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U.S. Economy in near-recession, Middle Class Suffers Most

Once again, the latest economic reports reveal very bad news for the U.S. economy in general, and the middle class in particular.

The Bureau of Economic Analysis (BEA)  reports that America’s real GDP-gross domestic Product—is a barely-above recession 0.8% for the first quarter of 2016.  That’s even less the dismal 1.4% for the last quarter of 2015. Incorporated into that figure is the latest trade deficit of $40.4 billion.

The New York Federal Reserve adds to the gloomy news with its latest Househild Debt and Credit Report, indicating that Americans are falling deeper into debt. “Aggregate household debt balances increased in the first quarter of 2016.  As of March 31, 2016, total household indebtedness was $12.25 trillion, a $136 billion (1.1%) increase from the fourth quarter of 2015… Mortgage balances, the largest component of household debt, increased in the fourth quarter. Mortgage balances shown on consumer credit reports stood at $8.37 trillion, a $120 billion increase from the fourth quarter of 2015.  Balances on home equity lines of credit…dropped by $2 billion, to $485 billion.”

The Bureau of Labor Statistics piles on more worrisome news. “Real average hourly earnings for all employees decreased 0.1 percent from March to April, seasonally adjusted…This result stems from a 0.3-percent increase in average hourly earnings being more than offset by a 0.4-percent increase in the Consumer Price Index for All Urban Consumers…Real average weekly earnings increased 0.2 percent over the month due to the decrease in real average hourly earnings combined with 0.3-percent increase in the average workweek.”

The BLS figure of 0.4% increase in consumer prices doesn’t reveal how bad the inflationary impact truly is, since that figure doesn’t include the vital areas of food and energy. When those items are included, inflation is at 1.1%.

The Obama economic policy is becoming clearer.  There is a substantial tilt towards those on government assistance, employees on the low end of the wage scale, and foreign born workers at the expense of the middle class. According to the BLS  foreign born workers, of which there are 26.3 million in the U.S. labor force, comprising 16.7 percent of the total, have a .5% lower unemployment rate.

The President’s program of increased public assistance and emphasis on job policies that have worked better for foreign born workers has had a detrimental effect on Americans both in the middle and lower income brackets, and the problems could get far worse.
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Mr. Obama has attempted to take action, without the permission of Congress, to render illegals eligible for federal benefit programs for which they are not currently eligible, including Social Security, disability, and Medicare, despite the fact that funds are already insufficient to pay for those who have paid into those programs for a lifetime.

According to the Pew Research Center …since 2010, Social Security’s cash expenses have exceeded its cash receipts. Negative cash flow last year was about $74 billion, according to the latest trustees’ report, and this year the gap is projected to be around $84 billion. While the credited interest on all those Treasuries is still more than enough to cover the shortfall, that will only be true until 2020…Social Security’s combined reserves likely will be fully depleted by 2034.”

The President’s priority can be seen in a fact recently reported by the Washington Examiner,  which reported that Mr. Obama’s budget of $17,613 for each of the approximately 75,000 Central American teens expected to illegally cross into the United States this year is $2,841 more than the average annual Social Security retirement benefit.

The overall impact of the Obama economic policy which slights the middle class was analyzed last September by Investors.com

“After six-plus years of President Obama’s … policies, middle-class families have seen their incomes decline and more families have fallen into poverty…The overall poverty number … climbed by almost 600,000 among blacks in 2014…the middle class is, incredibly, worse off than at the end of the Great Recession…From 2009 to 2014, real median household income dropped by more than $1,000 — or 2.3% — to $53,657. (And that decline would likely have been steeper if not for a 2013 change in the way the Census does its annual survey.)”

 

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Whatever happened to the middle class?

Whatever happened to America’s Middle Class? Today and tomorrow, the New York Analysis of Policy & Government reviews the most important data and research on this bedrock portion of the U.S. population. 

There is one issue that most Democrats and Republicans, progressives and conservatives actually agree on: America’s middle class is dwindling.  In both numbers as a percent of the population and in income, those at the center of the economy in earnings are becoming an endangered species. A review of several key reports is revealing.

As the New York Analysis of Policy & Government has previously reported, a significant source of middle income employment has been considerably reduced since President Clinton normalized trade relations with Beijing. Combined with America’s corporate tax rates (highest among any of the U.S.’s developed trading partners) and a refusal by both parties to adequately address issues such as the importation of goods manufactured overseas by slave or dramatically underpaid labor and with considerably less regulation than found domestically, the exodus of jobs has been rampant.

While the Obama Administration notes that some jobs have been created to replace those lost during the Great Recession, the reality is that these replacement jobs are largely very-low paying positions, many of them taken by immigrants, legal and illegal.

Writing in the Wall Street Journal, William Galston notes that “Over the next decade, the service sector will provide 95% of all the new jobs.  Manufacturing, which shed more than two million jobs between 2004 and 2014, will shrink by an additional 800,000, to only 7% of the workforce.  Of the 15 occupations with the most project job growth, only four ask for a bachelors degree, eight require no formal education credentials; nine offer median annual wages under $30,000…For middle income families…[net wealth has stagnated] from $96,000 in 1983, $98,000 in 2013…”

The latest report to join the ever-increasing number of worrisome analyses about the middle class comes from the Pew Research Center. Rakesh Kochhar and Richard Fry note that:

“Americans in middle-income households have lost significant ground since 1970, according to a new Pew Research Center analysis of government data. The middle class has long been the country’s economic majority, but our new analysis finds that’s no longer true. Meanwhile, the middle class has fallen further behind upper-income households financially, which now hold a larger share of aggregate household income than ever before in the 44-year period examined.”
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Pew summarizes its report in five points:

1.Middle-income Americans are no longer the nation’s economic majority. In early 2015, there were 120.8 million adults in middle-income households, matched in number by the 121.3 million adults who were in lower- and upper-income households combined. This is the culmination of a long slide in which the share of adults in middle-income households has fallen from 61% in 1971 to 50% in 2015.

  1. The decline in the middle represents both economic progress and polarization. The shift shows progress in the sense that a larger share of Americans now live in upper-income households. Fully 21% of American adults in 2015 were upper income, compared with 14% in 1971, a 7-percentage-point increase. The increase in the share of upper-income adults was greater than the change in the opposite direction. Some 29% of U.S. adults were low income in 2015, compared with 25% in 1971. But the data also show increasing economic polarization: As the distribution of adults thins in the middle, it is bulking up most at the extreme ends of the income distribution, the lowest and highest tiers.
  2. 3. Over the long haul, America’s middle-income households have seen their income grow.From 1970 to 2014, these households’ median income increased from $54,682 to $73,392 (in 2014 dollars), a gain of 34%. Lower-income household incomes have grown, too, but not as much: 28% over the same 44-year period. Upper-income household incomes have grown most, up 47% over this period. However, the nation’s economic progress over the past several decades masks financial setbacks since 2000.Because of the recession in 2001 and the Great Recession of 2007-09, overall household incomes fell from 2000 to 2014. The greatest loss was felt by lower-income households, whose median income fell 9% over this period; the median for middle-income households fell 4%, and that for upper-income households fell 3%.
  3. The shareof U.S. aggregate household income held by middle-income households has plunged,from 62% in 1970 to 43% in 2014. Meanwhile, the share held by upper-income households increased from 29% to 49%. This shift is driven both by the growing size of the upper-income tier and more rapid gains in income at the top. There is also a growing disparity in the median wealth (assets minus debts) of these income tiers. Upper-income families, who had three times as much wealth as middle-income families in 1983, more than doubled the wealth gap to seven times as much in 2013.
  4. Over the years, certaindemographic groups have fared better than others in moving up the economic ladder. Since 1971, older Americans (ages 65 and older) and African Americans have made notable progressin moving up the income tiers. But overall, both groups are still overrepresented in the lower-income tier. Married adults also made significant progress over this 44-year period, and women overall made greater economic gains than men.

“Americans without a college degree stand out as experiencing a substantial loss in economic status since 1971, as do young adults ages 18 to 29. Hispanics overall are also more likely to be in lower-income households than in 1971, a change driven by the increasing share of immigrants in the Hispanic population in the past four decades.”

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The Beleaguered Middle Class

According to a recent Pew Research Center report federal data indicates that the typical wealth of middle-income families was basically unchanged in 2013, remaining at about $96,500.

Combined with Pew’s 2012 study,  in which 85% of self-described middle-class adults said it was more difficult than it was a decade ago for middle-class people to maintain their standard of living, it is clear that middle income Americans continue to face tough times. “Their downbeat,” notes Pew, “comes at the end of a decade in which, for the first time since the end of World War II, mean family incomes declined for Americans in all income tiers. But the middle-income tier—defined as all adults whose annual household income is two-thirds to double the national median —is the only one that also shrunk in size, a trend that has continued over the past four decades.”

It is not coincidental that throughout the past half-century, $22 trillion dollars (not including Social Security or Medicaid) have been taken out of the U.S. economy in the form of taxes for an unsuccessful War on Poverty. That’s more than three times the cost of all U.S. military wars since the American Revolution, according to the Heritage Foundation.
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WallStreetCheat.com  notes “The struggles of the middle class have been well documented and oft-reported. Faced with a tough economy — including hard fights for jobs, adequate pay, and adjustments to compensate for the Affordable Care Act — members of what is supposed to be America’s backbone are finding that the post-recession world is more difficult than many imagined…Jobs that were lost to the recession have returned, but are paying a fraction of what they were previously. Essentially, everyone has had to make sacrifices to return the country to economic prosperity. But the sacrifices have been levied on those in the working class almost exclusively.”

By de-emphasizing free enterprise growth in favor of government programs, the means with which generations of Americans from the earliest days of the nation’s history until the middle of the twentieth century pulled their way out of poverty and into the middle class was handicapped.