It’s My Turn
“It’s the impending collapse of the middle class, stupid.” The confluence of various economic factors and practices impacting the middle class is both disheartening and revolting. A socioeconomic reality of which most Americans are now increasingly and very painfully aware.
Although the present crisis has been 30 years in the making, it was only when the 2007-2008 housing bubble burst that many middle income Americans fully realized the desperate straits in which they now find themselves. It threatens to undermine our middle class way of life.
But how, you ask, could this have gone unnoticed for so long? There are several reasons for this, not the least of which is something we all carry in our wallets, the credit card. The proliferation of the credit card served to mask the most salient of all factors – middle and working class wage stagnation. If we compare US median household income in the late 1980’s - $49,000 (adjusted for inflation) to the 2012 US median household income - $46,000, it is obvious that we are poorer today. The situation became even bleaker with the sudden and precipitous drop in home values, augmenting the home foreclosure debacle. Add to this the relentless increases in college tuition and healthcare costs, both of which out-paced inflation for the past three decades, and one can appreciate how our enormous personal debt has been amassed and how far the middle class has fallen.
However, living in debt as a way of life has finally reached a saturation point: it is now unsustainable.
The purpose of this article is to highlight some of the deplorable circumstances leading up to the crisis and recognize how our government officials and corporate America have let us down.
In addition to the cost of health care and college tuition, both of which increased 6 percent or 7 percent a year nonstop, three more areas of living expenses will be reviewed.
First, credit cards/bank interest rates and fees. Most credit card interest rates range from 13 to 25 percent annually. As most of us use the credit card for over 40 percent of all purchases, amounting to 4 or 5 trillion dollars a year, interest rates and fees have generated hundreds of billions of dollars in profit. Banks also continue aggressive marketing to promote borrowing despite high personal debt, perpetuating the new norm of living in debt as a way of life. Banks cost the middle class way too much.
Second, the cost of housing is too high relative to our median household incomes. This in part accounts for the 10 percent of homeowners with mortgages that are behind on their payments or in foreclosure. One third of almost 2 million home foreclosures last year were related to health care debt. Also due to the housing crash, over 13 million homeowners with mortgages have ‘negative equity’ – that is they owe more than their house can sell for. Because of this, many Americans are at minimum 25 percent poorer in net worth. Rent prices have also hit record highs and are now consuming 1/3 or more of average monthly incomes.
Lastly, there are the escalating costs of other everyday living expenses. They include food (4 percent in 2012), clothing, gasoline (25 percent since 2010), heating fuel (20 percent since 2010), bridge and tunnel tolls (10 percent in 2013, NY) and mass transit (10 percent in 2013, NY). Most of these costs have widely outpaced any increases in salaries for the past several years.
Consequently, most middle and working class families can barely make ends meet. Again, the problem fundamentally stems from the stagnation of wages over the past 20-30 years such that any increases in salary have not been sufficient nor commensurate with the rising cost of living expenses as noted above. And, our ability to continue to borrow to keep up may now be compromised.
We must also realize that the speed of electronic transactions, including online shopping, has ‘clouded’ our thinking and perpetuated the fiction that somehow we can afford and even buy whatever we want in an instant. That moment is now passing for many of us.
Inextricably linked to the economic evolution of a strong middle class is our cherished ideal of the “American Dream”: the promise of the opportunity to get ahead and make a better life. Regrettably, it is now almost out of reach for many. Seems that the good old American values of getting a good education, working hard, playing by the rules and being a responsible citizen may no longer be a working formula for socio-economic success. The fallout of this broken dream is sadly illustrated by the 50 percent of recent college graduates who remain unemployed and disappointed. Even many who are working are living home longer with their parents, delaying marriage or waiting to have children.
For many of the 46 million people on food stamps, it’s yet another symptom of the broader crisis of working people in this country: we don’t make enough money in our current economic times. The situation is so dire that one in four older middle age Americans are dipping into their retirement savings (401K’s, IRA’s) for much needed money.
Economists state that consumers are responsible for 70 percent of the US economy. Since our limited earned dollars buy less, this slows and drags on the economic recovery. With 7 ½ - 8 percent unemployment, the focus on job creation by our public officials and the business community is most urgently needed, but let’s not forget we need jobs that pay a living wage that will support a middle class way of life today.
So what do we do? Who do we turn to for help? Demonizing unions, although politically expedient, is certainly not going to fix our problem, even with corrections of some over generous benefits. One should also appreciate that unions are in many ways the last bastion of a viable economic labor structure that supports a middle class standard of living. No, something more fundamental is terribly out of kilter. It’s not the Democratic Party at fault, nor the Republican; it’s not the Liberals or the Conservatives. For the last 30 years it’s more like all our political leaders, from the Presidents, to Congress, to State and local Governments have done little to alter the downward economic trend for the middle class. Seems they missed it: I’m afraid to think they were ‘asleep at the wheel’ or maybe even ‘not in our corner.’ They have failed to alert us, or acknowledge the problem.
The best we can do now is to challenge our public officials to face the truth, and address the crisis – we need their guidance and support to move Government and Corporate America in the direction of strengthening, not weakening the middle class; to enlist the media to keep us focused and sustain our attention; and to convince Corporate America to reshape its culture to help save the middle class and the U.S. economy.
Nick Koumos is a Licensed Mental Health Professional.