Middle class decimated under GW
clams_casino
increase for the typical family."
http://www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
Elizabeth Warren
December 3, 2009 10:00 AM
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.
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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.
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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.
Rod Speed
Fools ran the same line during the great depression. Turns out that the foundation was fine.