MIDDLE CLASS BLUES - As if Americans Didn't Already Know, IMF Report

"Sobering IMF report on U.S. economy cites dwindling middle class, growing income equality" PBS NewsHour 6/22/2016

Excerpt

SUMMARY:  A new outlook issued Wednesday by the International Monetary Fund drew some startling conclusions about the U.S. economy.  The report asserts that the American middle class is gradually shrinking, the seven-year economic recovery is starting to slow and the pronounced income equality divide may become worse without intervention.  Judy Woodruff talks to Christine Lagarde of the IMF for more.

JUDY WOODRUFF (NewsHour):  The American middle class is shrinking and struggling.  The six-year-long economic recovery is showing some signs of slowing.  And the pronounced wealth divide in the U.S. may get worse without bigger steps.

That warning was part of a new report issued today about the U.S. economy by the International Monetary Fund.

I sat down with its managing director, Christine Lagarde, at IMF headquarters here in Washington earlier today to hear more of her concerns about what’s happening to the middle class and the poor, and what could be done about it.

Managing Director Christine Lagarde, thank you for talking with us.

CHRISTINE LAGARDE, Managing Director, International Monetary Fund:  Pleasure.

JUDY WOODRUFF:  So, this latest report from the IMF looks at the American economy, says it is in good shape overall, shows resiliency, but then it goes on to point out a number of factors that provide concern for the future.

And one of them has to do with the shrinkage of the American middle class.  What do you and your colleagues see, and what concerns you?

CHRISTINE LAGARDE:  We are seeing a shrinking of the middle class.

If you look at the size of the middle class in 1975, it was roughly 60 percent of total population.  If you look at the middle class today, it is about 50 percent.  So, that’s a significant decline of the middle class.  And it is an economic issue, because the middle class has always been the consumption force of this nation.

The upper class doesn’t spend as much.  The lower class doesn’t have as much to spend.  So, the maximum impact in terms of consumption is generated by the middle class.

HOW THE DECK IS STACKED - Today's U.S. Economy

"In today's economy, even two-income families struggle to make ends meet" PBS NewsHour 6/10/2016

Excerpt

SUMMARY:  Aaron and Mary Murray are middle-class Americans, but they don't feel like it: though the two teachers make a combined $90,000 a year, they still live paycheck-to-paycheck.  Even something as mundane as a stranger accidentally sideswiping their car can put a serious dent in their finances.  Marketplace's Kai Ryssdal reports on the struggles facing the Murrays and millions of similar families.

AARON MURRAY (Marketplace):  Don't I call my insurance first to make a claim?

MARY MURRAY:  Yes.  Do you think it's totaled?

AARON MURRAY:  Yes.

KAI RYSSDAL:  This has not been a good morning for Aaron and Mary Murray and Vandy, their 5-year-old daughter.  They came out to find Aaron's car had been hit overnight, one of those unexpected expenses that can throw a lot of middle-class families off-track.

WOMAN:  Thank you for calling Esurance.  My name is Rebecca.  How can I help?

AARON MURRAY:  Hello, Rebecca.  I'm calling because my car got sideswiped.  I did not see them.  They just left a note on my car, ah, and the note that they swerved to avoid a cat dashing across the street.

WOMAN:  OK.

MARY MURRAY:  Got to brake for animals.

KAI RYSSDAL:  Things get back on track, though, with Mary's car, and they head to the Los Angeles Zoo to meet some friends.  Vandy's really looking forward to the dinosaurs.

MARY MURRAY:  Oh, my gosh.

AARON MURRAY:  It's OK.  I will protect you.

MARY MURRAY:  Yes, right.  He makes noise.  I think he's real.

KAI RYSSDAL:  Over a standard zoo lunch of chicken fingers, talk turns back to that car accident.

AARON MURRAY:  The check goes to pay off the car.  It doesn't come to me.

KAI RYSSDAL:  Next up, groceries at Target.  And Vandy is eager to help.

VANDY MURRAY:  Fruit, taco kit, and (INAUDIBLE)

MARY MURRAY:  Nice.  High five.  Boom.  Awesome.

KAI RYSSDAL:  Mary keeps close eye on the family budget.  Money-saving apps are key.

MARY MURRAY:  Bread, any bread.  Unlocked.  Cha-ching, 25 cents.

AARON MURRAY:  All right.

KAI RYSSDAL:  The tricky thing when you're talking about the middle class is who exactly you're talking about.  One definition, according to the Pew Research Center, is a family of four making between $48,000 and $145,000 a year, which is basically the Murrays.

They're both teachers.  Household income is right at $90,000.  And they're the ones that politicians talk about all the time.

OPINION - Conservatives Are Killing Us

"NYTimes:  Conservative Economics and Income Inequality Are Literally Killing Us" by Dartagnan, Daily KOS 4/29/2015

Thirty-five years ago, babies born in the U.S. had an infant mortality rate equal to Germany.  Today, American babies die at twice (PDF download) the rate of those in Germany.

Thirty-five years ago, the U.S. ranked 13th in life expectancy for girls among the 34 recognized industrial societies.  Today we are ranked 29th out of those same 34 countries.

We have the highest teenage birth rate among the industrialized world.

One out of every four children in this country lives with a single parent, the highest rate by far in the industrialized world.

Our incarceration rate is triple what it was four decades ago, with an incarceration rate five times that of other wealthy democracies.

Economists from the University of Chicago, MIT and the University of Southern California conducted research to find out why our children die at a rate exponentially higher than European kids.  Their conclusion?  Staggering rates of income disparity, all stemming directly from the 1980's, the Era of Ronald Reagan and the beginning of the resurgence of the conservative movement.

"On nearly all indicators of mortality, survival and life expectancy, the United States ranks at or near the bottom among high-income countries,” says a report on the nation’s health by the National Research Council and the Institute of Medicine.

What’s most shocking about these statistics is not how unhealthy they show Americans to be, compared with citizens of countries that spend much less on health care and have much less sophisticated medical technology.  What is most perplexing is how stunningly fast the United States has lost ground.

The statistics above are taken from this article by Eduardo Porter in today's New York Times.  As Porter states, "Pick almost any measure of social health and cohesion over the last four decades or so, and you will find that the United States took a wrong turn along the way."  But as his analysis shows, it wasn't just lower wages caused by globalization and technological advancement that led to this dismal state of affairs (although those certainly played a part), but the unique failure of our U.S. government to respond to these developments:

[B]laming globalization and technological progress for the stagnation of the middle class and the precipitous decline in our collective health is too easy.  Jobs were lost and wages got stuck in many developed countries.

What set the United States apart — what made the damage inflicted upon American society so intense — was the nature of its response.  Government support for Americans in the bottom half turned out to be too meager to hold society together.

From the time most of us have even had a political memory we have had to listen to conservative ideology spewed at us, telling us that the U.S. was living in a "welfare state," that "handouts" to the poor were sapping our productivity and harming the "spirit" of the country.  That if we only unleashed the power of Big Business through fostering "entrepreneurship" while cutting programs designed to support the rest of us, the nation would "regain" its stature and create vast sums of wealth for all of our citizens, with corporate profits leading us back to a mythical promised land.  That shrinking government programs while cutting taxes for the richest would put wealth back into all our pockets and improve the quality of our lives.  This was the dominant narrative in the 1980's, it was swallowed nearly whole and regurgitated by Bill Clinton in the 1990's, and reached its apotheosis in the 2000's prior to the Economic Crash presided over by George W. Bush and the same tax-cutting, supply-side ilk who sold it to us from the start, often in the guise of "deficit reduction."  It is the same narrative that continues to paralyze our government's ability to respond to our citizens needs, now mutated into what we know as the "Tea Party."

Now this narrative has borne itself out to be nothing but a staggering lie.  The reality is that beyond a meager Social Security and Medicare for the aged, both creations of Democratic Administrations, and with the constant demonization and derogation of Labor and Unions, there was not much at all to break the fall of ordinary Americans when trends like globalization appeared over the horizon:

A more compelling explanation is that when globalization struck at the jobs on which 20th-century America had built its middle class, the United States discovered that it did not, in fact, have much of a welfare state to speak of. The threadbare safety net tore under the strain.

Call it a failure of solidarity.  American institutions, built from hostility toward collective solutions, couldn’t hold society together when the economic underpinning of full employment at a decent wage gave in.

"Hostility toward collective solutions" is polite terminology for "greed."

In searching for solutions, Porter weighs the benefits of education, but rightly concludes that the way education is structured in this country today it actually exacerbates inequality.  One need only to examine the income levels of those victimized by the latest collapse of for-profit colleges, left clutching their near-worthless degrees, to understand why.  He also points to attempts by Senator Elizabeth Warren and others to generate enthusiasm for lifting the payroll cap on Social Security to expand benefits for the elderly.  But caring for the elderly is ultimately not our biggest problem.  Ultimately the changes necessary to reverse the criminal damage already wreaked on us by the American Right and its malignant, self-serving ideology must be solved at the ballot box.

The challenge America faces is not simply a matter of equity.  The bloated incarceration rates and rock-bottom life expectancy, the unraveling families and the stagnant college graduation rates amount to an existential threat to the nation’s future.

That is, perhaps, the best reason for hope.  The silver lining in these dismal, if abstract, statistics, is that they portend such a dysfunctional future that our broken political system might finally be forced to come together to prevent it.

So this election is not just "our time."  It may be the only time.

TAXES - President Obama's Middle Class Tax Plan

"Inside Obama’s middle class tax plan" PBS NewsHour 1/18/2015

Excerpt

SUMMARY:  President Obama will reportedly unveil a plan to offer tax relief for the middle class during his State of the Union address on Tuesday night.  The plan would be paid for by increasing taxes the rich pay on investments and inherited property.  For more, Carol Lee of the Wall Street Journal joins Hari Sreenivasan from Washington.

HARI SREENIVASAN (NewsHour):  President Obama reportedly will unveil a plan to offer tax relief for the middle class during his State of the Union address Tuesday night.  The plan would be paid for by increasing taxes the rich pay on investments and inherited property.

For more about the president’s proposal, its chances of success, and its political impact, we’re joined now from Washington by Carol Lee. She is White House correspondent for The Wall Street Journal.

So, Carol, who does the administration say that this will help, and how?

CAROL LEE, The Wall Street Journal:  Their main target is the middle class.

And they — their argument is that it will help the middle class by taking — closing certain tax loopholes that they say benefit the top 1 percent of Americans and making different changes to the tax code, including raising the capital gains tax from 23.8 percent to 28 percent by, as you mentioned, taxing some of these investments and assets that people transfer to their children that currently are not taxed and a number of other things.

And what they do with that money, which is roughly several hundred billion dollars, is put it towards proposals such as tripling the child tax credit.  So, that would go from $1,000 to $3,000.  They’re proposing to create a new tax credit for households where both spouses work.

And they would — the president has unveiled a proposal to offer free community college for folks.  And that’s another thing that — that this would pay for.  And so it’s kind of — it’s basically the president’s opening bid on a number of tax issues that have been vexing Washington for a long time.

And, so far, it has not gotten a very warm reception from Republicans.  But the White House’s argument is that this would help the middle class, the Republicans say that they are now focused on the middle class, the economy is doing better, and so now is the time to do things — things — take steps like this.

And while conceding that they probably won’t get everything that they want, which is a very optimistic view of this package, given the response we have seen from Republicans, the hope is that this is an opening bid to what the White House hopes are broader negotiations on some of these individual tax code issues.

AMERICA - Dismantling of Middle-Class Power and Prosperity

"The Seismic Economic and Political Changes that Transformed the American Dream" PBS Newshour 10/1/2012

Excerpt

SUMMARY: For Pulitzer Prize-winning journalist Hedrick Smith, the American Dream depends upon the prosperity of middle class. Ray Suarez talks to Smith about his latest book, "Who Stole the American Dream?" for more on what needs to change to restore the American Dream, economically, politically and culturally.

JUDY WOODRUFF (Newshour): Now: the dismantling of middle-class power and prosperity. Ray Suarez has our book conversation.

RAY SUAREZ (Newshour): One aspect of the current national campaigns addressed by both parties is how hard it has been in recent years to get ahead in America, even to stay in place, as economic turmoil destroyed working lives, cratered housing values, and undermined retirement accounts.

In "Who Stole the American Dream?" veteran journalist Hedrick Smith takes us on a tour of the last four decades, of economic globalization, winners, and losers.

Significant excerpts

HEDRICK SMITH, author of "Who Stole the American Dream?": Well, they were living the American dream. They had pretty steady jobs. They had rising pay.

They had benefits, health care; 85 percent of the people who worked for companies of over 100 employees had health care, had retirement payments, a monthly check until you died on top of your Social Security, could afford to buy a home, pay off that mortgage over 30 years, and hope that your kids would do better.

That's a big chunk for an awful lot of people.

It made America the envy of the world. It let Richard Nixon go to Moscow and tell Nikita Khrushchev, the Soviet leader, we have a classless society.

RAY SUAREZ: That is also -- the people living that dream are also numerically the largest part of the United States.

HEDRICK SMITH: Sure.

RAY SUAREZ: How did they become so politically weak?

HEDRICK SMITH: Well, they were very strong back then.

As you know, Ray, the environmental movement was strong, put pressure on Washington.

The labor movement was strong, put pressure on General Motors and General Electric and U.S. Steel and so forth.

The civil rights movement put pressure on Washington to open up the American Dream to blacks and other minorities.

Part of what happened to them was, it was so successful. But part of what happened to them was, there was a power shift. There was a tremendous change of power in Washington. And that had a big effect on the ability of middle-class Americans to achieve the American dream.

And the other thing that happened is what I call wedge economics, the splitting of the American middle class off from the gains of the national economy, so that today you can see the economy improving bit by bit, but middle-class people aren't doing that much better.

People at the top are doing real well. Corporations are reporting profits, but the people in the middle aren't doing that well.

Back in the old days, back in the heyday of the middle class, everybody shared in that prosperity. Today, everybody doesn't share in that prosperity. And that's why so many people feel so much pain.



HEDRICK SMITH: Yes, that's a very good question. Let's just take the facts for a moment.

What happened was, the productivity of the American work force from World War II to the mid-'70s grew almost double, 97 percent. The wage and salaries of average Americans, not just assembly line workers, but plumbers, carpenters, small business people, and so forth, they rose 95 percent, so just about the same increase in wages and salaries as in productivity.

The wealth, the growth, the economy, the prosperity was shared.

Since then, however, those wedge economics came in. And what you have seen is productivity has continued to grow, about 80 percent since 1973. But the average hourly compensation of an average worker has grown only 10 percent.

The CEOs' pay has quadrupled, sextupled. The income of the people at the top 1 percent has grown 600 percent.

The Census Bureau says the average male worker since 1978 is making just the same pay, adjusted for inflation. So it's flat in the middle and it's soaring up at the top, tremendous inequality.

I think you're right. People don't favor expropriation. Americans are more tolerant of economic inequality than, say, Europeans and Asians and so forth.

But you do see in poll after poll people are -- there's too many wealth concentrated at the top. There's too much power in Washington lobbyists. The tax system should be changed to raise taxes on the top brackets. Two-thirds of Americans agree in almost every poll to those numbers.

So there is sentiment to change things. But there's not anger in any kind of rebellious sense of word. In fact, there's not even the same kind of anger that prompted the middle class to protest back in the '60s and '70s.

ECONOMY - Declining Middle Class?

"Arianna Huffington Zeroes in on Declining Middle Class in New Book"
PBS Newshour 9/16/2010

AMERICAN COMMUNITIES - The Disappearing Middle-Class Neighborhood

"U.S. Losing Its Middle-Class Neighborhoods" by Blaine Harden,Washington Post

Middle-class neighborhoods, long regarded as incubators for the American dream, are losing ground in cities across the country, shrinking at more than twice the rate of the middle class itself.

In their place, poor and rich neighborhoods are both on the rise, as cities and suburbs have become increasingly segregated by income, according to a Brookings Institution study released Thursday. It found that as a share of all urban and suburban neighborhoods, middle-income neighborhoods in the nation's 100 largest metro areas have declined from 58 percent in 1970 to 41 percent in 2000.

Widening income inequality in the United States has been well documented in recent years, but the Brookings analysis of census data uncovered a much more accelerated decline in communities that house the middle class. It far outpaced the decline of seven percentage points between 1970 and 2000 in the proportion of middle-income families living in and around cities.

Middle-income neighborhoods -- where families earn 80 to 120 percent of the local median income -- have plunged by more than 20 percent as a share of all neighborhoods in Baltimore, Chicago, Los Angeles and Philadelphia. They are down 10 percent in the Washington area.

"It means that if you are not living in one of the well-off areas, you are not going to have access to the same amenities -- good schools and safe environment -- that you could find 30 years ago," said Alan Berube, an urban demographer at Brookings.

The decline of middle-income neighborhoods may also be a consequence of increased economic opportunity and residential mobility, especially for upper-income minorities, said Joel Kotkin, an urban historian and senior fellow at the New America Foundation.

The question is, just what is the actual cause? Is this a reflection of the widening gap in income aka economic class? The article does state that the issues exposed do need more study to clarify the issue.

POLITICS - Middle Class Families Living on the Edge

There is a very interesting article in Harvard Magazine, "The Middle Class on the Precipice" by Elizabeth Warren.

In part:

Every day, middle-class families carry higher risks that a job loss or a medical problem will push them over the edge. Although plenty of families make it, a growing number who worked just as hard and followed the rules just as carefully find themselves in a financial nightmare. The security of middle-class life has disappeared. The new reality is millions of families whose grip on the good life can be shaken loose in an instant.

Although my own work, on bankruptcy and credit, has focused on the specifics of families’ household finances, I cannot help but think that their changed circumstances during the past generation have larger echoes for public policy.

During the same period, families have been asked to absorb much more risk in their retirement income. In 1985, there were 112,200 defined-benefit pension plans with employers and employer groups around the country; today their number has shrunk to 29,700 such plans, and those are melting away fast. Steelworkers, airline employees, and now those in the auto industry are joining millions of families who must worry about interest rates, stock market volatility, and the harsh reality that they may outlive their retirement money. For much of the past year, President Bush campaigned to move Social Security to a savings-account model, with retirees trading much or all of their guaranteed payments for payments contingent on investment returns. For younger families, the picture is not any better. Both the absolute cost of healthcare and the share of it borne by families have risen — and newly fashionable health-savings plans are spreading from legislative halls to Wal-Mart workers, with much higher deductibles and a large new dose of investment risk for families’ future healthcare. Even demographics are working against the middle class family, as the odds of having a frail elderly parent — and all the attendant need for physical and financial assistance — have jumped eightfold in just one generation.

From the middle-class family perspective, much of this, understandably, looks far less like an opportunity to exercise more financial responsibility, and a good deal more like a frightening acceleration of the wholesale shift of financial risk onto their already overburdened shoulders. The financial fallout has begun, and the political fallout may not be far behind.

The above is a good summary of the situation at this time. The article also contains a bargraph that emphasizes that the "fixed cost as a share of family income" has more than doubled while the discretionary income has dropped. Yes, the total family income has risen, but the fixed cost of living have also risen and family income has not kept pace.

When you here the Republicans, the Whitehouse, and Conservatives tout their economic policies keep the above in mind. Conservative economics only serve the upper classes, people that already have more money than they can need to live. They protect big-money investments and big business. Such policies have never been about providing the same protections to the middle class family, and definitely not the lower class families. By the way, I have nothing against being rich (boy, would I like to be rich) but to enact policies that protect only the rich is not ethical nor moral.