The four horsemen of the middle class apocalypse – what does it say that we as a nation bailed out the financially wealthy too big to fail banks yet failed to bail out the middle class?
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What made the U.S. the envy of the world was the belief that if you worked hard enough and had the right kind of grit and intelligence that you would be able to enjoy the fruits of your labor. This is what built the solid middle class after World War II. The majority of people finally had the chance to purchase a home without going into dramatic debt, to send a child to a quality public schools, and for the most part enjoy in the rising quality of life for most Americans. The last category has been lost in the last few decades. While incomes for the bottom 80 percent of Americans have gone stagnant income growth for those in the top 1 percent has skyrocketed. The tools and amount of capital needed to prosper are largely out of the reach of the middle class and only the modern day oligarchy can afford to send their kids to $50,000 a year private schools without sweating it. Does the public have at the top of their priority list a desire to keep the middle class solvent? We bailed out the too big to fail banks under the premise that they were instrumental for our economy but the same has not been offered to the middle class. Why is that?
Horseman #1 – Rising healthcare costs
Source: Kaiser Family
The cost of healthcare is far outstripping the rate of overall inflation. This is not exactly a recipe for success with 75 million baby boomers entering retirement. The fact that we spend more per capita on human wellbeing than any nation in the world yet produce poorer results than other industrialized nations should tell us something about our system. The rhetoric coming from D.C. and Wall Street is troubling because it once again only protects the small group of people that have amassed most of the wealth in the country. The rest of America is left to fend for itself or continue to payout larger and larger premiums with really no equal rise in quality.
The per capita annual income in the United States is $25,000. How much can someone at this level afford in terms of health coverage? Not much to be honest. According to a recent Census study the number of Americans without health insurance is up to over 45,000,000+. I’m certain that number is now higher given that the study was conducted at the beginning of the recession.
Horseman #2 – Cost of college
The rising cost of college and lack of income growth has pushed many students into massive amounts of debt. Many older Americans like to talk about the days when they went to college and paid for their schooling with a part-time job. No part-time job is going to pay for $50,000 a year in tuition (or even $20,000 at many public schools) when the average per capita income is $25,000:
Since 2000, in real terms college costs are now up by 23%
Since 2000, in real terms real pay for college graduates is down by 11%
This I find extremely troubling. While the cost of going to college has risen by 23 percent over the last decade actual real pay for college graduates has fallen by 11 percent. Can it be that higher education itself is in a bubble? This is very likely.
Education is vital to having a vibrant and competitive middle class. Yet Wall Street has allowed the banking system once again to turn this institution into a commodity meant to be traded and raided. This is why we have many paper-mill institutions predatorily going after students and condemning them to lives of debt serfdom with a worthless piece of paper. The working class is shrinking faster and faster as most of our manufacturing is outsourced so many are forced into becoming educated or face low pay service sector work. In a debt based society many of these people simply go back to school thinking they will pick up a skill in a new “hot” job field. Many simply come out with degrees and debt that put them into a deeper hole. Many would have been better off going to a community college or trade school but many of these for-profit schools get to students first before they can go to these more affordable options (at least for now as states hemorrhage funding).
If we really value educating the population and having an intelligent middle class, then why allow this banking and government backed circus to continue?
Horseman #3 – Price and volatility of housing
With all the volatility around in the world Americans at least were able to count on housing as a safe investment. That was before investment banks got their hands on the mortgage backed securities market and turned it into another wild casino with the aid of the both political parties. Nationwide since the Great Depression in the 1930s home prices in the United States never saw an annual price decline. So something seriously went wrong when home prices today are now down by over 30 percent from their peak levels reached half a decade ago!
A home suddenly turned into a commodity that could be traded on or even used as another credit card. Maybe it could be used to compound the problem by taking a HELOC to go to one of those paper-mill colleges. What a mess and that is why having a strong consumer protection agency was so important but what we are getting is a stripped down shell. While there are tens of thousands of lobbyists protecting investment banks, where is the protection for the middle class? Of course the oligarchs will say that a hands off approach is necessary and who really wants a nanny state? Of course that is what they say but these are the people with the most protection and support from the government.
Horseman #4 – Fuel and energy
Finally the last horseman of the middle class apocalypse is energy costs. Our nation is built on a cheap energy model. It has a hard time sustaining solid growth once it goes over $30 a barrel. We use petrol in our plastics, fertilizers, cars, planes, and so many other things that once the price goes up the entire chain changes. Now look at the above chart. In 2000 the cost of a barrel of oil was $27 while today it is closer to $100 (more than tripled in this last decade). Yet incomes and according to government data, inflation has been rather quite over this time. The cost of college and healthcare has gone up even faster.
This is the new world we are living in. There is little desire or regard for the middle class from the oligarch machine. A big portion of their wealth is derived from robbing the lower classes (i.e., gambling on housing, swindling people into worthless paper, and charging people outrageous amounts of money for medicine that may or may not produce statistically different results). They also have convinced many that they are simply temporarily embarrassed millionaires waiting for their turn to get rich quick if only the government got their hands off their money (of course 1 out of 3 Americans has zero dollars saved up). We are living in a time where the middle class is being asked to cut back to bail out the banking machine of Wall Street while at the same time being asked to tighten its belts. Sure sounds like we are doing what is right for the middle class.