America’s Middle Classes Are No Longer Coping

By Robert Reich

30/01/08 "FT" -- - 28/01/08 -- It is an election year and the US economy is in peril of falling into recession or worse. Not surprisingly, Washington is abuzz with plans to prevent it. President George W. Bush has proposed a $150bn stimulus package and all the main presidential candidates are offering similar measures, including middle-class tax cuts and increased spending on infrastructure.

Ben Bernanke and the Federal Reserve have reduced interest rates another three-quarters of a point. But none of these fixes will help much because they do not deal with the underlying anxieties now gripping American voters. The problem lies deeper than the current slowdown and transcends the business cycle.

The fact is, middle-class families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago. Yet for years now, America’s middle class has lived beyond its pay cheque. Middle-class lifestyles have flourished even though median wages have barely budged. That is ending and Americans are beginning to feel the consequences.

The first coping mechanism was moving more women into paid work. The percentage of American working mothers with school-age children has almost doubled since 1970 – from 38 per cent to close to 70 per cent. Some parents are now even doing 24-hour shifts, one on child duty while the other works. These families are known as Dins: double income, no sex.

But we reached the limit to how many mothers could maintain paying jobs. What to do? We turned to a second coping mechanism. When families could not paddle any harder, they started paddling longer. The typical American now works two weeks more each year than 30 years ago. Compared with any other advanced nation we are veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.

But there is also a limit to how long we can work. As the tide of economic necessity continued to rise, we turned to the third coping mechanism. We began to borrow, big time. With housing prices rising briskly through the 1990s and even faster between 2002 and 2006, we turned our homes into piggy banks through home equity loans. Americans got nearly $250bn worth of home equity every quarter in second mortgages and refinancings. That is nearly 10 per cent of disposable income. With credit cards raining down like manna, we bought plasma tele­vision sets, new appliances, vacations.

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http://www.informationclearinghouse.info/article19240.htm

I like the part about needing "a more progressive tax, stronger unions and, over the longer term, better schools for children from lower-income families and better access to higher education."

Those are minimal goals. We have got to reverse the transfer of wealth into the hands of an incredibly rich few.

All this attention is being paid to the crisis in buying and selling houses. What is anyone saying about people who can't even afford a house?

After taxes and health care, my take home pay is a little bit more than what my grandfather earned in the 1950s.

As a result, medical costs are said to go up...

The vicious circles must end.

One positive. We can actually walk to work also. And our town is just big enough to have a YMCA so we now go there regularly. Aot of small town won't have this, of course.

How about DOUBLED: homeowners insurance, food, gasoline, heating fuel, tuition costs, phone cost ??
Remember free tv?
Please don't blame the middle class just like the poor are blamed. We didn't get here all by ourselves

I don't think the $150B Bushco stimulus plan is meant to correct our economy's ills; rather, I think it's meant to just keep the economy going for a few more months so it falls even harder during a dem admin.

We're close to sinking.