comcast is most likely to be remembered as a relatively narrow ruling with limited impact on future cases, for reasons Andrew Longstreth explains at Reuters. Some plaintiffs will need to be a bit more careful in constructing their cases, but the differences won’t be major. Indeed, the dissenters, led by Justices Ruth Ginsburg and Stephen Breyer, describe the majority’s ruling as “good for this day and case only.”
The Cato Institute had entered the fray with an amicus brief arguing the following:
- Courts must engage in a rigorous analysis at the certification stage rather than wave plaintiffs through the gate, even when such an inquiry overlaps with questions of merits that go to the case’s ultimate substantive resolution.
- In particular, expert reports at the certification stage should be subject to Daubert tests of admissibility, as they are at the merits stage.
The majority opinion emphatically agreed with us on the first point and the dissent did not make any real attempt to challenge it. That suggests that a sound view of this question may command a broad or even unanimous consensus on the Court.
To many participants’ surprise, the Court never reached the second point about admissibility, instead proceeding to rule on questions of predominance. This led to a sharp protest from the four dissenters that the majority was reaching out to decide the case on a different ground than it had been briefed on.
Few doubt that we can expect more wrangling at the Court on class action standards. That could soon happen in its consideration of a Sixth Circuit washing-machine case called Whirlpool v. Glazer, discussed by Ted Frank here.
View full post on Cato @ Liberty
Standard Fire: SCOTUS Foils an Artful Class Action Dodge
Walter Olson
With Justice Breyer writing, a unanimous Supreme Court in Standard Fire Insurance Co. v. Knowles (opinion PDF, background SCOTUSBlog) has struck down as invalid a dodge used by some plaintiff’s lawyers to evade the provisions of the Class Action Fairness Act of 2005 (CAFA). As we wrote in October when Cato filed its amicus brief:
In relevant part, CAFA provides defendants with the right to move class actions to federal court where the claim for damages against them exceeds $5 million. But can clever lawyers keep these cases out of federal court by simply “stipulating” that potential damages are less than $5 million — and before the named plaintiff is even authorized to represent the alleged class? In this case, Greg Knowles is the named plaintiff in a putative insurance-recovery class action against Standard Fire Insurance in Arkansas state court. Before the court certified the class, Knowles tried to avoid that removal to federal court by stipulating that his class would not seek more than $5 million in damages at trial. Notably, the stipulation is worded in such a way that it will not apply if the class definition is later altered. … CAFA was enacted specifically to discourage attorneys from “forum shopping” (seeking friendlier courts) and attempting to keep cases out of federal court. Lawyers who game the system by agreeing to cap damages in an effort to keep cases in more favorable state courts violate the federal due process rights of absent would-be class members, thereby flouting CAFA.
In his opinion for the unanimous Court, Justice Breyer found that the named class representative lacked a right to limit absent class members’ claims in such a way. Individual litigants remain free to avoid federal jurisdiction through the use of damage stipulations, but that is a decision they are entitled to make only for themselves. That’s very much consistent with the principles Cato urged, and with the importance of individual rights as the fundamental basis for legal action, rather than as mere ingredients to be aggregated by lawyers seeking settlement advantage. Thanks again to the ever-brilliant David B. Rivkin, Jr., Andrew M. Grossman and colleagues at Baker & Hostetler for their work on the Cato brief.
View full post on Cato @ Liberty
Other • Consumer Spending Drought: 16 Signs That The Middle Class Is
Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money
By Michael, on February 28th, 2013 Is "discretionary income" rapidly becoming a thing of the past for most American families? Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought. Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank. Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news. How will we ever have a sustained economic recovery if consumers don’t have much money to spend? Well, the truth is that we aren’t ever going to have a sustained economic recovery. In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get. Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years.
Even though the Dow is surging toward a record high right now, everyone knows that things are not good for the middle class. A recent quote from CPA Howard Dvorkin kind of summarizes our current state of affairs very nicely…
"The fact of the matter is that America is broke — whether it’s mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months’ of savings," Dvorkin says."If you talk to people, most don’t have two pennies."
These days most Americans are living from paycheck to paycheck, and thanks to rising prices and rising taxes, those paychecks are getting squeezed tighter and tighter. Many families have had to cut back on unnecessary expenses, and some families no longer have any discretionary income at all.
The following are 16 signs that the middle class is rapidly running out of money…
#1 According to one brand new survey, 24 percent of all Americans have more credit card debt than money in the bank.
#2 J.C. Penney was once an unstoppable retail powerhouse, but now J.C. Penney has just posted its lowest annual retail sales in more than 20 years…
J.C. Penney Co. (JCP) slid the most in more than three decades after the department-store chain lost $4.3 billion in sales in the first year of Chief Executive Officer Ron Johnson’s turnaround plan.
The shares fell 18 percent to $17.40 at 11:28 a.m. in New York after earlier declining 22 percent, the biggest intraday drop since at least 1980, according to data compiled by Bloomberg. J.C. Penney yesterday said its net loss in the quarter ended Feb. 2 widened to $552 million from $87 million a year earlier. The Plano, Texas-based retailer’s annual revenue slid 25 percent to $13 billion, the lowest since at least 1987.
How much worse can things get? At this point the decline has become so steep for J.C. Penney that Jim Cramer of CNBC is declaring that they are in "a true tailspin".
#3 In the United States today, a new car has become out of reach for most middle class Americans according to the 2013 Car Affordability Study…
Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city actually can afford the typical new vehicle.
The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales. According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year.
#4 The founder of Subway Restaurants, Fred Deluca, says that the recent tax increases are having a noticeable impact on his business…
"The payroll tax is affecting sales. It’s causing sales declines," he said, estimating a decline of about 2 percentage points off sales at his restaurants. "There are a lot of pressures on consumers," Deluca said, adding "I think this is on the permanent side, but I think business will adjust to it."
#5 Many other large restaurant chains are also struggling in this tough economic environment…
Darden Restaurants, which owns the casual dining chains Oliver Garden, LongHorn Steakhouse and Red Lobster, said blended same-store sales at its three eateries would be 4.5 percent lower during its fiscal third quarter.
Clarence Otis, Darden’s chairman and chief executive, said that "while results midway through the third quarter were encouraging, there were difficult macro-economic headwinds during the last month of the quarter."
"Two of the most prominent were increased payroll taxes and rising gasoline prices, which together put meaningful pressure on the discretionary purchasing power of our guests," he added.
#6 The CFO of Family Dollar recently admitted to CNBC that this is a "challenging time" because of reduced consumer spending…
At Family Dollar where the average customer makes less than $40,000 a year, the combination of a two-percent hike in the payroll tax, rising gas prices and delayed tax refunds has created a "challenging time and an uncertain time for the consumer right now," said Mary Winston, the company’s chief financial officer.
"In our case, anything that takes money out of our customer’s wallet gives them less money to spend in our stores," she told CNBC. "So I think all of those things create nervousness for the consumer, and I think there are sometimes political dynamics going on that they might not even fully understand the details, but they know it’s not good."
#7 Even Wal-Mart is really struggling right now. According to a recent Bloomberg article, Wal-Mart is struggling "to restock store shelves as U.S. sales slump"…
Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”
“There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”
This all comes on the heels of an internal Wal-Mart memo that was leaked to the press earlier this month that described February sales as a "total disaster".
#8 Electronics retailer Best Buy continues to struggle mightily. Best Buy just announced that it will be eliminating 400 jobs at its headquarters in Richfield, Minnesota.
#9 It is being projected that many of the largest retail chains in America, including Best Buy, will close down hundreds of stores during 2013. The following is a list of projected store closings for 2013 that I included in a previous article…
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShack
Forecast store closings: 450 to 550
#10 Another sign that consumer spending is slowing down is the fact that less stuff is being moved around in our economy. As I have mentioned previously, freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.
#11 Many young adults have no discretionary income to spend because they are absolutely drowning in student loan debt. According to the New York Federal Reserve, student loan debt nearly tripled between 2004 and 2012.
#12 The student loan delinquency rate in the United States is now at an all-time high. It is only a matter of time before the student loan debt bubble bursts.
#13 Due to a lack of jobs and high levels of debt, poverty among young adults in America is absolutely exploding. Today, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
#14 According to one recent survey, 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.
#15 Median household income in the United States has fallen for four consecutive years. Overall, it has declined by more than $4000 during that time span.
#16 According to the U.S. Census Bureau, the middle class is currently taking home a smaller share of the overall income pie than has ever been recorded before.
Are you starting to get the picture?
Retailers are desperate for sales, but you can’t squeeze blood out of a rock.
For much more on how the middle class is absolutely drowning in debt, please see this article: "Money Is A Form Of Social Control And Most Americans Are Debt Slaves".
But if you listen to the mainstream media, they would have you believe that happy days are here again.
Right now, everyone seems to be quite giddy about the fact that the Dow is marching toward an all-time high. And I actually do believe that the Dow will blow right past it. In fact, it is even possible that we could see the Dow hit 15,000 before everything starts falling apart.
But at some point, the financial markets will catch up with economic reality. It is just a matter of time.
In the meanwhile, those that are wise are taking advantage of these times of plenty to prepare for the great economic drought that is coming.
Don’t be caught living paycheck to paycheck and totally unprepared when the next wave of the economic collapse strikes. Anyone that believes that this debt-fueled bubble of false hope can last indefinitely is just being delusional.
http://theeconomiccollapseblog.com/arch … t-of-money
Statistics: Posted by yoda — Thu Feb 28, 2013 9:15 pm
View full post on opinions.caduceusx.com
Other • Consumer Spending Drought: 16 Signs That The Middle Class Is
Consumer Spending Drought: 16 Signs That The Middle Class Is Running Out Of Money
By Michael, on February 28th, 2013 Is "discretionary income" rapidly becoming a thing of the past for most American families? Right now, there are a lot of signs that we are on the verge of a nightmarish consumer spending drought. Incomes are down, taxes are up, many large retail chains are deeply struggling because of the lack of customers, and at this point nearly a quarter of all Americans have more credit card debt than money in the bank. Considering the fact that consumer spending is such a large percentage of the U.S. economy, that is very bad news. How will we ever have a sustained economic recovery if consumers don’t have much money to spend? Well, the truth is that we aren’t ever going to have a sustained economic recovery. In fact, this debt-fueled bubble of false hope that we are experiencing right now is as good as things are going to get. Things are going to go downhill from here, and if you think that consumer spending is bad now, just wait until you see what happens over the next several years.
Even though the Dow is surging toward a record high right now, everyone knows that things are not good for the middle class. A recent quote from CPA Howard Dvorkin kind of summarizes our current state of affairs very nicely…
"The fact of the matter is that America is broke — whether it’s mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months’ of savings," Dvorkin says."If you talk to people, most don’t have two pennies."
These days most Americans are living from paycheck to paycheck, and thanks to rising prices and rising taxes, those paychecks are getting squeezed tighter and tighter. Many families have had to cut back on unnecessary expenses, and some families no longer have any discretionary income at all.
The following are 16 signs that the middle class is rapidly running out of money…
#1 According to one brand new survey, 24 percent of all Americans have more credit card debt than money in the bank.
#2 J.C. Penney was once an unstoppable retail powerhouse, but now J.C. Penney has just posted its lowest annual retail sales in more than 20 years…
J.C. Penney Co. (JCP) slid the most in more than three decades after the department-store chain lost $4.3 billion in sales in the first year of Chief Executive Officer Ron Johnson’s turnaround plan.
The shares fell 18 percent to $17.40 at 11:28 a.m. in New York after earlier declining 22 percent, the biggest intraday drop since at least 1980, according to data compiled by Bloomberg. J.C. Penney yesterday said its net loss in the quarter ended Feb. 2 widened to $552 million from $87 million a year earlier. The Plano, Texas-based retailer’s annual revenue slid 25 percent to $13 billion, the lowest since at least 1987.
How much worse can things get? At this point the decline has become so steep for J.C. Penney that Jim Cramer of CNBC is declaring that they are in "a true tailspin".
#3 In the United States today, a new car has become out of reach for most middle class Americans according to the 2013 Car Affordability Study…
Looking to buy a new car, truck or crossover? You may find it more difficult to stretch the household budget than you expected, according to a new study that finds median-income families in only one major U.S. city actually can afford the typical new vehicle.
The typical new vehicle is now more expensive than ever, averaging $30,500 in 2012, according to TrueCar.com data, and heading up again as makers curb the incentives that helped make their products more affordable during the recession when they were desperate for sales. According to the 2013 Car Affordability Study by Interest.com, only in Washington could the typical household swing the payments, the median income there running $86,680 a year.
#4 The founder of Subway Restaurants, Fred Deluca, says that the recent tax increases are having a noticeable impact on his business…
"The payroll tax is affecting sales. It’s causing sales declines," he said, estimating a decline of about 2 percentage points off sales at his restaurants. "There are a lot of pressures on consumers," Deluca said, adding "I think this is on the permanent side, but I think business will adjust to it."
#5 Many other large restaurant chains are also struggling in this tough economic environment…
Darden Restaurants, which owns the casual dining chains Oliver Garden, LongHorn Steakhouse and Red Lobster, said blended same-store sales at its three eateries would be 4.5 percent lower during its fiscal third quarter.
Clarence Otis, Darden’s chairman and chief executive, said that "while results midway through the third quarter were encouraging, there were difficult macro-economic headwinds during the last month of the quarter."
"Two of the most prominent were increased payroll taxes and rising gasoline prices, which together put meaningful pressure on the discretionary purchasing power of our guests," he added.
#6 The CFO of Family Dollar recently admitted to CNBC that this is a "challenging time" because of reduced consumer spending…
At Family Dollar where the average customer makes less than $40,000 a year, the combination of a two-percent hike in the payroll tax, rising gas prices and delayed tax refunds has created a "challenging time and an uncertain time for the consumer right now," said Mary Winston, the company’s chief financial officer.
"In our case, anything that takes money out of our customer’s wallet gives them less money to spend in our stores," she told CNBC. "So I think all of those things create nervousness for the consumer, and I think there are sometimes political dynamics going on that they might not even fully understand the details, but they know it’s not good."
#7 Even Wal-Mart is really struggling right now. According to a recent Bloomberg article, Wal-Mart is struggling "to restock store shelves as U.S. sales slump"…
Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”
“There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”
This all comes on the heels of an internal Wal-Mart memo that was leaked to the press earlier this month that described February sales as a "total disaster".
#8 Electronics retailer Best Buy continues to struggle mightily. Best Buy just announced that it will be eliminating 400 jobs at its headquarters in Richfield, Minnesota.
#9 It is being projected that many of the largest retail chains in America, including Best Buy, will close down hundreds of stores during 2013. The following is a list of projected store closings for 2013 that I included in a previous article…
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShack
Forecast store closings: 450 to 550
#10 Another sign that consumer spending is slowing down is the fact that less stuff is being moved around in our economy. As I have mentioned previously, freight shipment volumes have hit their lowest level in two years, and freight expenditures have gone negative for the first time since the last recession.
#11 Many young adults have no discretionary income to spend because they are absolutely drowning in student loan debt. According to the New York Federal Reserve, student loan debt nearly tripled between 2004 and 2012.
#12 The student loan delinquency rate in the United States is now at an all-time high. It is only a matter of time before the student loan debt bubble bursts.
#13 Due to a lack of jobs and high levels of debt, poverty among young adults in America is absolutely exploding. Today, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
#14 According to one recent survey, 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.
#15 Median household income in the United States has fallen for four consecutive years. Overall, it has declined by more than $4000 during that time span.
#16 According to the U.S. Census Bureau, the middle class is currently taking home a smaller share of the overall income pie than has ever been recorded before.
Are you starting to get the picture?
Retailers are desperate for sales, but you can’t squeeze blood out of a rock.
For much more on how the middle class is absolutely drowning in debt, please see this article: "Money Is A Form Of Social Control And Most Americans Are Debt Slaves".
But if you listen to the mainstream media, they would have you believe that happy days are here again.
Right now, everyone seems to be quite giddy about the fact that the Dow is marching toward an all-time high. And I actually do believe that the Dow will blow right past it. In fact, it is even possible that we could see the Dow hit 15,000 before everything starts falling apart.
But at some point, the financial markets will catch up with economic reality. It is just a matter of time.
In the meanwhile, those that are wise are taking advantage of these times of plenty to prepare for the great economic drought that is coming.
Don’t be caught living paycheck to paycheck and totally unprepared when the next wave of the economic collapse strikes. Anyone that believes that this debt-fueled bubble of false hope can last indefinitely is just being delusional.
http://theeconomiccollapseblog.com/arch … t-of-money
Statistics: Posted by yoda — Thu Feb 28, 2013 9:15 pm
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High-Maintenance Ruling Class
As Thomas Sowell has pointed out, politicians like to spend money on government pensions, for obvious reasons. It reinforces their professional ruling-class status, they are spending other people’s money on themselves, and the spending comes down the line in the future. But in a lingering recession and shrinking economy, articles like this are starting to appear, daring to question whether politicians deserve the fat payouts.
The poster boy for this story is Norman Dicks, 72, a Washington State Democrat who has been in Congress since 1977, when Jimmy Carter was president. Dicks is retiring and will get $107,268 a year or $8,939 per month. His annual payout could rise to more than his 2012 salary of $174,000 if he lives long enough. Dicks thinks this is fair and that he did a good job but the article cites no contrary opinion on his performance, which doubtless falls short of his glowing review.
The article did reveal that congressional pensions, available at age 62, are two to three times as generous as those in the private sector. They are also more lucrative that those of other federal workers and one taxpayer advocate wants them to make their benefits part of a deficit reduction package or at least harmonize their benefit formula with the rest of the federal government.
That fails to qualify as meaningful reform because federal employee pensions also outstrip those of most workers in the private sector. For example, the Federal Employees Retirement System (FERS) allows retirement at age 55, seven years earlier than Social Security. And FERS offers a Special Retirement Supplement (SRS) that gives early federal retirees money from Social Security until they reach age 62. And early federal retirees are not subject to the absurd and repressive income restrictions of those on Social Security alone.
Making Congress and federal employees part of the Social Security system would be reform Americans could believe in, but nobody is talking about that. One legislator is pushing reforms through the Congress Is Not A Career Act, but has been unable to line up a single co-sponsor. So any kind of federal pension reform is unlikely. As Norman Dicks confirms, a careerist Congress likes the separate-and-unequal arrangement that forces the working class to accept an inferior system and subsidize the lavish benefits of the ruling class.
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