Game Over for the American Middle Class – Inflation Adjusted Wages up 20 Percent in Last 20 Years While Housing Costs are up 56 Percent and Healthcare Costs are up 155 Percent.

The struggle for average Americans to keep up is largely becoming an act of will power and force in this current grand recession.  Now you wouldn’t think that there is a definite war raging against the middle class if you simply follow the mainstream media but the facts speak to a more distilled and corporatized method of debt slavery.  Americans are working more hours trying to stay in the same place that they believe would keep them on pace to having the American Dream.  And this dream is merely the ability to afford a home, provide your children with a good education (public or private), and save enough to have a retirement that doesn’t require you to eat cat food after a lifetime of working.  That is at the root of what most average Americans would want after a full working career.

But we are at an inflexion point and the middle class is largely being squeezed out.  A recent study from the Commerce Department shed some light on an issue that we already know.  Over the past 20 years the middle class has been falling behind:

middle-class-costs

Everything is relative in this world.  Incomes have gone up during this time but the cost of housing, healthcare, and access to education have outpaced income gains in some cases by four to one.  Money is only worth what you can buy with it.  The grand housing bubble of this decade lured many into buying homes that they simply could not afford.  Banks and Wall Street were more than willing to provide access to this dream since they knew if all bets crashed, and they did, that they would call on their connected politicians to bail them out and send the bill to taxpayers for their adventures in finance.  Take a look at the chart above closely.  Housing price changes have wiped out any gains in income.  The relative amount of income needed to buy a home has put many two income households on the brink of bankruptcy.  And the 4 million foreclosure filings in 2009 alone tell us that many Americans are unable to hold onto one cornerstone of the American Dream.

The middle class is absolutely vital to having a sustainable and flourishing economy.  The massive debt machine coming from the big banks has created a new form of debt servitude.  Some would argue that this is a personal responsibility issue and I will be the first to agree with that.  People should live within their means.  But think of the FICO score that has become like a permanent financial report card.  Some employers actually screen for credit scores before hiring applicants.  Want to rent a home because you don’t want to over extend and buy a home?  You better hope that FICO is up to par.  And many insurance companies base their analysis on this score.  So even if you never had a credit card or any debt, you would be in a bad spot because so many people rely on this number.  This is only one example of how people are actually forced to use debt simply to pursue the avenues of the middle class.

In fact, we have many more people simply trying to stay afloat let alone pursuing the middle class ideal.  Over 37 million Americans are now part of the food stamp program, not only is this the highest number ever but also the highest percentage of Americans ever to be on food assistance:

food-stamps

I sometimes read gut wrenching stories from the Great Depression where people would wash and reuse paper towels or have soup for weeks on end just to keep their families fed.  37 million Americans would be one step away from that existence if it weren’t for some basic safety nets.  It is troubling to say the least that this patch is what is keeping this great recession from being a profound depression.  Yet I think the 27 million underemployed Americans are already in that state of mind.  The idea of a middle class life is slowly drifting away as each and every day we realize that our nation is becoming more of a corporatacracy.

The housing nightmare really played on both ends of this middle class dream.  Banks were more than willing to lend trillions of dollars to people that really could not afford the homes they were buying.  This created the biggest housing bubble the world has ever witnessed and the bursting ramifications are being felt throughout the economy.  Yet if you look at the equation, who is really being punished?  Average Americans are being punished as they have their homes foreclosed on.  Yet banks who are in the supposed position of financial experts, have not only garnered trillions in bailouts but are now back to their speculative ways.  This is disturbing because it is highlighting a marked shift and a near game over for the middle class.

Think of the rise of our economy in the 1940s and 1950s.  Many returning GIs had access to affordable education through new programs and grants.  It is the least you can offer to someone defending this country.  Next, it was possible to support a family with one income because we had a strong and sustainable manufacturing base.  Now, we have families with two incomes in the service sector trying to piece things together.  Throw in a child, and that second income evaporates through childcare costs and educational fees.  In other words, just because people have more income their buying power has collapsed.

And this fact is revealed in the data that two-income households are more of an economic necessity:

two-income-households

So of married couples with two children 76 percent have two earners.  The average American is simply working to stay on track or face being thrown off the treadmill.  Jobs are so important to keeping a solid middle class.  This should be obvious but current policy being driven by the corporatacracy is simply focusing on keeping prices inflated for the big ticket items (i.e., housing and healthcare).  At this point in the game, housing values have gone up to points that are clearly unsupportable:

the-cost-of-homeownership1

This being the biggest budget item for most households, you would assume that lower prices would be welcomed from the government seeing that many Americans are underemployed and those with jobs have seen stagnant wages.

The middle class dream is at risk.  This is a question of what we want out of our country.  Are we simply obsessed on keeping home values inflated so banking giants could keep gaming accounting rules and claim billion dollar profits?  If we want to prosper in the next decade, there will need to be a radical change to preserve what once was envied by the world.  Otherwise, you can expect banks and their political allies to keep selling away the middle class of America.  On the path we are traveling on the middle class is largely at risk for a big game over in the next decade.

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17 Comments on this post

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  1. traineeinvestor said:

    Very well written and on point.

    The other big contributor to the decline of the middle class in several developed countries is government spending – on things like bloated civil service pay rolls and unfunded pensions. The blunt reality is that a number of countries (not just America) have been living beyond their means for some time and, to a large extent, the disappearing middle class has been called on to pay for it.

    Of course, when the middle class finally disappears government revenues will shrink even further and no amount of soak the rich and bash the banks rhetoric will plug the gap.

    Interestingly, at the same time that the middle class in developed countries had been under so much pressure, we have seen the emergence of a very large middle class in countries like India and China as econmic liberalisation and development have given many people the ability to advance from subsistance living to the point where they have meaningful discretionary spending and meaningful lifestyle choices.

    January 28th, 2010 at 1:43 am
  2. bob said:

    Yet again , your charts tell the story as it really is.

    The American dream poured down the throats of the masses has been steadily eroding.

    January 28th, 2010 at 4:18 am
  3. arjay said:

    this writer – as many others – completely ignores the cost of government as a contributor to the cost of living. in the post ww2 timeframe, our economy was indeed stronger since we had a robust, growing manufacturing sector. but government was only about 1/4 the size that it is today with all those millions of govt employees.

    January 28th, 2010 at 10:49 am
  4. 23kj434 said:
    January 28th, 2010 at 10:54 am
  5. Jane said:

    Great article, thanks.

    January 28th, 2010 at 12:10 pm
  6. Tristan said:

    Perhaps we need a new Dream?

    January 28th, 2010 at 2:16 pm
  7. TobyBo said:

    Self responsibility is never reached by the self destructive.Government workers hate the government that provided their good jobs.Labor union members hate labor unions that provided their good jobs.

    Middle class is a useful label even if the facts do not support the reality.The United Nations did a survey in Russia where 80% said they were middle class.Economic measurements said Russia was 20% middle class.

    Family is a useful label for a society of no-fault divorce and abortion on demand.Family size shrank but houses got larger.Restaurant kitchens in houses where nobody cooked.Mood pills to fill empty rooms.

    January 28th, 2010 at 4:19 pm
  8. michael mazur said:

    Forty years ago in Australia three time gross annual income was the price of a house, and affordable.

    Now, ten time gross annual income is the price of a house.

    Engineered by a conspiracy of private banks and govts over that time to enslave the people so that they thereby live into a penurious retirement, who then make a living bequest of their mortgage to their descendants.

    January 29th, 2010 at 1:30 am
  9. Scott Ewing said:

    I guess I should have twigged when Detroit moved to China in 2004.

    January 29th, 2010 at 3:28 am
  10. Marid said:

    Quit using facts, they are unfair to the upper class. Class warfare is alive and well. But, alas, The Sheep Don’t Look Up.

    January 29th, 2010 at 6:50 am
  11. Matthew Carson said:

    I agree with your analysis of the situation. And I worry about the future of this country. So my question is, as a single-income household with four children, what can I expect in the future for us as family and later for my children when they enter the workforce (at least a decade off)?

    January 29th, 2010 at 3:24 pm
  12. William said:

    In order to reduce the govt to its proper functions and enable the market to operate with a sound currency backed by gold so they can no longer inflate the paper dollars consider joining with those of us who believe our government has exceeded its Constitutional limits.

    http://www.campaignforliberty.com

    http://www.mises.org

    http://www.atlassociety.com

    http://www.fff.org

    http://www.aynrand.org

    January 30th, 2010 at 3:02 am
  13. Jimbo said:

    Game over for the American Middle Class means also game over for America sooner or later.
    Sad story

    February 4th, 2010 at 5:58 am
  14. SS said:

    Ha Ha,
    I am so glad. When I was a PhD student in the United States, the same middle class people would look down their noses at me because I was poor. Although I was working my ass off in hard science on a scholarship won by pure merit, most Americans saw me on the same lines as a welfare queen. The American middle class is losing out because they lack even the slightest sense of perspective or creativity.

    The American dream is great and I admire it intensely. But the American dream is about an individual building himself up with his bare hands through hard work and talent and daring. The middle class does not actually subscribe to this dream. The middle class guy thinks to himself: Hey I bought that car because I am better than all those lowly people in India and China who have to use public transport. Although I have never worked more than average in my life and my accomplishments are hardly anything, I am greater than everyone else because I am American. And why isn’t the govt helping me make my car payments? Doesn’t everybody know that an American is superior by birth to Indians and Chinese?

    Short answer: NO! And your politicians don’t have the courage to tell you this upfront. I guess you just to have to figure it out the hard way. “Lured” into buying homes they could not afford? Ha Ha… ya…because ADULT middle class Americans don’t have a brain, right? When are you going to start taking RESPONSIBILITY, buttercups?

    Snap out of it. Don’t blame the bankers. They only cashed in on your American sense of entitlement.

    February 23rd, 2010 at 2:54 am
  15. DB said:

    SS, I’ve got news for you. If you live in this country and it goes down, you go down too. What good is being the only guy in the life boat if it’s leaking faster than you can bail it out by yourself.

    July 9th, 2010 at 1:50 pm
  16. BeornBorg said:

    SS,

    One thing about your argument. In the 50s and 60s a family could have one person working (i.e. the father) and then have the mother stay at home and raise the kids. That isn’t possible any more … so is it because Americans are lazy … or did something else change.

    August 13th, 2010 at 2:20 pm
  17. scott bowlan said:

    let me tell you a some thing.
    the game is not over now nor will it ever be over for the middle class.
    at least not for the 20% of us who can see threw the government smoke screen.
    you can give a man a fish and feed him for a day.
    or you show him how to fish you feed him for a live time.
    as long as i can hunt and fish and grow my own food it will never be over.
    as for all you fools on wall street who couldent find a sandwish with out buying it.
    well for you people it will be over.
    for all you fools out there who live high on the hog,well my friend the end is coming fast for you also.
    its called economic colapce and that will effect every one.

    September 15th, 2010 at 4:18 pm

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