The American Dream is now to get out of debt
— David Rosenberg, Chief Economist & Strategist, Gluskin Sheff
A new report has surfaced called The American Middle Class Under Stress (pdf). In a set of easy to understand graphs, New American Foundation researchers Sherle R. Schwenninger and Samuel Sherraden present a compelling case that America's Middle Class is gradually disappearing, and has been for some time. Many of their graphs show pressures on Middle Class incomes beginning in the early 1980s, which is when I date the decline of the American Empire. I have covered many (if not all) of the subjects covered in the report, so I have included links to older posts where relevant.
I believe the Empire's decline is inextricably associated with the decline of Middle Class living standards. America's ability to enforce its military and financial "interests" all over the world will inexorably decline as a result. When wealthy interests took over the country, the Middle Class got left behind. I agree with many of the views expressed by Richard Kirsch in We’re not Broke. We’ve been Robbed! Actually, the United States is broke. But we've been robbed, that's for sure.
We’re not broke, but the wealth grab [by monied special interests] is wrecking our economy. The rich can’t spend enough to keep the economy going. The engine that drives it is a strong middle class. The problem isn’t that we haven’t generated wealth, it’s that we’ve stopped sharing the wealth we’ve generated. If wages had kept up with productivity over the past 30 years, the median wage would be 60% higher than it is now. If income had increased at the same rate for everyone from 1979 to 2006, the average family would make about $10,000 more a year, but the top 1% would make $700,000 less...
The middle class is not only the engine of our economy, it’s the glue of our democracy. A bigger middle class leads to higher voting rates and lower levels of public corruption. When we believe that the system is stacked against us, we’re more likely to drop out or cheat.
It’s no wonder that despite elite celebration of economic recovery, Americans are deeply pessimistic about the future. Much of the public believes that our best days are behind us. And unless we build a movement for change, they will be right.
It would be naive to expect the deplorable trends documented by the New American Foundation to be reversed in the future. Your best days are behind you—if you're still in the Middle Class and still struggling to make ends meet, or you're a young person hoping for a decent life. Our "Democracy" exists in name only. Corruption is rampant in the Imperial Capital. A majority of desperate Americans voted for Barack Obama in the hope he would bring The Change. If you were among them, you have been betrayed in the profoundest way.
And now, some of the data. Look at the New America Foundation report for the rest.
More of the Employed Have Low-Income Jobs — "The share of middle-income jobs in the United States has fallen from 52% in 1980 to 42% in 2010. Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment." David Stockman has done the best work on this subject. See my post No New Jobs Is The New Normal.
The Under-Employed American — "The problem is not lack of skills, but the structure of the job market.17 million Americans with college degrees are doing jobs that require less than the skill levels associated with a bachelor’s degree. Just under 30% of flight attendants and 16% of telemarketers have bachelor’s degrees even though this credential is not necessary for these jobs. See my post A Resurgence Of Lousy Jobs.
Government Transfers Have Partly Offset the Stagnation of Wages — "Wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. Government transfers have risen from 11.7% of personal income in 1980 to 18.4% in 2010, a post-War high. There are 8.5 million people receiving unemployment insurance and over 40 million receiving food stamps." See my recent post America's Road To Perdition.
Rising Health Expenditures — "Despite an increase in government transfers, America’s social wage has been eroded by the rising cost of health care and education. Health care spending increased from 9.5% of personal consumption in 1980 to 16.3% in 2010. Many households cannot afford rising insurance premiums and out-of-pocket health care costs, leaving nearly 50 million Americans without adequate health coverage."
Higher Education is Not Affordable — "A college education is considered necessary to get a good job, but for many families college is no longer affordable. The average cost of one year of college is $21,000. After adjusting for inflation, it has risen 72% since 1990. For households with incomes at the 40th and 60th percentiles, one year of college tuition makes up 54% and 40% of their annual income, respectively." See my recent post The College Degree Scam Goes Ballistic, and follow the links therein.
The Emergence of “Screwflation” — "“Screwflation,” a term coined by Wall Street guru Doug Kass, describes how falling wages and rising costs of basic goods are squeezing the middle class. The share of personal consumption spent on food and energy has risen from 13.4% in 2002 to 15.3% in 2010. Elizabeth Warren warned that the rising costs of basic middle class goods and stagnant incomes have put many Americans in an “economic vice.” I have written about the dangers of food & energy ("non-core") inflation on several occasions. I most recently touched on these issues in Tim Geithner Knows Diddly-Squat.
The Great Recession Dealt a Blow to Middle Class Wealth — "Household net worth declined from $65.7 trillion in the second quarter of 2007 to $56.8 trillion in the fourth quarter of 2010. The middle class, which has much more of its net worth tied up in home equity, has borne the brunt of this decline. Wealth recovered $8.1 trillion since the first quarter of 2009 due mostly to the recovery in stock prices." Not only has Middle Class wealth declined as house prices have fallen, but the large debt they incurred (mostly in mortgages) remains behind. Default (foreclosures) is the only option for many Americans. See my post Decending The Household Debt Mountain.
Home Equity and Wealth — "Home equity makes up a greater share of total wealth for the middle class than it does for wealthy families. For families up to the 90th percentile of net worth, home values make up over 50% of total wealth. But with the decline in home values, many homeowners are now underwater, meaning that the value of their home is less than the amount owed on their mortgage."
Aaron Task of Yahoo's Daily Ticker did a story on the New America Foundation report called America's Middle Class Crisis: The Sobering Facts. If you like reading lists of "sobering" facts, visit there for stuff like this—
- There are 8.5 million people receiving unemployment insurance and over 40 million
- At the current pace of job creation, the economy won't return to full employment until 2018.
- Middle-income jobs are disappearing from the economy. The share of middle-income jobs in the United States has fallen from 52% in 1980 to 42% in 2010.
- Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment.
- 17 million Americans with college degrees are doing jobs that require less than the skill levels associated with a bachelor's degree.
- Over the past year, nominal wages grew only 1.7% while all consumer prices, including food and energy, increased by 2.7%.
And so on. Here's Aaron's interview with Sherle Schwenninger, director of economic growth and American strategy programs at the New America Foundation.
This is powerful information.
Any one who has any sense of community, would be sick to their stomachs.
Those who feel they can pull themselves up by their own bootstraps won't be phased one bit - unless their bootstraps have broken!
Don Levit
Posted by: Don Levit | 05/05/2011 at 12:17 PM