America without a middle class.

[screwball]

Interesting article by Elizabeth Warren. For those who don't know, Elizabeth Warren is the Chair of the Congressional Oversight Panel created to oversee the banking bailouts.

The article is posted at the Huffington Post, which I understand turns some people off right away. In this case, what she has to say is more important than where it comes from. The investment/economic community sites that I frequent have high respect for her, and I agree. She seems like a straight shooter.

I'll post the article here, but the link provides some excellent charts and links to backup her data.

Link here

America Without a Middle Class

Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.

Families have survived the ups and downs of economic booms and busts for a long time, but the fall-behind during the busts has gotten worse while the surge-ahead during the booms has stalled out. In the boom of the 1960s, for example, median family income jumped by 33% (adjusted for inflation). But the boom of the 2000s resulted in an almost-imperceptible 1.6% increase for the typical family. While Wall Street executives and others who owned lots of stock celebrated how good the recovery was for them, middle class families were left empty-handed.

The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s.

But core expenses kept going up. By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago -- for a house that was, on average, only ten percent bigger and 25 years older. They also had to pay twice as much to hang on to their health insurance.

To cope, millions of families put a second parent into the workforce. But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder. Even with two incomes, they tightened their belts. Families today spend less than they did a generation ago on food, clothing, furniture, appliances, and other flexible purchases -- but it hasn't been enough to save them. Today's families have spent all their income, have spent all their savings, and have gone into debt to pay for college, to cover serious medical problems, and just to stay afloat a little while longer.

Through it all, families never asked for a handout from anyone, especially Washington. They were left to go on their own, working harder, squeezing nickels, and taking care of themselves. But their economic boats have been taking on water for years, and now the crisis has swamped millions of middle class families.

The contrast with the big banks could not be sharper. While the middle class has been caught in an economic vise, the financial industry that was supposed to serve them has prospered at their expense. Consumer banking -- selling debt to middle class families -- has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.

And when various forms of this creative banking triggered economic crisis, the banks went to Washington for a handout. All the while, top executives kept their jobs and retained their bonuses. Even though the tax dollars that supported the bailout came largely from middle class families -- from people already working hard to make ends meet -- the beneficiaries of those tax dollars are now lobbying Congress to preserve the rules that had let those huge banks feast off the middle class.

Pundits talk about "populist rage" as a way to trivialize the anger and fear coursing through the middle class. But they have it wrong. Families understand with crystalline clarity that the rules they have played by are not the same rules that govern Wall Street. They understand that no American family is "too big to fail." They recognize that business models have shifted and that big banks are pulling out all the stops to squeeze families and boost revenues. They understand that their economic security is under assault and that leaving consumer debt effectively unregulated does not work.

Families are ready for change. According to polls, large majorities of Americans have welcomed the Obama Administration's proposal for a new Consumer Financial Protection Agency (CFPA). The CFPA would be answerable to consumers -- not to banks and not to Wall Street. The agency would have the power to end tricks-and-traps pricing and to start leveling the playing field so that consumers have the tools they need to compare prices and manage their money. The response of the big banks has been to swing into action against the Agency, fighting with all their lobbying might to keep business-as-usual. They are pulling out all the stops to kill the agency before it is born. And if those practices crush millions more families, who cares -- so long as the profits stay high and the bonuses keep coming.

America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.

America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.

Elizabeth Warren is the Leo Gottlieb Professor of Law at Harvard and is currently the Chair of the Congressional Oversight Panel.

[shabba4detroit]

Part of the problem is standard of living. 40 years ago, middle class meant one car, no tv, no microwave, no dishwasher, no answering machine, one telephone and a regular trip to the laundromat. Today's college graduate expects to start adulthood with a new car, a high-def tv, a $100 cable bill for content for that tv, a cell phone, a home computer, a microwave, a dishwasher, a washer and dryer, dvd players, video games, and the list goes on and on.

It's not that we have no middle class, but that the middle class expects to live like millionaires. And today's middle class are a bunch of $30,000aires who have toppled Maslow's hierarchy of needs. Frankly, there are a lot of people out there who do the right things, but while they are out busy working and saving, their neighbors are living beyond their means.

[billms]

I think that your observations about expectations are accurate. But your conclusion about the shrinking middle class are off the mark.

[TheCouga]

Big government and big business in this country are for the most part two sides of the same coin. They're really the same thing, and populist outrage would have long ago focused on fighting this animal. Instead, they have us fighting ourselves as to whether "big government" or "big business" is the real problem. Our government is pretty much an extension of big business. Both parties. Big business has lobbied against campaign finance reform that allows our government to be bought by the highest bidder, which, by default, is themselves. They've lobbied against all sorts of regulation that allows them to screw consumers. And they've lobbied against all sorts social programs that leave the middle-class ever-more dependent on their services for which they can charge a profit. And the more dependent we are on them, the less leverage and opportunity we have. They've spend billions financing propagandists that make us feel guilty for demanding anything from our government. They don't provide us with jobs. Their economic system squeezes us out of the good jobs we once provided for ourselves in the form of small, family business. Back in the 50s when tax rates on the super-rich were close to 90% (although they never actually paid this), small businesses were flourishing. We've now enabled a race to the bottom, attacked our labor unions, and eroded our leverage as workers. It's up to us to take that back. The solution isn't less government and less regulation. That's the solution that helps Wall Street fat cats only. The solution is a strong but transparent government and campaign finance reform.

[eastside billee]

Part of the problem is standard of living. 40 years ago, middle class meant one car, no tv, no microwave, no dishwasher, no answering machine, one telephone and a regular trip to the laundromat.

You know I love you Shabba, but I gotta say, I was 17 years old 40 years ago. We were very low middle class. We had one car. Mom didn't drive. We certainly had 1 black and white tv. Only folks pretty well off had color ones. Microwaves were not the norm and I'm not sure they were actually invented, nor were dishwashers. Nobody had an answering machine - not sure they existed then either. We did have one telephone, but my parents certainly had a washing machine and dryer.

I hate to say it - but I agree with TheCouga on most of what he said.

[CMRivdog]

This is from a friend's blog

You remember how in the 1950’s, Dad went to 3-maritini lunches and brought home the bacon while Mom took care of the kids, baked apple pies and took valium? Well, that stereotype got busted wide open in the 1970’s and 80’s when economic pressures forced families to produce dual income-earners. With Mom and Dad both working, the joint incomes gave the appearance all was well- and affordable. But it has now caught up with us. Two incomes don’t cut it anymore. And increasingly, because of the jobless situation, the stresses increase exponentially when two incomes become one income or none at all.

Garcia Media Life

[TheCouga]

Originally Posted by shabba4detroit

Part of the problem is standard of living. 40 years ago, middle class meant one car, no tv, no microwave, no dishwasher, no answering machine, one telephone and a regular trip to the laundromat. Today's college graduate expects to start adulthood with a new car, a high-def tv, a $100 cable bill for content for that tv, a cell phone, a home computer, a microwave, a dishwasher, a washer and dryer, dvd players, video games, and the list goes on and on.

It's not that we have no middle class, but that the middle class expects to live like millionaires. And today's middle class are a bunch of $30,000aires who have toppled Maslow's hierarchy of needs. Frankly, there are a lot of people out there who do the right things, but while they are out busy working and saving, their neighbors are living beyond their means.

People need that second car now because both parents are expected to work. Social costs notwithstanding, they then need to pay for daycare because no one's at home taking care of the kids. I'm not sure an extra car is a luxury as much as it is a necessity for today's lifestyle. Same with the microwave, dishwasher, multiple phones, answering machines, etc. Nobody's ever home or has time to do things the old-fashioned way because they're all out working.

As far as all those other things go, they make life more exciting in the short-run, but they don't provide many real benefits. Television teaches kids to worship an empty celebrity culture that completely distorts any sort of needs heirarchy Maslow postulated. And it distracts them from the real problems caused by our own semi-fascist government. And the entire apparatus to access this culture (TV, cell phones, video games, dvd players, etc.) is manufactured overseas, so our consumption doesn't even benefit us in the form of jobs. Nobody spends any time reading or reflecting upon deep and complex problems, whether they be their own or ones of this world. Nobody goes out and plays anymore, walks anymore, or gets any exercise. They'd rather stay in and stare at a screen showing other people doing stuff that is largely inconsequential. Even people who intend to take their responsibility as citizens seriously and inform themselves of the real happenings in this world are distracted by the circus-like political coverage on cable news. Has any of this actually made our lives better or our characters stronger? Has anyone really reached self-actualization? Has anyone actually discovered more truth? Or are they just fooling themselves by being distracted by shiny flashing boxes showing people with hardly any clothes on or being lured into petty philosophical arguments that distract people from the real problem?

And despite all this BS, we still can't supply the most basic, cost-efficient preventative and ongoing medical care to all of our population, because that would be "socialism" to do so. But you can't have it unless you are working, even if you are 60 years old. Yet it's okay to let people get sick on their own and treat them only when it becomes an emergency and hospitals can rake in the profits and distribute the cost to everyone else.

Something's wrong alright. Our government no longer fights for or works to promote better lives. It fights for higher profits than only benefit a fraction of the populace. It does so because it's doing the bidding of big-business.

[thewave84]

What drives and sustains a middle class? Jobs. High-quality, good pay, private sector jobs. Americans need to demand a government that treats jobs as one of the country's most important assets, not one of it's least important.

[screwball]

Speaking of all the Chinese junk we buy, anybody old enough to remember these;

[Lousluggage]

Originally Posted by CMRivdog

This is from a friend's blog



Garcia Media Life

Interestingly, a friend of mine became a SAHM a few years ago, in spite of economic pressures. She actually found that her family wasn't much worse off at all, because she saved so much not having to pay for work clothes, lunches, transportation, and childcare.

IMO, a big reason women went into the workforce is because they didn't want to be SAHMs, and many remain in the workforce because they like to work. Most women don't like to admit that, though.

[djhutch]

This is exactly why the gov't can't sustain our way of life. Eventually, the money runs out. Gov't doesn't produce anything. It only has what money it takes from us.

[mtutiger]

Originally Posted by djhutch

This is exactly why the gov't can't sustain our way of life. Eventually, the money runs out. Gov't doesn't produce anything. It only has what money it takes from us.

Then who do we look to for salvation then? Couga is right... government and big business are most certainly in bed with each other. Unfortunately, both government and big business also are the only things that have the power to drive anything in our society anymore.

The small business owner, even, is powerless when put up against the big-business complex that has developed in this country.

I wouldn't call us socialist, but there's another form of government that this country is beginning to resumble. A plutocracy. Governmental power held by the elite rich.

[billms]

Originally Posted by djhutch

This is exactly why the gov't can't sustain our way of life. Eventually, the money runs out. Gov't doesn't produce anything. It only has what money it takes from us.

Did you hear Beck or Hannity tell you that? Lets do an exercise - look at the Soviet Union under socialism or China under pure socialism when the government owned everything. You will see lots and lots and lots of stuff produced.

Any reasonable person would conclude that if Beck or Hannity told you that then Beck or Hannity are idiots, since it is obviously false.

[billms]

Originally Posted by mtutiger

I wouldn't call us socialist, but there's another form of government that this country is beginning to resumble. A plutocracy. Governmental power held by the elite rich.

This is America - we call that meritocracy. Except when the rich aren't christian.

[Buddha]

Originally Posted by djhutch

This is exactly why the gov't can't sustain our way of life. Eventually, the money runs out. Gov't doesn't produce anything. It only has what money it takes from us.

Printing presses make sure the money never runs out for the federal government...

[MrDeeds]

Originally Posted by shabba4detroit

Part of the problem is standard of living. 40 years ago, middle class meant one car, no tv, no microwave, no dishwasher, no answering machine, one telephone and a regular trip to the laundromat. Today's college graduate expects to start adulthood with a new car, a high-def tv, a $100 cable bill for content for that tv, a cell phone, a home computer, a microwave, a dishwasher, a washer and dryer, dvd players, video games, and the list goes on and on.

This should be sticky'ed at the top of this message board.

[screwball]

Originally Posted by Buddha

Printing presses make sure the money never runs out for the federal government...

Speaking of printing presses, the head printer, Mr. Bernanke was on the hill today for his confirmation hearing. Oh boy, was that the entertainment.

Bunning from KY was a real hoot. Told Ben he was the creature from Jekyll Island, you are moral hazard, called him Greenspan by accident, among other things. On the downside, Dodd, Corker, Shelby, and Gregg were close to having sex with the guy. I expect that from Bunning, but so many of the others just slobbered all over the guy.

Of course Ben has been practicing his lying skills, he still good at it. He will probably get confirmed and that's too bad.

[TheCouga]

Originally Posted by djhutch

This is exactly why the gov't can't sustain our way of life. Eventually, the money runs out. Gov't doesn't produce anything. It only has what money it takes from us.

What baloney. Government funding, when properly channeled, produces plenty. It allows all kinds of research and development that has moved our economy and our society forward. It educates most of our citizens and makes them more effective workers. It builds infrastructure that supports and enhances business. It protects our business environment from crime and attacks from foreign governments or entities. It's theoretically supposed to protect people from fraud. Government enhances the market's productivity in countless ways, and it produces many things itself. The money only runs out if you cut taxes for the very rich, start two unfunded wars, and then leave the economy to crash. Otherwise, a good portion of government spending creates more wealth by enabling business.

[shabba4detroit]

Originally Posted by TheCouga

People need that second car now because both parents are expected to work. Social costs notwithstanding, they then need to pay for daycare because no one's at home taking care of the kids. I'm not sure an extra car is a luxury as much as it is a necessity for today's lifestyle. Same with the microwave, dishwasher, multiple phones, answering machines, etc. Nobody's ever home or has time to do things the old-fashioned way because they're all out working.

If there weren't two parents working ... you wouldn't need that second car, or the daycare. The costs for that second job are $1500 a month. It better be a well paying second job to be worth it.

And frankly, if every household took one job from the pool of jobs instead of two, we'd be above full employment and that only forces wages up.


For example. I pay $180 a month for phone, cable and internet; and another $150 a month for two cell phones for internet capability. $330 per month in communications costs. Where my parents just had a phone. I could save $300 per month on communication costs if I scaled back to the status quo circa 1975.

[mtutiger]

Originally Posted by shabba4detroit

I could save $300 per month on communication costs if I scaled back to the status quo circa 1975.

Adjusted to inflation?

[shabba4detroit]

Originally Posted by Lousluggage

Interestingly, a friend of mine became a SAHM a few years ago, in spite of economic pressures. She actually found that her family wasn't much worse off at all, because she saved so much not having to pay for work clothes, lunches, transportation, and childcare.

IMO, a big reason women went into the workforce is because they didn't want to be SAHMs, and many remain in the workforce because they like to work. Most women don't like to admit that, though.

I became a SAHD when my third child was born. It lasted for a little over a year. It was something I had always wanted to do. My roommates and I dreamed of marrying ambitious women so that we could be housefathers. I loved the time that I got to spend with my kids. But it's not the life I was cut out for. Take a year and have virtually no interaction with grown-ups. I felt like my life was saved when I went back to work.

[shabba4detroit]

Originally Posted by mtutiger

Adjusted to inflation?

I pay $330 a month now. If I cut back to just a home phone (status quo circa 1975), I'd be paying $30 a month. I don't know how to adjust that for inflation. I don't know that it's relevant that I do.

[TheCouga]

Originally Posted by shabba4detroit

If there weren't two parents working ... you wouldn't need that second car, or the daycare. The costs for that second job are $1500 a month. It better be a well paying second job to be worth it.

And frankly, if every household took one job from the pool of jobs instead of two, we'd be above full employment and that only forces wages up.

For example. I pay $180 a month for phone, cable and internet; and another $150 a month for two cell phones for internet capability. $330 per month in communications costs. Where my parents just had a phone. I could save $300 per month on communication costs if I scaled back to the status quo circa 1975.

I'm all for promoting a single income-earner environment here. I really don't think that it's all that efficient for both parents to work unless they both have white-collar careers. And I think the benefits that can be reaped from additional parent-child interaction would be worth it, even if you do take in less money initially. It's astonishing how much day care costs, plus a car payment plus gas to commute, plus more car insurance, plus the money you spend on restaurants/prepared food instead of grocery shopping/cooking, plus work clothes/dry cleaning...etc., etc.

[Buddha]

Originally Posted by shabba4detroit

Part of the problem is standard of living. 40 years ago, middle class meant one car, no tv, no microwave, no dishwasher, no answering machine, one telephone and a regular trip to the laundromat. Today's college graduate expects to start adulthood with a new car, a high-def tv, a $100 cable bill for content for that tv, a cell phone, a home computer, a microwave, a dishwasher, a washer and dryer, dvd players, video games, and the list goes on and on.

It's not that we have no middle class, but that the middle class expects to live like millionaires. And today's middle class are a bunch of $30,000aires who have toppled Maslow's hierarchy of needs. Frankly, there are a lot of people out there who do the right things, but while they are out busy working and saving, their neighbors are living beyond their means.

The cost of those things has decreased as technology has improved. Microwaves are no longer expensive. You can get a nice TV for cheap nowadays. Same with smaller cars, dishwashers, dvd players, etc.

Thanks to shipping jobs overseas, technological improvements, easy credit, and the erosion of the manufacturing base in America, all those things are within the reach of the average middle class american consumer.

I'm not disagreeing with your basic premise of the rising expectations of younger people (and anyone post-baby boom) having an effect, but their commercial goods expectations are very much attainable in a way that wasn't possible 40 years ago.

Another thing as far as "must have two parents with two careers" thing. Yes, it's partly because of the rising costs of the standard of living, but it's also because of the rise in individual expectations of life. Women are now allowed to have careers and, by golly, some of them want them! Sitting at home and taking care of the kids - which there is nothing wrong with - isn't the be-all and end-all for women anymore. Some choose to have careers. And, as you've noted, while sitting at home with the kids has advantages, it can also be boring for many who are intellectually inclined to do something else besides watch Yo Gabba Gabba and Spongebob all day.

[TheCouga]

Originally Posted by shabba4detroit

Take a year and have virtually no interaction with grown-ups.

You think that's bad, try taking two years and be an honest person trying to get something done in Congress.

[screwball]

Originally Posted by TheCouga

You think that's bad, try taking two years and be an honest person trying to get something done in Congress.

I wasn't aware there was an honest person in congress.

[Lousluggage]

Originally Posted by shabba4detroit

I became a SAHD when my third child was born. It lasted for a little over a year. It was something I had always wanted to do. My roommates and I dreamed of marrying ambitious women so that we could be housefathers. I loved the time that I got to spend with my kids. But it's not the life I was cut out for. Take a year and have virtually no interaction with grown-ups. I felt like my life was saved when I went back to work.

It's good that you did it though, so that you don't have regrets.

I always used to wonder why my Mom used to spend so much time talking to other adults in the grocery store. It drove us kids crazy. Now we understand that she just wanted to have an adult conversation.

[Lousluggage]

Originally Posted by Buddha

Another thing as far as "must have two parents with two careers" thing. Yes, it's partly because of the rising costs of the standard of living, but it's also because of the rise in individual expectations of life. Women are now allowed to have careers and, by golly, some of them want them! Sitting at home and taking care of the kids - which there is nothing wrong with - isn't the be-all and end-all for women anymore. Some choose to have careers. And, as you've noted, while sitting at home with the kids has advantages, it can also be boring for many who are intellectually inclined to do something else besides watch Yo Gabba Gabba and Spongebob all day.

That's a better way of saying what I meant in my first post. Not to mention that some women, believe it or not, or actually not good at being homemakers or taking care of children.

[Lousluggage]

Originally Posted by TheCouga

I'm all for promoting a single income-earner environment here. I really don't think that it's all that efficient for both parents to work unless they both have white-collar careers. And I think the benefits that can be reaped from additional parent-child interaction would be worth it, even if you do take in less money initially. It's astonishing how much day care costs, plus a car payment plus gas to commute, plus more car insurance, plus the money you spend on restaurants/prepared food instead of grocery shopping/cooking, plus work clothes/dry cleaning...etc., etc.

It also works if one or both of the parents has flexible work. My dad taught at the college level, and my mom started teaching at the elementary level once all of us were in school. Mom had the same vacations we did, and Dad only had to be in work a couple of days a week so we had both parents around much of the time. We were pretty lucky.

[Euphdude]

Originally Posted by Buddha

And, as you've noted, while sitting at home with the kids has advantages, it can also be boring for many who are intellectually inclined to do something else besides watch Yo Gabba Gabba and Spongebob all day.

It pleases me to no end that there is someone else here who knows of Yo Gabba Gabba.

[ToledoTigerFan]

Originally Posted by screwball

Speaking of all the Chinese junk we buy, anybody old enough to remember these;

Oh, yeah, I remember those. I've said it multiple times. It is impossible to grow a domestic economy by sending core jobs and capital to foreign shores. It keeps the shareholders of corporations happy in the short term, but not a lot of them are happy now. Looking for cheap labor abroad will always kill a domestic economy. Always.

[TheCouga]

Originally Posted by ToledoTigerFan

Oh, yeah, I remember those. I've said it multiple times. It is impossible to grow a domestic economy by sending core jobs and capital to foreign shores. It keeps the shareholders of corporations happy in the short term, but not a lot of them are happy now. Looking for cheap labor abroad will always kill a domestic economy. Always.

As long as the lazy, overpaid American workers are forced to break up their unions, it's all worth it.

Signed,
America's conservatives

[Sparks4Ever]

Lame populist dribble. Straight out of the playbook:

1. Complain about the death of the middle class.
2. Make stuff up about the righteousness of the middle class ("the middle class never asked for a handout". Uh, ok ).
3. Rip on the man.
4. Talk about how the man is holding back whatever it is you're trying to pitch.

On the surface, I think the CFPA sounds like a good idea, but that article made me want to vomit. I guess I shouldn't expect too much from a Harvard professor.

[billms]

Originally Posted by Euphdude

It pleases me to no end that there is someone else here who knows of Yo Gabba Gabba.

John William Cummings was a genius and died too early.

[screwball]

At least some of the too big to fail don't seem to have a problem with it. License plate from Morgan Stanley Vice-Chairman Rob Kindler.

[Auburndale Ray]

[djhutch]

Originally Posted by Euphdude

It pleases me to no end that there is someone else here who knows of Yo Gabba Gabba.

My 4 yr old grandson wants to watch Clifford & Curious George every day, but has told me on more than one occasion that he'll "settle for Yo Gabba Gabba."

[Biff Mayhem]

Originally Posted by billms

look at the Soviet Union under socialism or China under pure socialism when the government owned everything. You will see lots and lots and lots of stuff produced.

There. Fixed.

[sub rosa]

Originally Posted by Auburndale Ray

dear cute little girl in the pink,

i represent the theoretical personal debt agency mentioned on your placard. you are past due on your payments. you have 30 days from the date of this letter to make your account current. a failure on your part to do this will require us to put a lien on your dollhouse, and take further steps to protect our financial interests.

have a nice day, and eat your vegetables.

[billms]

Originally Posted by Biff Mayhem

There. Fixed.

the conclusion is the same - you agree with me - the banal platitude i was responding to is easily proven wrong by either you or me