CNNMoney.com: U.S. Middle Class 'On the Edge' This article sounds vaguely familiar ;)
I'm glad the 'experts' are catching on and telling the leadership what it is really like for those not in the upper 3rd of the country. [Dec 8: Do the Bottom 80% of Americans Stand a Chance?] We used the first half of the decade using our homes to cover the shortfall [house ATM] that has been slowly growing (erosion of living standard) - now it's the credit cards. Once that goes - so will come the rise in personal bankruptcies (which Congress has also made much more difficult to declare on behest of lobbyists group of financial corporations - it's all quite circular).
I cannot stress enough, this is an era very similar to right before the Great Depression - the highest % of wealth in the upper 0.5% and the highest proportion of national output in form of corporate profits (versus workers wages). Not saying we will be entering a new Great Depression but simply saying it will be a struggle for the great many if trends stay intact - even if they continue sideways (they do not need to degrade). I always repeat this stat since blog readers, by virtue of having disposable income to invest, probably do not fall into this category but the MEDIAN income in America is roughly $38K. Meaning half live below that. That's $730 a week... gross; not net. So $20 more a week for gas and $30 more for groceries at that income level means everything. I continue to believe if trends persist, social acrimony will finally become a major factor in this country as it has in many others. The pressure is slowly filtering up the economic strata food chain and capturing more and more families. When it hits critical mass is anyone's guess.
- America's middle class is growing increasingly squeezed by sagging incomes and soaring expenses, experts told Congress on Wednesday.
- Adjusted for inflation, median household income dropped by $1,175 between 2000 and 2007, said Elizabeth Warren, professor at Harvard Law School
- At the same time, the average family is spending $4,655 more on basic expenses, such as gas, housing, food and health insurance.
- Families with children saw their child care costs soar. Those with children under age 5 spent an additional $1,508 a month, while after-school costs for older children rose $622.
- To cover these soaring expenses, many people have had to turn to credit cards. Nearly 10% of total disposable income in the United States goes to paying off such debt
- "There have never been since the Great Depression so many families standing right on the edge," Warren said. "Families have tightened their belts. They have cut down on every discretionary area they possible can."
- "These costs are tearing a hole in the family they simply can't make up," she added. "You can't cut out enough lattes to pay for health insurance in America."
- Increasing economic inequality is to blame, testified Jared Bernstein, senior economist with the liberal-leaning Economic Policy Institute. While the middle class is contributing to productivity, the rewards are increasingly going to the wealthy.
- Warren and Bernstein also called for more regulation and oversight of the financial markets, particularly the credit industry, to avoid abuses that lead to bubbles. The last two or three economic downturns were caused by such run-ups.
- These bubbles are "a major contributor to the middle class squeeze," Bernstein said. (There have been incredible transfers of wealth from the many to the few.)
Back off of soapbox...